A lot of employees, and a fair number of employers, mix up two things that are actually completely separate systems. GOSI is social insurance a monthly contribution that funds a pension, and for Saudi nationals, unemployment support. The end-of-service benefit, sometimes called gratuity, is a one-off lump sum an employer owes when the employment relationship ends. One is paid monthly throughout your career. The other is paid once, at the end.
Confusing the two leads to bad math on both sides employees who underestimate what they are owed at exit, and employers who miscalculate their liability. Here is how each one actually works, with the numbers worked through.
End-of-Service Benefits: The Formula
This is set out in Articles 84 to 87 of the Saudi Labor Law, and the formula itself is simple even though the exceptions around it are not:
- Half a month’s wage for each of the first five years of service
- A full month’s wage for each year after that
Partial years count too the law provides a proportional award for any part of a year worked, not just full years.
“Wage” here means more than basic salary. Under Article 84, the calculation base is the employee’s Actual Wage basic salary plus fixed allowances such as housing and transport that are part of the employment contract. This surprises people who assume the calculation only uses base pay.
A Worked Example
Take an employee earning SAR 8,000 per month (basic plus fixed allowances) who has completed seven years of service and is terminated by the employer:
| Period | Calculation | Amount |
| First 5 years | (SAR 8,000 ÷ 2) × 5 | SAR 20,000 |
| Remaining 2 years | SAR 8,000 × 2 | SAR 16,000 |
| Total EOSB | SAR 36,000 |
That is the full entitlement on employer-initiated termination. Resignation changes the number, which is the part most people get wrong.
Resignation Reduces the Award — Unless You Have Been There Long Enough
If the employee resigns rather than being terminated, Article 85 scales the entitlement down based on length of service:
- Less than 2 years: nothing is due
- 2 to 5 years: one-third of the full award
- More than 5 but less than 10 years: two-thirds of the full award
- 10 years or more: the full award, exactly as if the employer had terminated the contract
Using the same SAR 36,000 example above, an employee who resigns after seven years — sitting in the “more than 5 but less than 10” band receives two-thirds: SAR 24,000, not the full SAR 36,000 they would get on termination.
There is one exception worth knowing regardless of tenure: a woman who resigns within six months of marriage, or within three months of childbirth, is entitled to the full EOSB award regardless of how long she has worked there. This overrides the ordinary resignation scale entirely.
Can the Formula Be Changed by Agreement?
To a limited extent, yes. Article 86 allows the employer and employee to agree a different EOSB arrangement in writing. If the contract is silent on this, the statutory formula applies in full an employer cannot simply decide informally to calculate it differently. Get this in writing, or expect the default rule to govern.
GOSI: The Monthly System Running Alongside It
GOSI, the General Organization for Social Insurance, is a completely different mechanism, and the rules differ sharply depending on nationality.
For Saudi nationals, contributions fund a pension, occupational hazard coverage, and SANED the unemployment insurance branch that supports Saudi nationals who lose their job involuntarily. Rates depend on registration date:
- Registered before 3 July 2024: combined rate of 21.5% (employer 11.75%, employee 9.75%)
- Registered on or after 3 July 2024, under the New Social Insurance Law: combined rate starting at 22.5%, rising by 0.5 percentage points annually, reaching 23.5% from 1 July 2026
For non-Saudi employees, the position is much simpler: there is no deduction from the employee’s salary at all. The employer alone pays 2% of the contributable wage for occupational hazard insurance. Expatriate workers are not covered by the pension branch or SANED.
The contributable wage is capped at SAR 45,000 per month contributions do not increase further above that ceiling, regardless of actual salary.
GOSI and EOSB Do Not Offset Each Other
This is the point that causes the most confusion, so it is worth stating plainly: GOSI contributions and the end-of-service benefit are two separate entitlements. Paying into GOSI throughout employment does not reduce what is owed as an EOSB gratuity when the employment ends, and vice versa. An employee, Saudi or expatriate, generally leaves a job with both a GOSI-linked position (a pension record for Saudi nationals, or simply no ongoing entitlement for expatriates) and a separate lump-sum EOSB calculated entirely under Articles 84 to 87.
What This Means Practically
For employers: your EOSB liability is a real, calculable number that grows every year an employee stays, and it needs to be budgeted for, not treated as a surprise at exit. Getting the wage base wrong using basic salary only, when fixed allowances should be included is one of the more common and expensive mistakes we see in termination disputes.
For employees: know your number before you resign, not after. The gap between resigning at year four (one-third entitlement) and year ten (full entitlement) is significant, and timing a departure with this in mind is a legitimate part of planning an exit.
For both sides: the final settlement on leaving a job is usually more than just the EOSB figure unpaid salary, unused leave pay, and any outstanding commissions typically form part of the same settlement calculation. Getting the full picture right avoids a dispute later, and if a dispute does arise, our guide to Saudi labor law compliance and employee disputes covers how those disagreements are generally resolved.
Where This Connects to Probation and Contract Terms
If the employment relationship ends during a probationary period, none of the above applies no EOSB is due during probation, regardless of how it ends. We cover the current probation rules, including the 2025 changes, in our guide to the Saudi labor law probation period. And because so much of an EOSB dispute traces back to how the original contract defined “wage,” getting that clause right at the hiring stage is worth the same attention we recommend for contract clauses every Saudi business should add before signing.
How We Help
We advise employers on calculating EOSB liability correctly, drafting Article 86 alternative arrangements where appropriate, and resolving disputes over final settlement figures. For employees, we review whether an offered settlement actually reflects what the law requires before you sign anything.
Our full range of legal services in Saudi Arabia covers employment matters from contract drafting through to exit disputes.
Common Questions
How is end-of-service benefit calculated in Saudi Arabia?
Half a month’s wage for each of the first five years of service, plus a full month’s wage for each year after that, based on the employee’s Actual Wage basic salary plus fixed allowances such as housing and transport. Partial years are counted proportionally.
Does resigning reduce my end-of-service benefit?
Yes, unless you have completed ten years of service. Under Article 85, resignation before two years pays nothing, two to five years pays one-third of the full amount, and more than five but less than ten years pays two-thirds. At ten years or more, resignation pays the same as termination the full amount.
Do GOSI contributions count toward my end-of-service benefit?
No. GOSI and the end-of-service benefit are entirely separate. GOSI is an ongoing monthly social insurance contribution; the end-of-service benefit is a one-off lump sum calculated under different rules entirely. One does not offset or reduce the other.
Do expatriate employees pay into GOSI?
No. Non-Saudi employees have no GOSI deduction from their salary. Their employer pays a flat 2% of the contributable wage for occupational hazard insurance only, and expatriates are not covered by the pension or SANED unemployment branches.
What counts as “wage” for the end-of-service calculation?
Basic salary plus fixed allowances that form part of the employment contract, most commonly housing and transport allowances. Variable payments such as commission or discretionary bonuses are generally treated differently confirm how your specific contract defines these before relying on an estimate.
Is there any exception to the resignation reduction rules?
Yes. A woman who resigns within six months of marriage, or within three months of childbirth, is entitled to the full end-of-service benefit regardless of her length of service, overriding the ordinary tiered reduction.
Can my employer change how my end-of-service benefit is calculated?
Only with a written agreement under Article 86. Without one, the statutory formula in Articles 84 and 85 applies in full, and an employer cannot informally apply a different method.
What is the GOSI wage ceiling in 2026?
Contributions are calculated up to a contributable wage of SAR 45,000 per month. Above that figure, the GOSI deduction does not continue to increase, regardless of actual salary.
