Saudi Arabia is the only GCC country where the way your job ends still changes what you receive. This guide walks through the formula, the resignation rules, the exceptions most people never hear about, and how to check your own figure.
Article 84 of the Saudi Labour Law sets the award at half a month's wage for each of the first five years of service and a full month's wage for each year after that. Parts of a year are paid in proportion, so eight months counts as two thirds of a year rather than being ignored or rounded up.
The rule applies to Saudi and non Saudi employees alike in the private sector. That makes Saudi Arabia different from the UAE and Bahrain, where nationals are covered by a pension scheme instead of employer gratuity. Saudi nationals also build GOSI pension contributions in parallel, but that doesn't remove their Article 84 entitlement.
The award is calculated on the last wage you received, and in Saudi Arabia that means the actual wage defined in Article 2: basic salary plus the fixed allowances paid with it, such as housing and transport. This is the single biggest difference from the UAE and Qatar, where only basic salary counts, and it's why Saudi figures often look higher than people expect.
Article 86 allows one exception. The employer and employee can agree in writing that commissions, sales percentages and similar pay that naturally goes up and down are left out of the wage used for the award. If your contract says this, only the fixed part of your pay counts.
Article 85 reduces the award when the employment ends because the employee resigned. The reduction depends on continuous service:
| Continuous service | Share of the full award on resignation |
|---|---|
| Less than 2 years | Nothing |
| 2 to 5 years | One third |
| More than 5 but less than 10 years | Two thirds |
| 10 years or more | The full award |
Because the reduction is so large, the difference between resigning at 9 years and 11 months and resigning at 10 years is worth a full third of your award. If you're close to a threshold, timing matters.
Amendments to the Labour Law came into force on 18 February 2025. They introduced a formal resignation process through Qiwa and a statutory definition of resignation. Some law firms now read that definition as linking resignation to fixed term contracts, which would mean an employee who ends an unlimited contract by giving notice is treated as ending it with notice rather than resigning, and the Article 85 reduction wouldn't apply.
This is an interpretation, not settled practice. Many employers still apply Article 85 to any employee who leaves voluntarily, and Labour Court decisions will decide how it's applied. Our calculator applies the reduction to resignations as the most cautious estimate. If you're on an unlimited contract and resigning, ask your HR department which approach they use and keep a record of how your exit was processed in Qiwa.
Several situations restore the full award even though the employee is the one who leaves:
Article 80 lists the cases where an employer can end the contract without notice or award, for example serious misconduct, assault, repeated unexcused absence beyond the legal limits, or disclosing trade secrets. The employer must follow the procedure in the law, including giving the employee a chance to respond. Dismissal under Article 80 is often disputed, and the burden is on the employer to show the grounds existed.
Article 88 sets the deadline. If the employer ends the contract, the award and other dues must be paid within one week. If the employee ends it, the deadline is two weeks. The employer can deduct amounts the employee genuinely owes the company, but not unrelated penalties.
If the numbers don't match, ask HR for their calculation in writing. Most differences come down to the wage basis or the treatment of the exit.
Calculate your gratuityChecked against the published labour law text for each country. Where the law is unclear or interpretations differ, we say so. Last verified 5 October 2026.