Saudi Arabia: What is an End of Service Benefit?

Many expatriates elect to work in a place such as Saudi Arabia due to the lucrative incentives they are offered.  These incentives include generous tax free salaries (in most cases), housing allowance, transport allowance, medical coverage, paid vacation and ultimately, in lieu of retirement, an End of Service Benefit (ESB).

There are expatriates who spend most of their life working in the Kingdom for an employer.  While they receive a decent salary and incentive package it is unlikely that funds are removed from the salary towards retirement as is common in other places of the world.  This is where the ESB is key to an expatriate whose work in the Kingdom comes to an end after many years of faithful service.

The ESB is provided in lieu of a standard retirement and if invested wisely, the expatriate has the funds for a comfortable retirement upon departure from the Kingdom.

According to the Saudi Arabia Board of Labor, Article 84 of the Labor Law has explicitly stated the benefits to be paid for the expatriates. It is proportional to the number of years he or she has stayed with a particular sponsor.

There are certain exceptions, though. If an expatriate has resigned within the first two years of service, he is not entitled to any ESB. If he has resigned between two to five years of continuous service, he is entitled to one third of the salary as ESB. If he has resigned between five years up to ten years of continuous service, he is entitled to two thirds of the salary and to a full salary, beyond 10 years of continuous service. 

 

It may be confusing for an expatriate to determine what ESB he or she is entitled to.  The equation has been explained to me as follows:  An expat professional must work for two years before it kicks in. Then for the first five years you get one half months salary per year and each year after that it is one months salary. However,  the ESB is calculated on the Basic salary (paid per year) plus the benefits given which should total max up to 2 months Basic salary per year. If it is more, then it is calculated on the greater sum. This is called the Actual Salary and the ESB is then done….one half months salary for the first 5 years based on the Actual Salary and one month each year after. Add it up and that is the ESB payment that should be made. Some employers give one month per year period and also add a bonus to it. However that is up the individual employer.  The required amount is 1/2 month for the first 5 yrs and then 1 month each year after based on Actual salary. Actual salary is figured using your housing costs, car/transportation costs or worth, any other benefits given.

 

The  Ministry of Labor/Law in Saudi Arabia will not  uphold a contract that is not  written in Arabic…gets tossed out. Usually they are written in both Arabic and English. AND…the contract does not need to be in writing…it is acceptable  under the Law verbally. A lot of expats don’t know that. But if it is a written one it had better be in both Arabic and English and they aren’t going to bother with one written by some legal group outside of here either.

 

The ESB is to be paid to professional employees no later than ONE WEEK following the last paycheck and non professionals no later than TWO WEEKS following the last paycheck.

Western expats need to understand their ‘rights’ under the Law. They should also be aware that there can be a distinction in how the law is followed depending on whether an expatriate has a company as an employer or worked directly for an individual.  There are sadly documented instances of some expatriates who have worked exclusively for some members of the Royal Family have not received an ESB in a timely manner, if at all.

 

Muhammad Jaber Nader also gives a detailed explanation to Arab News on how to calculate the End of Services Benefit.

If you have been an expatriate in Saudi Arabia, please share your experience in obtaining your ESB.  Were you able to obtain it in a timely manner and in the amount expected?  Or, have you been unable to obtain your ESB?  If so, what difficulties have you encountered?

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16 Responses

  1. “The Ministry of Labor/Law in Saudi Arabia will not uphold a contract that is not written in Arabic…gets tossed out. Usually they are written in both Arabic and English. AND…the contract does not need to be in writing…it is acceptable under the Law verbally. A lot of expats don’t know that. But if it is a written one it had better be in both Arabic and English and they aren’t going to bother with one written by some legal group outside of here either.”

    The language of the contract is so critical. Wonder how many ex-pats have been caught on this one.

  2. @Jean – too many!

  3. I recall reading some time ago in the Arab News that over and above your total package used in calculating ESB an annual incentive if paid for more than 3 consecutive years is also included using the formula ; last 3 years incentive added together and divided by 36. This figure is then added to your final salary package in computing ESB. Can you verify that please?

  4. i’m working for 1yr of one korean company here at saudi arabia i was plan to going home after finish my 1year. because my contract is yearly only. my salary is 1300$. how can i calculate my benefits & what is my other benefits receive before i going home.

  5. i’m working for almost 32 years in the ministry of health but then i was stopped work last muharram 1433. my contract date is 24/7/1401. during this period i was having late from my annual vacation and there is one year deduction for my benefits. our maximun benefits is only until 50, 000 riyals only no matter how long you worked. i came to know that my benefits will be only 47,000 because according to our salary section one year is been deducted from my benefits. my question is how you are going to deduct the one year from the number of years experience or from 50, 000 direct. to think i should have been getting 67,000 sr but because the ministry of health rules it’s only 50,000 why then it is only 47,000 be given to me.please what is the law for this. according to them i’m only the first one who is asking about this issue.

    example: if i’m working for 10 years and i’m receiving 4,000 riyals salary. i have one year deduction because of late from vacation. it will easily they will deduct one year from the years of experience. so the calculation is 2,000 x 9 years and benefits will be 18,000 riyals. so what about those more than 30 years with 1 year deduction how is it calculated?
    thank you.

  6. I was laid off from work last muharram and up to this date, I didnt recieve my ESB and to top it all, we are asked to provide letters like proof that we worked from this day to that day. this is so ridiculous when everything was in the MOH system. Up to now, I have no idea when I will receive this money. Too many paperworks that we have to process by ourselves, most in arabic…can u believe it? this is just too much for us

  7. good afternoon. just want to know how much it will be my end of service benefits exactly coz according to our hospital MOH will give only half month salary with all service years. i worked for 8 years with one delay from my vacation. am i entitled according to article 84 of saudi labor code or no?

  8. Dear,

    Iam working in the bank through as consulting company & every year my consulting company is taking signature on no objection certificate (ESB), we dnt have any ESB , i ask them regarding the issue their telling it is policy of their company but its against the saudi labour law .

    so guide me how to claim my end of service benefit from my company

    Thanks
    showkath

  9. I have been working for a company for 4 years in KSA, Can I avail of my ESB for 4 years even though have plans on quitting my job?

  10. I mean i have “NO” plans of quitting my job yet

  11. Well, I don’t know what to say! I just read in a Saudi newspaper that Carol Fleming has sadly passed away. I’m so sorry for that. Rest in peace, American Bedu.

  12. Dear Sir, I am working in a contruction company for the last 22 years. My salary is 3700 Basic. How much I will get ESB once i resign from job and go back to my country.

  13. Sir, is there any new of ESB in Saudi Arabia. I heard that 7 days salary in one year if you contine your job 3 years, will be given

  14. my contract will be cease on september 2013 ( four years ) as a personal assistant. would I get those benefits mentioned here even if my visa is not the same as my work?

  15. I mean I actually resigned on my 4th year ( september ) but was asked by my employer to extend until october for a chance to have enough time of endorsement to the new guy who will replace my post.

  16. i am working in a hospital here in al-khobar and some staff who went for exit are being deducted 10% of their salary/ year, for their housing accommodation. how come? for free housing accommodation are included in our contract even 1 free meal during our duty hours but sadly we don’t benefit, now our rights for free housing accommodation? i am actually planning to continue my contract but just to take my gratuity but now so many changes occur in this hospital, if u want to take your gratuity u go for exit no reentry visa given. i am going for exit with no choice but deducting almost 5,000 riyal from my salary is big enough to pay for the operation of my son.
    pls. extend any help, or interfer on my behalf. tell me what and where and who to contact. GODBLESS!

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