Not legal advice
Content summarises labour law as published by each GCC ministry, current as of May 2026. Not a substitute for legal advice. Employment law is jurisdiction-specific and subject to change. For contracts, disputes, visa issues, or any decision with legal consequences, consult a qualified labour lawyer licensed in your jurisdiction.
Not legal advice
This guide summarizes Saudi Arabia employment law for informational use only. It is not a substitute for advice from a qualified labour lawyer. Employment law is complex and jurisdiction-specific. For contracts, disputes, visas, or decisions with legal consequences, consult a licensed labour lawyer in your jurisdiction.
Quick summary
End-of-service benefit (mukafat) is 15 days of basic salary per year for the first five years and 30 days per year thereafter, with no statutory cap. Resignation in under two years forfeits mukafat; partial vesting from years 2–10. Termination by the employer or contract-end pays in full.
The statutory formula
Article 84 of the Saudi Labour Law sets the mukafat (end-of-service) formula:
- Years 1–5: 15 days of basic wage per year.
- Years 5+: 30 days of basic wage per year, on top of the years-1–5 entitlement.
- No statutory cap. Long-tenure mukafat at senior levels can run into seven figures.
Wage base, basic, with allowance treatment contested
Saudi mukafat is calculated on the last basic wage under Article 86. The treatment of fixed regular allowances (housing, food, transport) is contested, some Saudi court decisions have included them in the wage base where contractually committed, while other decisions have held to basic-only. Variable bonuses and commission are not part of the wage base. If a meaningful share of your package sits in allowances, the mukafat figure can swing materially. Get a lawyer to confirm the base before signing or settling.
Resignation, the sliding scale
Article 85 reduces mukafat for employees who resign voluntarily:
- Less than 2 years' service: no mukafat.
- 2 to 5 years' service: one-third of the statutory mukafat.
- 5 to 10 years' service: two-thirds.
- 10+ years: full mukafat.
Termination by the employer, contract-end on a fixed-term contract, and a few qualifying "forced resignation" events (employer breach, serious wage delay, abuse) all pay the full mukafat regardless of tenure.
Payment timing
Article 88 requires mukafat to be paid within one week of the end of the employment relationship for terminated employees, and within two weeks for resigning employees. Late payment is enforceable through HRSD and the Labour Court.
The new savings-system trial
Saudi Arabia has piloted a savings-system alternative to mukafat (similar to the UAE's DEWS pilot). Under it, the employer contributes monthly to a regulated savings vehicle in the employee's name, replacing the statutory accrual. Where the savings system applies, the contractual terms control, read your contract carefully and confirm what's been set up.
Worked example
Hassan worked for a Riyadh consultancy for eight years. His final basic wage was SAR 22,000/month. Years 1–5: 5 × 15 days = 75 days × (SAR 22,000 ÷ 30) = SAR 55,000. Years 6–8: 3 × 30 days = 90 days × (SAR 22,000 ÷ 30) = SAR 66,000. Total statutory mukafat if dismissed: SAR 121,000. If Hassan instead resigned at 8 years, the two-thirds rule applies: SAR 121,000 × 2/3 ≈ SAR 80,667.
Frequently asked questions
Does my housing allowance count for mukafat?
Fixed, regular, contractually committed allowances, housing, transport, food, have historically been treated as part of the wage base for mukafat. Variable allowances, bonuses, and commission are not. The case law isn't always consistent, so the safest position is to negotiate explicit contract language and have a lawyer review the formula before signing.
I resigned after three years, what do I get?
Under Article 85, you're entitled to one-third of the statutory mukafat. For three years at SAR 20,000/month basic that's roughly: (3 × 15 × SAR 666.67) × 1/3 = SAR 10,000. Always run the calculation through the Tenure mukafat calculator to confirm.
When can I claim mukafat without the resignation reduction?
When the employer terminates without legitimate cause, when a fixed-term contract expires, when you resign for one of the protected reasons in Article 81 (employer breach, deception, unsafe workplace, etc.), or when you've completed 10 years of service.
Is there a cap on mukafat?
No statutory cap. Saudi mukafat differs from UAE gratuity here, there's no two-year-salary ceiling, so long-service senior executives can accrue very large entitlements.
When to consult a labour lawyer
Consult a Saudi employment lawyer if your contract spells out a mukafat formula different from the statutory one, your employer is disputing whether allowances count toward the wage base, you're being asked to sign a settlement waiving mukafat, or you've been moved to a savings-system contract and want to understand how the accrual works.