How do you calculate gratuity in Saudi Arabia?
Written by Usama Afzal, Founder & Editor, GratuityHisab. Last updated: October 2026. Based on the Saudi Labour Law; not legal advice.
To calculate gratuity in Saudi Arabia, multiply your last monthly wage by 0.5 for each of the first 5 years of service and by 1.0 for every year after that. You need at least 2 years of service to qualify, partial years count proportionally, and the wage used is your last actual wage — usually basic salary plus fixed allowances like housing, not overtime or bonuses. Example: a SAR 10,000 monthly wage with 7 years of service gives (5 × 0.5 + 2 × 1) × 10,000 = SAR 45,000.
How to calculate gratuity in Saudi Arabia: the short formula
If you only need the number, here is how to calculate gratuity in Saudi Arabia in one line:
| Years of service | Rate per year |
|---|---|
| Years 1–5 | Half (0.5) a month's wage per year |
| Year 6 onwards | One (1.0) full month's wage per year |
| Less than 2 years | No gratuity is payable |
| Partial years | Counted proportionally (6 months = half a year) |
The rest of this guide shows how to calculate gratuity in Saudi Arabia with your own numbers — which salary to use, two worked examples, a quick-reference table, and the traps that shrink the payout. To skip the maths, run our free Saudi gratuity calculator — it applies the same Article 84 formula.
The Saudi gratuity formula: Article 84 of the Saudi Labour Law
Every guide on how to calculate gratuity in Saudi Arabia starts from one article: Article 84 of the Saudi Labour Law. It says that when the employment relationship ends, the employer must pay an end-of-service award (the legal name for gratuity in Saudi Arabia) of half a month's wage for each of the first five years and a full month's wage for each year after that. Two conditions come with it:
- You must have completed at least 2 years of service. Under Article 85, resigning with less than 2 years earns no end-of-service award at all.
- The award is calculated on your last wage — the wage you were entitled to when the contract ended, not the salary you started on.
Two features make the Saudi gratuity calculation unusual in the Gulf. First, partial years count proportionally — 4 years and 6 months means 4.5 years in the formula, not 4. Second, unlike the UAE, Saudi law sets no two-year wage ceiling on the award: the longer you stay, the higher it grows.
Which salary goes into the gratuity calculation in Saudi Arabia?
The biggest source of disputes about how to calculate gratuity in Saudi Arabia is the wage figure itself. The law says the calculation uses your last actual wage — in practice that means your basic salary plus the fixed allowances written into your contract, such as housing and transport allowances. Variable pay — overtime, commissions and one-off bonuses — is not included.
How the wage basis is calculated in Saudi Arabia
Take this example: your basic salary is SAR 6,000 and your contract lists a fixed housing allowance of SAR 2,000. Your gratuity calculation wage is SAR 8,000 — so with 4 years of service, the gratuity is (4 × 0.5) × 8,000 = SAR 16,000. If the same worker had calculated it on the basic salary alone, the result would be only SAR 12,000 — a SAR 4,000 loss from one wrong number. Our dedicated guide on whether housing allowance is included in Saudi gratuity walks through the allowance rules in detail.
If you got a pay rise during your service, the whole service period is valued at the last wage — early low-salary years are not calculated separately.
Worked example: how to calculate gratuity in Saudi Arabia after 7 years
Take a worker with a last monthly wage of SAR 10,000 and 7 full years of service. Here is how to calculate gratuity in Saudi Arabia step by step:
- Split the service into the two bands. First 5 years: 5 years. Remaining years: 7 − 5 = 2 years.
- Apply the rates. First band: 5 × 0.5 = 2.5 months. Second band: 2 × 1.0 = 2 months.
- Add the months. 2.5 + 2 = 4.5 months' wage.
- Multiply by the last monthly wage. 4.5 × SAR 10,000 = SAR 45,000.
Check it yourself: the same formula in the Saudi gratuity calculator returns SAR 45,000 for SAR 10,000 over 7 years.
Gratuity in Saudi Arabia after 3, 5 and 10 years: quick table
The table below shows how to calculate gratuity in Saudi Arabia for the wages and service lengths people search for most:
| Last monthly wage | After 3 years | After 5 years | After 7 years | After 10 years |
|---|---|---|---|---|
| SAR 5,000 | 7,500 | 12,500 | 22,500 | 37,500 |
| SAR 8,000 | 12,000 | 20,000 | 36,000 | 60,000 |
| SAR 10,000 | 15,000 | 25,000 | 45,000 | 75,000 |
| SAR 15,000 | 22,500 | 37,500 | 67,500 | 112,500 |
Notice the jump: because the rate doubles after year 5, the award grows faster than your service years. For the exact 5-year figure, see gratuity after 5 years in Saudi Arabia.
How to calculate gratuity in Saudi Arabia on resignation
Resignation changes the number. Under Article 85, the full Article 84 award is only guaranteed when the employer ends the contract. If you resign, how to calculate gratuity in Saudi Arabia depends on your service length:
| Service at resignation | What you get |
|---|---|
| Less than 2 years | Nothing — no award is payable |
| 2 to 5 years | One third of the full Article 84 award |
| 5 to 10 years | Two thirds of the full Article 84 award |
| 10 years or more | The full award |
Example: with a SAR 9,000 wage and 6 years of service, the full award is (5 × 0.5 + 1 × 1) × 9,000 = 3.5 × 9,000 = SAR 31,500. Resigning at 6 years pays two thirds: SAR 21,000. See resigning before 2 years in Saudi Arabia for the edge cases.
Partial years and pay rises: two rules that change your number
Two fine-print rules change how to calculate gratuity in Saudi Arabia in real cases. First, partial years count proportionally. With 5 years and 6 months of service at SAR 12,000, the award is (5 × 0.5 + 0.5 × 1.0) × 12,000 = 3 × 12,000 = SAR 36,000 — those 6 months are worth SAR 6,000, so don't let anyone round them down to zero.
Second, a pay rise raises the whole award. Because the calculation always uses your last wage, a rise in your final year lifts the value of every earlier year too. Keep your latest salary letter — it is the proof of the wage figure.
7 mistakes in the Saudi gratuity calculation
- Using the basic salary alone and leaving out fixed allowances like housing — the most expensive mistake in how to calculate gratuity in Saudi Arabia.
- Applying the full-month rate to the first 5 years. Years 1–5 earn half a month each; only year 6 onwards earns a full month.
- Rounding partial years down instead of counting them proportionally.
- Expecting a full award after resigning at 3 years — that pays one third, not the full amount.
- Assuming a 2-year wage ceiling like the UAE — Saudi law has no such cap; the award keeps growing.
- Using your starting salary after a pay rise instead of your last wage.
- Signing the final settlement without a breakdown — if the employer won't pay, see what to do when your employer does not pay gratuity in Saudi Arabia.
Gratuity vs final settlement: what else you are owed
Knowing how to calculate gratuity in Saudi Arabia is only half the final settlement. On top of the end-of-service award, you are also owed: unused annual leave encashed at the last wage (see unused leave encashment in Saudi Arabia), notice-period pay if the notice period was not served, and any unpaid wages. Domestic workers follow separate regulations — see end-of-service rules for domestic workers in Saudi Arabia.
Your 5-minute Saudi gratuity checklist
- Confirm your service length — count months, not just years, and make sure it is at least 2 full years.
- Find your last wage figure — basic plus fixed allowances from your contract or latest salary letter.
- Split the years into the 0.5-rate and 1.0-rate bands and multiply by the last wage — or use the Saudi gratuity calculator.
- If you resigned, apply the one-third / two-thirds / full tier to the Article 84 result.
- Before signing the final settlement, check gratuity + unused leave + notice pay are all listed separately — if the employer refuses to pay, file a complaint (our employer-not-paying guide shows the steps).
Frequently asked questions
How do I calculate my gratuity in Saudi Arabia?
Multiply your last monthly wage (basic plus fixed allowances) by 0.5 for each of the first 5 years of service and by 1.0 for every year after that. You need at least 2 years of service. Example: SAR 10,000 wage and 7 years gives (5 × 0.5 + 2 × 1) × 10,000 = SAR 45,000.
What is the gratuity calculation formula in Saudi Arabia?
Gratuity = (years 1–5 × 0.5 + years 6+ × 1.0) × last monthly wage, under Article 84 of the Saudi Labour Law. Partial years count proportionally, and the wage used is the last actual wage including fixed allowances.
Is gratuity calculated on basic salary or gross salary in Saudi Arabia?
On the last actual wage — basic salary plus fixed allowances such as housing and transport that are written into your contract. Variable pay like overtime and bonuses is not included. Using the basic salary alone usually underpays you.
How much gratuity will I get after 5 years in Saudi Arabia?
With 5 years of service the award is 2.5 months' wage: on a SAR 10,000 monthly wage that is SAR 25,000; on SAR 8,000 it is SAR 20,000. If you resign with 5 years, you get two thirds of that amount (SAR 16,666 on a SAR 10,000 wage).
Do I get gratuity if I resign after 2 years in Saudi Arabia?
Yes, but reduced: resigning with 2 to 5 years of service pays one third of the full Article 84 award. Resigning with less than 2 years pays nothing. If the employer ends your contract, you get the full award once you have 2 years of service.
Work out your own amount
Enter your dates and salary to see your end-of-service pay instantly.
More questions
- Resign before 2 years: do you get gratuity?
- Is housing allowance included in gratuity?
- Company not paying gratuity? What to do
- How is unused leave paid?
Sources
This guide is based on the Saudi Labor Law (Royal Decree No. M/51). Labour laws are amended from time to time; for the latest version, always check the official gazette of Saudi Arabia.
