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:
- EOSB — End-of-Service Benefit (most common English abbreviation)
- Gratuity — Traditional term from British-influenced labour systems, widely used in South Asian expat community
- End-of-Service Award — The official Saudi Labour Law term (Article 84)
- Mukafa'at Nihayat Al-Khidma — The Arabic term
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:
- Employer using different terminology: Some employers call it a "gratuity" in your contract and others call it "EOSB." Some use both terms. They all mean the same legal entitlement under Article 84 of the Saudi Labour Law.
- Confusion with service-sector gratuity: In hospitality and restaurants "gratuity" means a tip or service charge — nothing to do with employment benefits. New expats sometimes confuse these two meanings. In the context of employment contracts in Saudi Arabia, gratuity always refers to the end-of-service benefit.
The EOSB / Gratuity Formula
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:
- First 5 years: SAR 3,500 × 5 = SAR 17,500
- Year 6: SAR 7,000 × 1 = SAR 7,000
- Full EOSB total: SAR 24,500
Now what does Ahmed actually receive depending on how employment ends?
- Terminated by employer → SAR 24,500 (full)
- Contract expired → SAR 24,500 (full)
- Resigned voluntarily → SAR 24,500 × 2/3 = SAR 16,333 (two-thirds, as service is 5–10 years)
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.