End of Service Benefits in Saudi Labor Law | Calculation, Eligibility, and Rights

Employee rights after terminating a work contract are guaranteed under the Saudi Labor Law. Employers are not permitted to deny these rights except in specific, legally defined cases. In this article, we will explore these rights and how employees can claim them effectively.

Employee Entitlement to End-of-Service Benefits

Receiving end-of-service benefits is one of the most prominent rights of employees after the termination of their work contract. This is an obligation on the employer, who must pay the employee a financial amount proportional to their length of service, as stipulated in Article 84 of the Saudi Labor Law.

The purpose of explicitly guaranteeing end-of-service benefits in the law is to encourage employees to continue working and to secure their future against risks like disability or old age. Therefore, employees should ensure they claim this right, and if needed, seek assistance from a lawyer specializing in labor disputes to retrieve their full entitlements.

if you need any help contact a labor law attorney in Riyadh

Conditions for Eligibility to End-of-Service Benefits

The Saudi Labor Law outlines specific conditions for eligibility to end-of-service benefits:

1. Contract Termination:
   • The contract ends due to general reasons for termination.
   • The agreed duration of a fixed-term contract ends, or the agreed-upon work is completed in contracts for specific tasks.
2. Employer-Initiated Termination:
   • In cases of indefinite-term contracts, the employer terminates the contract, whether or not there is a valid reason.
3. Employee Resignation:
   • Employees are entitled to benefits if they resign after completing at least two years of continuous service. They do not qualify for benefits if they resign before this period.
4. Partial Entitlement Based on Service Duration:
   • Employees receive one-third of the benefit if their service is between two and five years.
   • Employees receive two-thirds if their service exceeds five years but is less than ten years.
   • Full benefits are granted for ten or more years of service.
5. Force Majeure:
   • If the contract ends due to unavoidable circumstances, the employee is entitled to full benefits, regardless of the contract type or duration.
6. Female Employees Resigning Due to Marriage or Childbirth:
   • Women are entitled to full benefits if they resign within six months of their marriage or three months after giving birth.
7. Violations by the Employer:
   • Employees leaving due to violations by the employer, as specified in Article 81 of the Labor Law, are entitled to full benefits.

Forfeiture of Benefits

Employees are denied end-of-service benefits if their contract is terminated due to reasons stated in Article 80 of the Labor Law, such as severe misconduct or breaches of contract terms.

Calculation of End-of-Service Benefits

The Saudi Labor Law, as stated in Article 84, explains how end-of-service benefits are calculated:

“If the employment relationship ends, the employer must pay the employee a benefit for their service period, calculated as half a month’s wage for each of the first five years and a full month’s wage for each of the subsequent years. The last wage received by the employee is used as the basis for the calculation. The employee is also entitled to a proportionate benefit for any partial year of service.”

Key Details on Benefit Calculation:

1. Service Duration:
   • For the first five years, the benefit is calculated based on half a month’s wage for each year.
   • For any service beyond five years, the benefit is calculated as one month’s wage for each year.
2. Partial Years:
   • Employees are entitled to a proportional benefit for any months worked that do not amount to a full year. For instance, if an employee worked a few months without completing a full year, they are still entitled to a benefit for those months.
3. Basis of Calculation:
   • The last wage received is the standard for calculating the benefit.
   • Additional earnings, such as overtime pay or commissions, are excluded unless otherwise agreed upon, as per Article 86 of the law.

Read Also: Article 83 of the Saudi Labor Law: Non-Compete Clauses and Protection of Trade Secrets

Special Cases for Resignation (Article 85):

• Resignation before Two Years:
  • Employees are not entitled to end-of-service benefits if they resign before completing two continuous years of service.
• Resignation After Two Years:
  • Employees who resign after at least two years and up to five years of service receive one-third of the calculated benefit.
  • For service exceeding five years but less than ten years, employees are entitled to two-thirds of the benefit.
  • Full benefits are granted for service durations of ten years or more.

Exceptions for Full Benefits (Article 87):

Employees are entitled to full end-of-service benefits in the following situations:

1. If the employee leaves due to an unavoidable force majeure.
2. If a female employee resigns:
   • Within six months of marriage.
   • Within three months of childbirth.

This ensures that employees’ rights are protected even under unique or unexpected circumstances.

Employee Right to a Certificate of Service

The Saudi Labor Law mandates that employers must provide employees, upon request, with a Certificate of Service. This certificate serves as proof of experience and facilitates the employee’s search for new job opportunities. It is considered one of the most important rights granted to employees after the termination of their employment contract.

Employers are also obligated to return all documents and records that the employee had submitted at the time of their hiring. This is stipulated in Article 64 of the law, amended under Royal Decree No. (M/46), which states:

1. Certificate of Service:
   • Employers must issue a service certificate free of charge upon the employee’s request.
   • The certificate must include the following details:
     • Date of employment.
     • Date of contract termination.
     • Job title.
     • Last salary earned.
   • Employers are prohibited from including any remarks in the certificate that could harm the employee’s reputation or reduce their future employment prospects.
2. Return of Employee Documents:
   • Employers must return all certificates or documents submitted by the employee during the hiring process.

Read Also: Article 75 of the Saudi Labor Law: Conditions and Rights for Terminating Contracts and Compensation

Requirements for the Certificate

The certificate must focus on the key details of the employee’s role and salary, without including:

• Recommendations or endorsements.
• Criticism of the employee’s performance, reliability, or skills.

Employee Rights

The employer cannot deny the employee this certificate, even if the contract was terminated due to reasons attributed to the employee. It is a fundamental right of the worker after the contract’s termination. Similarly, all personal documents or records handed to the employer during employment must be returned to the employee.

Financial Entitlements Agreed Upon in the Work Contract

Another key right of employees after the termination of their work contract is the receipt of all financial entitlements agreed upon in the employment contract. These include:

• Vacation allowances.
• Housing allowances.
• Transportation allowances.
• Any other financial benefits specified in the employment contract.

Employer Obligations

The Saudi Labor Law ensures that employees receive their agreed-upon financial entitlements after contract termination. Employers are legally obligated to pay these amounts and cannot withhold them except in specific circumstances explicitly stated in the Labor Law.

If you require legal assistance in claiming your financial entitlements, consider consulting a legal expert or firm, such as Al-Othman Law Firm, for guidance on understanding and securing your rights.

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References

• Saudi Labor Law: Explanation of the provisions of the Saudi Labor Law in accordance with the amendments issued by Royal Decree No. (M/46) dated 05/06/1436 AH.