Gratuity vs EOSB Saudi Arabia — Are They the Same Thing? 2026

You will hear both "gratuity" and "EOSB" used by expats and employers in Saudi Arabia — often interchangeably. This causes genuine confusion. This guide explains clearly what each term means, whether they are the same and what you are actually entitled to when you leave employment.

Quick Summary

  • In Saudi Arabia gratuity and EOSB are the same thing — different names for one benefit
  • The official legal term is End-of-Service Award under Article 84 of Saudi Labour Law
  • Calculated on basic salary only — not total salary including allowances
  • Formula: half month per year for first 5 years, then full month per year beyond 5 years
  • Resignation reduces the amount — termination and contract expiry give full entitlement
  • Payable within 7 days of employment ending — delay is a violation

Gratuity vs EOSB — The Simple Answer

Gratuity and EOSB (End-of-Service Benefit) are two names for exactly the same legal entitlement in Saudi Arabia. The official legal term in the Saudi Labour Law is "End-of-Service Award" — but in everyday usage among expats and HR professionals you will hear all three terms used interchangeably:

All four refer to the exact same calculation, the same legal entitlement and the same payment rules. Do not let the terminology confuse you.

Where the Confusion Comes From

The confusion usually arises in two situations:

The EOSB / Gratuity Formula

First 5 years of service Half month basic salary per year
Beyond 5 years of service Full month basic salary per additional year
Partial years Calculated proportionally by days
Calculated on Basic salary only — not total package

How Termination Type Affects the Amount

How Employment Ends EOSB / Gratuity Entitlement
Terminated by employer Full EOSB — 100%
Fixed-term contract expires (not renewed) Full EOSB — 100%
Mutual agreement to end contract Full EOSB — 100%
Resigned — under 2 years service Zero EOSB
Resigned — 2 to 5 years service One-third of full EOSB
Resigned — 5 to 10 years service Two-thirds of full EOSB
Resigned — 10+ years service Full EOSB — 100%
Constructive dismissal (Article 81) Full EOSB — 100%

Worked Example — Same Person, Different Outcomes

Ahmed has worked for 6 years at a basic salary of SAR 7,000/month. His full EOSB calculated on Article 84 is:

Now what does Ahmed actually receive depending on how employment ends?

Frequently Asked Questions

My contract says "gratuity" but HR says I am not entitled to EOSB. Is this correct?

No — if your contract uses the word "gratuity" in the context of end-of-service payment it refers to the same legal entitlement as EOSB under Article 84 of Saudi Labour Law. Renaming it does not change the entitlement. You are entitled to the EOSB calculation regardless of whether your contract calls it gratuity, EOSB or end-of-service award. File an HRSD complaint if your employer refuses to pay.

Does gratuity include my housing and transport allowances?

No — this is one of the most common misconceptions. EOSB and gratuity are both calculated on basic salary only. Housing allowance, transport allowance, food allowance and any other allowances are excluded from the calculation. This is why negotiating a higher basic salary — rather than higher allowances — produces a better long-term financial outcome.

My employer is paying my gratuity in instalments over 6 months. Is this legal?

Saudi Labour Law requires EOSB to be paid within 7 days of employment ending — not in instalments over months. If your employer is delaying payment through instalments without your agreement this is a violation. You can accept the arrangement if you choose to — but you do not have to. If you want full payment immediately as required by law, file an HRSD complaint citing the Article 84 seven-day payment requirement.

EOSB or Gratuity Dispute With Your Employer?

Underpaid, refused or paid in instalments? Book a consultation for clear guidance on your exact entitlement and how to claim what you are owed.

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