The first and most important aspect of our labor rights is end of service benefits in KSA (Saudi Arabia) . That is why it can be a little tricky to figure out how to compute or see if we are eligible for this fantastic service.
In this article, we will be looking at some points to keep in mind when calculating our end of service benefits as per saudi labor law. in addition, we will be presenting a specific formula to determine our benefits, always keeping in mind our duration and our basic salary.
What is Gratuity End Of Service Benefits?
Before knowing how to use an end of service calculator in Saudi Arabia you should know what it is. We, as employees, receive the benefits of end of service in KSA as compensation at the end of our contract.
This is to form financial security after our service time and as a reward for our significant work. All workers in the country can earn the entitlement of the benefits of end of service in KSA.
Who is Eligible for End of Service Benefits (Gratuity) in KSA?
According to Article 84 of the Saudi Labor Law, the Saudi Arabian government grants ESB end of service benefits to all employees working under an employment contract. Furthermore, this applies regardless of our nationality, gender, or position.
Also, there are some exceptions and criteria that affect eligibility and the amount of our end of service Saudi Arabia benefits payment. eligible individuals must follow this set of rules:
Factors Affecting the End of Service Benefits (Gratuity) in Saudi Arabia.
In addition, please note that all of us who have a legal contract in Saudi Arabia are eligible for end of service Saudi Arabia benefits. Although certain factors affect the eligibility for the benefit, let’s see what they are:
- Basic salary
- Length of service
- Change in salary
- Legal compliance
Employee factors
The employee factors that we must take into account when obtaining end of service benefits in KSA are as follows:
- Performance:
- When determining our amount of end of service benefits in KSA, they may consider our performance in some cases. Great performance may lead our bosses to give us additional bonuses at the end of our contract.
- Attendance and punctuality:
- Also, the company can reward our consistent attendance with a more favorable end of service calculator in Saudi Arabia.
- Contract Type:
- In addition, our contract type whether permanent, temporary, or long-term, can directly affect the entitlement of end of service benefits in KSA.
- State of residence:
- Also, our state of residence in Arabia may affect our entitlement to benefits.
- Employee Benefits:
- These are benefits that may be provided to us by our employer, such as a housing allowance, transportation allowance, or health insurance. These can affect our compensation package and influence the amount of end of service benefits in KSA.
Basic salary (impact and potential adjustments)
The basic salary impacts our end of service benefits in KSA, and we should keep in mind that we calculate it based on our base salary. In addition, this includes increases. decreases and their legal compliance, let us see how to use an end of service benefits calculator Saudi Arabia:
- Calculation of gratitude in case of termination:
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- According to Article 84 of the Saudi labor law, the employees are entitled to the following end of service benefits in case of termination.
- ½ of salary during the first 5 years for each year of service.
- For each year of service after the first 5 years, full salary.
- We need to know that we will not have the privilege of end of service benefits in KSA if they terminate us under Article 80 of the Saudi labor law.
- Calculation in case of resignation:
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- Resignation within the first 2 years: we do not have end of service benefits in KSA.
- Resignation between 2 and 5 years: we have the benefit of 1/3 of our ESB award.
- Potential adjustments:
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- Annual increase: If we have an annual increase this could affect when using an end of service benefits calculator Saudi Arabia for our bonus.
- Job promotion: In addition, when we move up our base salary generally increases.
- Merit: In some cases, these are raises based on our incredible performance.
- Reduction of hours: Also, if our working hours are reduced, our base salary will go down and that will affect our end of service benefits in KSA.
- Disciplinary Sanctions: Also, if we have poor performance or misconduct, we may be subject to salary reductions.
- Demotion: Also, if we are demoted from a position, our salary will go down and this will directly affect us when using an End of service benefits in KSA calculator for our benefits.
See More: What is Mudad Payroll in Saudi Arabia?
Length of service (thresholds and specific calculations)
Our length of service is another fundamental factor when calculating our benefits. let us take a look at how we can calculate them:
- Threshold of our length of service:
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- We must have worked for at least a minimum of 2 continuous years with the same employer. If we have a shorter duration, they will not give us end of service benefits in KSA.
- Specific calculation:
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- We calculate the amount of gratuity based on our length of service and our basic salary.
- The company awards us ½ of the basic salary for each year of our service for the first 5 years.
- After 5 years, the company will give us the full salary for each additional year.
- A clear example would be an employee who worked for 7 years with a basic salary of 10,000 SAR/month.
- ESB for our first 5 years = 5 years x 10,000 / 2 = 25.00 SAR.
- For a later period = 2 years x 10,000 = 20,000 SAR.
- Total = 45,000 SAR.
Type of employment contract (fixed vs. open-ended)
In Saudi Arabia, we have two main employment contracts. The fixed employment contract, and open-ended employment contracts. These can affect the eligibility for end of service benefits in KSA:
- Fixed employment contract:
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- These contracts establish a specific duration for us. Additionally, we calculate benefits based on our full-time service. At the end of this contract. We are entitled to receive a bonus based on our length of service (minimum 2 years) and basic salary at the end of this contract.
- Indefinite employment contract:
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- We or our employer decide when these end, as they are not based on having a specific date. Additionally, they calculate the gratuity to us based on all the full-time work and our total basic salary at the time of termination.
Additionally, our employers must follow the procedures outlined in Arabian law fairly and legally to terminate an indefinite employment contract.
Termination factors
Now that we have explored a little of the causes of us as employees that may be detrimental to us when calculating the amount of our gratitude, let us look at the causes that may be unfavorable to us when terminating our contracts:
Reason for termination
Termination for misconduct:
- We will not owe gratitude to someone who terminates us for misconduct. This includes policy violations, illegal acts, or any other malicious behavior.
Voluntary resignation:
- We are entitled to gratitude according to the established rules if we resign of our own free will. They will calculate this based on our length of service and base salary.
Retirement:
- When we retire, we are entitled to our gratuity. The company calculates our gratuity based on our total length of service and basic salary.
Termination due to company closure:
- Our company is entitled to our end of service benefits in KSA if we have a complete closure. The amount will be as per applicable rules.
Force majeure situations
We should know that this refers to the termination of the contract due to major or unforeseen outside events (such as natural disasters, or changes in the law) all employees will be entitled to gratitude.
How Payroll Middle East Assist you in End of Service Benefits in KSA (Saudi Arabia)?
Payroll Middle East is a company in which we offer payroll services in the Middle East with many more Middle Eastern countries. Also, here we can help you with different tools to save your money, time, and resources.
Also, with several experts and a platform with an End of service benefits in KSA calculator, you can manage the end of service payment to your employees, either by a bank transfer, cash, or check, and also issue receipts. Connect with the best payroll companies in Saudi Arabia and start your payroll now.
If you want to read more about this and other topics of interest you can check out our blog section, or if you want to write us you can do it at contact@payrollmiddleast.org we are waiting for you.
