1. Implementing Payroll for Saudi Arabia
  2. Payment of Gratuity for Fixed and Unlimited Contracts for Saudi Arabia

Payment of Gratuity for Fixed and Unlimited Contracts for Saudi Arabia

As per the Saudi Arabia Labor Law, persons working in Saudi Arabia are entitled to gratuity payment on termination. The contract associated with the primary term or assignment is used for gratuity processing.

An employee is entitled to half month's basic salary for the first 5 years and full month's salary for each additional year. The gratuity is calculated based on the contract type, duration of service, and whether the employer or employee initiates the termination.

Payment of Gratuity for Employee on Fixed Contract

These rules for payment of gratuity are applicable to an employee on a fixed contract:

  • If the employer terminates the employee, then the full gratuity amount is paid.

  • If the employee resigns before completing 2 years, then no gratuity is paid.

  • If the employee resigns and has completed more than 2 years but less than 5 years, then one-third of the accrued gratuity amount is paid.

  • If the employee resigns and has completed more than 5 years but less than 10 years, then two-thirds of the accrued gratuity amount is paid.

  • If the employee resigns and has completed 10 years or more, then the full gratuity amount is paid.

  • If the contract has expired and the employee has completed more than one year of service, then the full gratuity amount is paid.

Payment of Gratuity for Employee on Unlimited Contract

These rules for gratuity payment are applicable to an employee on an unlimited contract:

  • If the employer terminates the employee, then the full gratuity amount is paid.

  • If the employee resigns before completing 2 years in the organization, then no gratuity is paid.

  • If the employee resigns and has completed more than 2 years but less than 5 years, then one-third of the accrued gratuity amount is paid.

  • If the employee resigns and has completed more than 5 years but less than 10 years, then two-thirds of the accrued gratuity amount is paid.

  • If the employee resigns and has completed 10 years or more, then the full gratuity amount is paid.

Note: As an exception, a female worker is entitled to the full gratuity amount if she resigns within 6 months of her marriage or 3 months after giving birth to a child. No minimum length of service is required in this case.