EOSB Rules in Saudi Arabia — Complete Guide 2026

What Is EOSB in Saudi Arabia?

End of Service Benefits (EOSB), also called gratuity or end of service gratuity, is a mandatory payment that every worker in Saudi Arabia is entitled to receive when their employment ends. It does not matter whether you resigned, were terminated, or your contract expired — in most cases you are entitled to some amount of EOSB.

EOSB is governed by Saudi Labour Law Article 84 and applies to all workers on both unlimited (open-ended) and fixed-term employment contracts. It applies to expatriate workers and Saudi nationals equally.

Think of EOSB as a reward for your years of service — the longer you work for a company, the more you accumulate. Many expats leave Saudi Arabia without claiming their full EOSB because they do not know the rules. This guide will make sure that does not happen to you.

EOSB Formula — How It Is Calculated

The calculation is straightforward once you understand the formula. Saudi Labour Law uses a daily wage system:

Worked Example — 7 Years Service

Let us say your basic salary is SAR 6,000 and you worked for 7 years. Here is exactly how EOSB is calculated:

Resignation vs Termination — The Critical Difference

The single most important factor in your EOSB calculation is why your employment ended. The rules are very different depending on whether you resigned or were terminated.

What Is Included in Basic Salary?

This is where many employers try to manipulate the calculation. EOSB must be calculated on basic salary only. The following are NOT included in the EOSB calculation:

When Does Your Employer Have to Pay EOSB?

Under Saudi Labour Law, your employer must pay your complete final settlement — including EOSB — within 7 days of your last working day. This is not optional. It is a legal requirement.

If your employer delays payment beyond 7 days without a valid reason, they are in breach of Saudi Labour Law and you have the right to file a complaint through the HRSD (Ministry of Human Resources and Social Development) portal.

Can Your Employer Reduce or Cancel Your EOSB?

Yes, but only in very specific circumstances defined under Article 80 of Saudi Labour Law. An employer can reduce or cancel EOSB only if the worker is terminated for serious disciplinary reasons, including:

• Physically assaulting the employer or colleagues
• Serious violation of employment duties after written warnings
• Disclosing confidential company information to competitors
• Being absent without valid reason for 20+ days in a year or 10 consecutive days
• Being found guilty of a criminal offense related to work

Normal termination, redundancy, company downsizing or closure do not allow the employer to reduce your EOSB. If you were terminated for any reason other than the above, you are entitled to full EOSB.

Partial Year EOSB — How Are Incomplete Years Calculated?

If you have worked for a partial year beyond your last complete year, that partial period is still counted proportionally. For example, if you worked for 5 years and 6 months, the 6 additional months count as 0.5 years in the calculation.

This means even if you leave mid-year, you do not lose those months. They are pro-rated into your EOSB calculation. Our EOSB Calculator handles this automatically — just enter your years and additional months separately.

EOSB and Probation Period

Your EOSB starts accumulating from your very first day of employment, including probation. However, there are some important points about probation:

• If the employer terminates you during probation, they are not required to pay EOSB for that short period — but must pay any agreed amounts in the contract.
• If the employee leaves during probation, no EOSB is payable.
• Once probation ends and you continue working, that probation period is included in your total service calculation.

What If Your Employer Refuses to Pay EOSB?

This is unfortunately common. Here is exactly what you should do if your employer refuses to pay or underpays your EOSB:

• Step 1 — Document Everything: Gather your employment contract, all payslips, offer letter and any written communication about your final settlement.
• Step 2 — Calculate Your Entitlement: Use our free EOSB Calculator to confirm the exact amount you are owed.
• Step 3 — Request in Writing: Send a formal written request to your HR department or employer asking for your EOSB. Keep a copy of this communication.
• Step 4 — File a Complaint: If the employer ignores your request, file a complaint through the HRSD website (hrsd.gov.sa) or through the Qiwa platform.
• Step 5 — Labour Court: If the complaint is not resolved, the Labour Court can order the employer to pay the full amount plus compensation.

Common EOSB Mistakes Employers Make

After 20 years in Saudi Arabia, I have seen employers make the same mistakes repeatedly — sometimes by accident, sometimes deliberately. Watch out for these:

• Using total package instead of basic salary — This actually benefits you since it results in a higher EOSB. But if your employer uses a suspiciously low "basic" figure, verify it against your Qiwa contract.
• Not counting partial years — Every month beyond your last complete year should be included proportionally. Do not let employers round down.
• Applying resignation rules to termination cases — Some employers reduce EOSB claiming "resignation rules apply" even when they terminated the employee. This is illegal.
• Deducting amounts without legal basis — Employers can only deduct proven, documented amounts owed by the employee. Vague "damages" claims are not valid.
• Delaying payment beyond 7 days — This is a breach of law even if the amount itself is correct.

EOSB for Fixed-Term Contracts

If you are on a fixed-term (limited) contract in Saudi Arabia, the EOSB rules work slightly differently:

• When a fixed-term contract expires naturally, you are entitled to full EOSB — same as termination.
• If the employer does not renew and asks you to leave, this is treated as end of contract — full EOSB applies.
• If you refuse to renew a fixed-term contract, this is treated as resignation — the resignation EOSB rules apply based on your total service length.
• If a fixed-term contract is renewed multiple times, the total service period (all contract periods combined) is used for EOSB calculation.

Is EOSB Taxable in Saudi Arabia?

Saudi Arabia does not have personal income tax, so EOSB is not taxed when you receive it in Saudi Arabia. However, depending on your home country's tax laws, you may be required to declare EOSB as income when you return home.

For example, Indian nationals may need to declare EOSB under certain conditions. Pakistani, Filipino and other nationals should check with a tax advisor in their home country before assuming EOSB is completely tax-free.

Frequently Asked Questions About EOSB