Is Saudi Gratuity Based on Basic or Gross Salary?

Written by Usama Afzal, Founder & Editor, GratuityHisab. Last updated: October 2026. Based on the Saudi Labour Law; not legal advice.

Short answer

No. Saudi gratuity is not based on basic salary alone — and not on the everyday meaning of 'gross salary' either. Under Article 84 of the Saudi Labour Law (Royal Decree M/51), your end-of-service award is calculated on your last actual wage: your basic salary plus fixed allowances such as housing and transport. Example: a SAR 6,000 basic + SAR 1,500 housing + SAR 500 transport = SAR 8,000 actual wage, and with 7 years of service that pays SAR 36,000 — a full SAR 9,000 more than a basic-salary-only calculation.

Is Saudi gratuity based on basic salary or gross salary?

Imagine this: after 7 years working in Jeddah, you sit down to sign your final settlement. Your employer has calculated your Saudi gratuity on your basic salary alone — and in that one line, they have quietly kept SAR 9,000 that was rightfully yours. Stories like this appear on worker forums every single week, and they almost always come down to one question: is Saudi gratuity based on basic salary, or on the full pay you actually received?

Here is the answer in one line: Saudi gratuity is based on neither basic salary alone nor the everyday meaning of 'gross salary'. The law uses its own term — the full wage figure — which means your basic salary plus fixed allowances like housing and transport that are written into your contract. If your employer is calculating your gratuity on basic salary only, the maths is on your side, not theirs. Run your own numbers with our free Saudi gratuity calculator before you sign anything.

What the Saudi Labour Law actually says about your salary figure

Article 84 of the Saudi Labour Law (Royal Decree M/51) sets the rule plainly: on the end of the work relation, the employer pays an end-of-service award of half a month's wage for each of the first five years and one month's wage for each following year, calculated on the basis of the last wage, with part years paid pro-rata. Note the word it uses: wage, not basic wage.

What is the 'actual wage' in Saudi Arabia?

Article 2 of the law defines the actual wage as the basic wage plus all allowances and increments payable to the worker in return for their labour. For a normal EOSB calculation in Saudi Arabia, your full wage figure is the last monthly figure made of your basic salary plus every fixed, regular allowance — typically housing and transport. Variable pay is a different story, covered below.

This is what separates Saudi Arabia from its neighbours: the UAE, Qatar and Oman calculate gratuity on basic salary only, while Saudi Arabia and Kuwait use the full wage including regular allowances — a difference that alone changes the result by 30–50%. For the complete step-by-step formula, see our guide on how to calculate gratuity in Saudi Arabia.

What counts and what doesn't: the include / exclude list

Because Saudi gratuity is based on the full wage figure rather than the basic salary, these parts of your pay go into the calculation:

Basic salary — the fixed monthly figure in your contract
Housing allowance — if it is a fixed monthly amount
Transport allowance — if it is a fixed monthly amount
Other fixed contractual allowances — any regular, fixed amount written into your contract or payslip (food, mobile, etc.)

And these stay out of the calculation:

Overtime pay — however many extra hours you worked
One-off or discretionary bonuses — annual bonuses, performance awards, festival payments
Commissions — unless your contract clearly says they count as part of your wage; commissions can be excluded only with a clear written agreement
Reimbursable expenses — money that merely repays what you spent

Important: the housing allowance is the single biggest fight in Saudi end-of-service cases. If it is a fixed monthly line on your contract, it counts — full stop. Our guide on whether the housing allowance is included in gratuity walks through exactly how to prove it at final settlement.

Worked example: SAR 8,000 actual wage vs SAR 6,000 basic, 7 years of service

Meet Ahmed, a technician in Riyadh. His contract says: basic salary SAR 6,000, housing allowance SAR 1,500, transport allowance SAR 500. He worked 7 full years, and his contract ended normally. Because Saudi gratuity is based on the full wage figure — not basic salary alone — the maths runs like this:

Find the full wage figure. 6,000 + 1,500 + 500 = SAR 8,000.
Count the award months. First 5 years at half a month each = 2.5 months. Years 6–7 at a full month each = 2 months. Total = 4.5 months.
Multiply. 4.5 × 8,000 = SAR 36,000.

Watch out: if Ahmed's employer had calculated Saudi gratuity on basic salary only, he would have received 4.5 × 6,000 = SAR 27,000. That SAR 9,000 gap is exactly what the basic-salary-only trick costs a worker — and under Article 84 it is legally Ahmed's money, not the company's. Always compare the employer's figure against your own calculation before signing.

Saudi gratuity table: actual wage vs basic salary only (2026)

Every figure below assumes the 'basic salary only' column is 75% of the full wage figure — a very common contract split. Both columns use the Article 84 formula: 1.5 months for 3 years, 2.5 months for 5 years, 7.5 months for 10 years. This is how much of your money the basic-salary-only method silently removes:

Actual wage / month	Basic-only / month	3 years: actual	3 years: basic-only	5 years: actual	5 years: basic-only	10 years: actual	10 years: basic-only
SAR 5,000	SAR 3,750	7,500	5,625	12,500	9,375	37,500	28,125
SAR 6,000	SAR 4,500	9,000	6,750	15,000	11,250	45,000	33,750
SAR 8,000	SAR 6,000	12,000	9,000	20,000	15,000	60,000	45,000
SAR 10,000	SAR 7,500	15,000	11,250	25,000	18,750	75,000	56,250
SAR 12,000	SAR 9,000	18,000	13,500	30,000	22,500	90,000	67,500

Notice the pattern: the longer you work, the more the basic-salary-only shortcut costs you — after 10 years on a SAR 12,000 full wage figure, the gap is a staggering SAR 22,500. And unlike the UAE, Saudi Arabia sets no 2-year wage cap on the award, so your entitlement keeps growing with every year of service. For more year-by-year numbers, see our guide on gratuity after 5 years in Saudi Arabia.

Watch out: how some employers shrink your wage figure

Important: because Saudi gratuity is based on the full wage figure and not the basic salary alone, any employer calculation that uses basic salary only is legally wrong — even if it is printed on an official-looking settlement sheet. You are entitled to the difference, and you can raise it through the labour office if the company refuses to correct it (our guide for unpaid gratuity in Saudi Arabia shows the complaint steps).

Three tricks to watch for at final settlement:

The basic-only shortcut. The most common one: the employer quietly drops the allowances column from the calculation. Always demand the breakdown in writing.
Re-labelling fixed allowances as 'variable'. A housing allowance that arrives every month, in the same amount, is a fixed allowance — renaming it does not change the law.
Mid-service contract amendments. If you signed an amendment that moved part of your basic into 'allowances' or reduced a fixed allowance, your full wage figure shrank with it. Never sign such an amendment without understanding the gratuity cost.

Your best defence is simple: keep a copy of your contract and every payslip, photograph the salary-breakdown page, and run your own figure through the Saudi gratuity calculator before you attend the settlement meeting.

Does resigning change the basic-salary rule?

No — the wage basis stays the same. Whether you resign or the contract ends, Saudi gratuity is based on the full wage figure, never the basic salary alone. What changes on resignation is only the amount, under the Article 85 tiers:

Under 2 years: nothing — no gratuity at all if you resign
2 to 5 years: one third of the full Article 84 award
5 to 10 years: two thirds of the full award
10 years or more: the full award, same as termination

Example: Ahmed's SAR 36,000 award (7 years, SAR 8,000 full wage figure) becomes SAR 24,000 if he resigns with 7 years (two thirds) — but it would have been only SAR 18,000 if the basic-salary-only trick had also been applied. See resigning before 2 years in Saudi Arabia for the zero-entitlement edge cases.

Two more things workers get wrong

There is no maximum. Unlike the UAE's two-year-wage ceiling, Saudi law caps nothing — your end of service benefits in Saudi Arabia keep growing with every year you work. A 15-year worker on SAR 10,000 full wage figure is owed 12.5 months = SAR 125,000.

Domestic workers are a separate case. This entire actual-wage rule covers private-sector workers under the Labour Law. Domestic workers follow separate regulations (one month's wage after four consecutive years) and are not covered by Article 84 — a different calculation entirely.

And remember: your final settlement is more than gratuity. Unused annual leave is also cashed out — see how unused leave is paid — and check your Saudi notice period rights before your last day.

Related guides

Work out your own amount

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Sources

This guide is based on the Saudi Labour Law (Royal Decree No. M/51), Articles 2, 84 and 85, cross-checked against specialist Saudi EOSB references. Labour laws are amended from time to time; for the latest version, always check the official gazette of Saudi Arabia.

Frequently asked questions

Is Saudi gratuity calculated on basic salary or gross salary?

Neither, exactly. Saudi gratuity is calculated on your last actual wage — basic salary plus fixed allowances such as housing and transport. Calculating on basic salary alone underpays you; 'gross salary' is not a legal term, so use the full wage figure from your contract.

What is the actual wage in Saudi Arabia for gratuity purposes?

The actual wage is your basic salary plus all fixed, regular allowances payable for your labour — typically housing and transport. It excludes overtime, one-off bonuses, commissions (unless your contract includes them) and reimbursable expenses.

Is housing allowance included in the Saudi gratuity calculation?

Yes, if it is a fixed monthly amount in your contract. A regular housing allowance is part of the full wage figure under Articles 2 and 84 of the Saudi Labour Law, so it must be included in the end-of-service award.

How much gratuity do I get after 5 years in Saudi Arabia?

With 5 years of service the full award is 2.5 months of your full wage figure — for example SAR 20,000 on an SAR 8,000 full wage figure. If you resign with exactly 5 years, you receive two thirds of that (about SAR 13,333).

Is there a maximum limit on Saudi gratuity?

No. Saudi law sets no cap on the end-of-service award, unlike the UAE's two-year-wage ceiling. Your award keeps growing with every year of service — 15 years on SAR 10,000 full wage figure pays 12.5 months, i.e. SAR 125,000.