How is the gratuity calculated?
Under Article 84 of the Labor Law: half a month's pay for each of the first five years, and a full month's pay for each year after that. Your actual entitlement percentage of that amount depends on the reason for termination (Article 85): under 2 years with resignation = nothing; 2 to under 5 years = one-third; 5 to under 10 years = two-thirds; 10+ years, or employer termination = the full gratuity.
Disciplinary dismissal under Article 80 (for proven serious misconduct) forfeits the entire gratuity regardless of length of service.
FAQ
What's the difference between resignation and employer termination?
If the employer ends your contract (not a disciplinary dismissal under Article 80), you're entitled to the full gratuity (100%) regardless of service length. Resignation follows the tiered percentages in Article 85.
Do variable allowances (like commissions) count toward "last salary"?
No — the basis is the fixed, regular "actual wage" only (basic salary + fixed allowances like housing and transport), excluding one-time bonuses or variable commissions.
Source
Saudi Labor Law, Royal Decree No. M/51 and its amendments, Articles 80, 84, and 85.
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Last updated: July 2026
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