Quick Summary
- Gratuity is calculated on basic salary only — not total salary
- First 5 years: half month basic per year
- Beyond 5 years: full month basic per year
- Resignation reduces gratuity — termination and contract expiry pay full gratuity
- Partial years are calculated proportionally by days
- Use our free EOSB Calculator to get your exact figure instantly
The Formula — How Gratuity Is Calculated
Example 1 — Terminated After 3 Years
Ahmed was terminated by his employer after 3 years and 4 months of service. His basic salary is SAR 6,000.
Example 2 — Resigned After 3 Years
Same scenario as above but Ahmed resigned voluntarily after 3 years 4 months. Resignation under 5 years means zero gratuity entitlement.
Example 3 — Terminated After 7 Years 6 Months
Priya was terminated after 7 years and 6 months of service. Her basic salary is SAR 8,000. Service crosses the 5-year threshold so calculation splits into two parts.
Example 4 — Resigned After 7 Years 6 Months
Same as Example 3 but Priya resigned voluntarily. Resignation after 5 years means two-thirds of full gratuity is owed.
Example 5 — Resigned After 12 Years
Carlos resigned after exactly 12 years. His basic salary is SAR 12,000. Resignation after 10+ years means full gratuity — same as termination.
Example 6 — Fixed-Term Contract Expiry After 4 Years
Ravi's fixed-term contract expired naturally after 4 years. His basic salary is SAR 7,500. Contract expiry is treated same as termination — full gratuity.
Resignation Gratuity Summary Table
| Service Length | Resignation Gratuity | Termination / Expiry Gratuity |
|---|---|---|
| Under 2 years | Zero | Half month per year |
| 2 to 5 years | One-third of full | Half month per year |
| 5 to 10 years | Two-thirds of full | Half month (yr 1–5) + full month (yr 5+) |
| 10 years and above | Full gratuity | Full gratuity |
Common Mistakes Employers Make in Gratuity Calculation
- Calculating on total salary instead of basic — the most common error. Always verify the basic salary figure used in the calculation.
- Not counting probation period in service — probation counts toward total service for gratuity. If you were on 90 days probation before confirmation, those 90 days are included.
- Rounding down service years unfairly — partial years must be calculated proportionally. 3 years 8 months is not rounded down to 3 years.
- Using wrong resignation rate — some employers apply zero gratuity for all resignations regardless of service length. After 2 years of service you are entitled to at least one-third of full gratuity.
- Not including service across contract renewals — if you had multiple contracts with the same employer without a genuine break in employment, all service counts cumulatively.
Calculate Your Exact Gratuity Now
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Open Gratuity Calculator — FreeFrequently Asked Questions
My employer calculated my gratuity on my total salary. Is this correct?
No — gratuity must be calculated on basic salary only. If your employer used your total salary (which is higher) and paid you more as a result, that is a benefit to you. However if they used a lower figure claiming it is your "basic" when your contract shows a higher basic, that is an underpayment you can claim through HRSD.
I resigned after 4 years and 11 months — just short of 5 years. Do I get one-third or two-thirds?
Since you have between 2 and 5 years of service, you receive one-third of the full gratuity — not two-thirds. The two-thirds rate only applies from 5 years onwards. Had you stayed just one more month you would have received two-thirds. This is why checking your service length carefully before resigning matters enormously.
My basic salary changed over the years. Which figure is used for gratuity?
Gratuity is calculated on your last drawn basic salary — the salary at the time employment ends, applied across all years of service. You do not use different salary figures for different years. This means salary increases benefit your gratuity retrospectively across all service years.
I was terminated during probation. Do I get any gratuity?
Generally no — gratuity is not owed for termination during probation unless your contract specifically provides for it. If your contract includes a gratuity clause covering the probation period that clause is enforceable. Without such a clause the standard rule applies — no gratuity during probation.
Employer's Gratuity Figure Does Not Match Yours?
Book a consultation to get your gratuity verified independently and get guidance on how to claim any underpayment through HRSD.