Aqid ERPThe formula (article 84)
- Half a month's wage for each of the first five years of service.
- A full month's wage for each year after the fifth.
- Parts of a year count in proportion to the time worked.
- The award is worked out on the last wage, the one paid at the end of service.
A worked example
Eight years of service, a last monthly wage of SAR 10,000, and the employer ending the contract:
| First 5 years: 5 × ½ × 10,000 | SAR 25,000 |
|---|---|
| Next 3 years: 3 × 1 × 10,000 | SAR 30,000 |
| End-of-service award | SAR 55,000 |
When the worker resigns (article 85)
In the example above, resigning after eight years would give two thirds of SAR 55,000: SAR 36,666.67. The law lists cases where a worker who leaves still receives the full award, such as force majeure, and a woman ending her contract within six months of marriage or three months of giving birth.
- Less than two years of service: no award.
- Two to five years: one third of the award.
- Five to ten years: two thirds of the award.
- Ten years or more: the full award.
Which wage counts
The Labor Law works on the actual wage, which generally includes regular allowances, not only basic pay. Contracts and company policies differ on which allowances are included, so check yours; when in doubt, take advice before the final settlement.
Accruing it every month
Because the award builds up with every month of service, the books should carry it as a liability as it grows, not as a surprise when someone leaves. Aqid ERP's payroll accrues end of service each month for every employee, so the balance sheet shows what is owed and the final settlement draws on it.