Saudi Labor Law 2026: End of Service Benefits Complete Guide
End of Service Benefits (EOS) is one of the most important — and most misunderstood — obligations for Saudi employers. Here's everything you need to know.
What is End of Service Benefit?
EOS is a mandatory payment owed to employees when their employment ends, regulated by Article 84 of the Saudi Labor Law. It applies to all employees who have completed at least 2 years of service (for resignations) or from day 1 (for terminations).
The Official Calculation (Article 84)
For Termination by Employer
| -- | -- |
|---|---|
| First 5 years | ½ month salary per year |
| After 5 years | 1 full month per year |
Example: 8 years of service, SAR 10,000 basic salary
- First 5 years: 5 × (10,000 × ½) = SAR 25,000
- Next 3 years: 3 × 10,000 = SAR 30,000
- Total EOS = SAR 55,000
For Resignation
- Less than 2 years: No EOS
- 2 to less than 5 years: ⅓ of the calculated amount
- 5 to less than 10 years: ⅔ of the calculated amount
- 10 years or more: Full amount
What Salary is Used?
The calculation is based on basic salary only — not including allowances, commissions, or bonuses, unless the contract states otherwise.
Common Employer Mistakes
❌ Using total salary instead of basic salary — inflates the obligation ❌ Forgetting to accrue monthly — creates surprise liabilities at year-end ❌ Not accounting for partial years — final period must be pro-rated ❌ Applying 45-day rule for 10+ years — this does NOT exist in Saudi law
Monthly Accrual (Accounting Treatment)
Employers must accrue EOS monthly as a liability:
Debit: EOS Expense Credit: EOS Provision (Liability)
Monthly accrual = (Annual EOS entitlement) ÷ 12
What Can Be Deducted from EOS?
- Outstanding loans advanced to the employee
- Any financial obligations the employee owes the company
- Notice period payment if employee left without notice
Recent Changes in 2026
The Ministry of Human Resources confirmed that EOS calculation rules remain unchanged in 2026. However, enforcement has increased — HRSD now cross-references EOS payments with the WPS Mudad system.
Best Practice: Use a Payroll System
Manual EOS calculations lead to errors. A compliant payroll system will:
- Track each employee's tenure automatically
- Calculate monthly accrual per the law
- Generate EOS settlement statements
- Flag employees approaching milestones