End of Service Benefit in Saudi Arabia

The best thing for expatriates working in Saudi Arabia, apart from a tax-free salary, is the provision of End of Service Benefits (ESB) in the Saudi Labor Law :) I have been getting frequent requests for clarifications on this, and hence decided to write an exclusive post on the same.

Nothing more can cause a bigger worry for an expatriate who has decided to leave for good, than the thought of financial insecurity, atleast in the short run. Unless people have a job ready for them as soon as they leave the kingdom, the prospect of being unemployed is truly frightening, particularly in this age of global recession. For those expatriates who have worked in Saudi Arabia for quite a long time, the biggest question before them is: What Next? End of Service Benefits offers some kind of comfort to expatriates, once they have completed their term in the kingdom.

Article 84 of the Labor Law has explicitly stated the benefits to be paid for the expatriates. It is proportional to the number of years he or she has stayed with a particular sponsor. So, for the first five years of service, an expatriate is entitled to receive half a month's pay for each year of service, and one month's pay for each subsequent year of service. Note that this is in case of completion of the contract by the expatriate. Calculation of ESB is based on the last wage a person has earned and includes all allowances. However, these allowances do not include wage components such as sales commissions, sales percentages, etc., because they cannot be accurately determined :-B

There are certain exceptions, though. If an expatriate has resigned within the first two years of service, he is not entitled to any ESB. If he has resigned between two to five years of continuous service, he is entitled to one third of the salary. If he has resigned between five years upto ten years of continuous service, he is entitled to two thirds of the salary and to a full salary, beyond 10 years of continuous service. Again, the definition of "salary" here includes basic pay plus all the allowances, excluding of course, certain exceptions such as sales commissions, etc., as mentioned earlier. In all cases, the last salary drawn is the basis for calculations.

In case the expatriate has to leave due to Force Majeure conditions, he is entitled to a full salary. Force Majeure has been well-defined and in short, it relates to uncontrollable situations such as War, Earthquake, etc.

In case of female workers, Article 87 of the labor law has given some additional benefits. If a female worker leaves the job within six months after her marriage or within three months after she gives birth to a child, she is entitled for full salary benefits.

Hope you found the above information useful. Ignorance isn't bliss, sometimes it could be dangerous not to know your entitlements :)

Happy Retirement……..