How to Calculate End of Service Benefits (EOS) in Saudi Arabia

End of Service Benefits (EOS), known in Arabic as مكافأة نهاية الخدمة, are a legal entitlement for most employees working in Saudi Arabia under the Saudi Labor Law. As an employer, understanding how to calculate EOS accurately is essential for both compliance and financial planning.

What Are End of Service Benefits?

EOS is a lump-sum payment made to an employee when their employment ends — whether through resignation, termination, or retirement. It is calculated based on the employee's length of service and final wage.

The Basic EOS Formula

Under Article 84 of the Saudi Labor Law:

- For each of the first 5 years of service: the employee is entitled to half a month's wage per year.

- For each year beyond 5 years: the employee is entitled to a full month's wage per year.

Example: An employee who worked for 7 years with a final monthly wage of SAR 5,000 would receive:

- First 5 years: 5 × (5,000 ÷ 2) = SAR 12,500

- Next 2 years: 2 × 5,000 = SAR 10,000

- Total EOS: SAR 22,500

What Counts as the Final Wage?

The "wage" used in the EOS calculation typically includes the base salary and any fixed regular allowances (such as housing and transportation allowances), unless the employment contract specifies otherwise.

Resignation vs. Termination

If the employee resigns before completing 2 years of service, they are not entitled to EOS. If they resign after 2 years but before 5 years, they receive one-third of the full EOS. After 5 years of service, a resigning employee receives two-thirds of the full EOS. An employee who completes 10 or more years and resigns receives the full EOS amount.

If the employer terminates the employee without cause, the employee is entitled to the full EOS amount regardless of years of service.

Common Mistakes to Avoid

1. Using the wrong wage base (excluding regular allowances)

2. Not accounting for partial years of service

3. Miscalculating the resignation entitlement tiers

4. Forgetting to factor in unpaid salary or accrued leave balance

How Madar People Helps

Managing EOS calculations manually is error-prone and time-consuming. Madar People's payroll module automatically calculates EOS for each employee based on their contract start date, wage components, and reason for leaving — ensuring accuracy and compliance every time.

For more information about Saudi labor law compliance and how Madar People can help your business, request a free demo today.