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?