Employee Rights Upon End of Employment Contract

Ending an employment contract in Saudi Arabia triggers important rights and entitlements for employees. The Saudi Labor Law ensures that workers receive fair compensation, particularly the end-of-service benefit (Gratuity), which depends on the duration of service and the reason for contract termination. Understanding these rights is crucial for both employees and employers to ensure compliance with the law and prevent disputes.

What Are End-of-Service Benefits?

The end-of-service benefit is a financial entitlement guaranteed to employees when the employment relationship ends. It is calculated based on the employee’s last salary and the number of years served.

Key points:

It applies to both fixed-term and indefinite-term contracts.
The calculation differs based on the reason for termination (resignation, dismissal, or retirement).
It ensures fair treatment and recognition of employees’ service.

How Is the Gratuity Calculated?

According to Saudi Labor Law:

For the first five years of service:
Employees are entitled to half a month’s salary for each year.
For service beyond five years:
Employees are entitled to one full month’s salary per year.
For partial years:
The gratuity is calculated proportionally based on the fraction of the year completed.
Effect of Resignation:

Resignation after 2–5 years of service: one-third of the gratuity.
Resignation after 5–10 years: two-thirds of the gratuity.
Resignation after 10 years or more: full gratuity.

Example Calculation:

Last monthly salary: SAR 6,000
Total service: 7 years
First 5 years: 5 × (6,000 ÷ 2) = 15,000 SAR
Next 2 years: 2 × 6,000 = 12,000 SAR
Total gratuity: 27,000 SAR

Other Employee Rights Upon Termination

Employees are also entitled to:

Unpaid salaries up to the last working day.
Payment for unused leave.
Work experience certificate indicating job title and duration.
Compensation in certain cases, such as unlawful termination.

Employer Obligations

Employers must calculate and pay end-of-service benefits accurately.
They must issue final settlement and clearance certificates.
Non-compliance may lead to legal disputes filed at the Labor Office or Labor Court.

Steps to Claim Your Rights

Review your employment contract to understand entitlements.
Collect evidence of your salary, working period, and any unpaid benefits.
Submit a claim to the Ministry of Human Resources (MHRSD) or directly to the Labor Court if necessary.
Seek legal assistance from experienced labor lawyers or platforms like SNDK for guidance.

Frequently Asked Questions (FAQ)

Q1: How is the end-of-service benefit calculated?
A: Based on last salary, years of service, and reason for termination. Half a month per year for the first 5 years, one month per year thereafter.

Q2: What happens if I resign before completing 2 years?
A: Typically, you are not entitled to any gratuity.

Q3: Can my employer delay payment?
A: No. Labor law requires final settlement to be paid upon termination.

Q4: Are these rights applicable to non-Saudi employees?
A: Yes, but contracts and gratuity may differ for fixed-term agreements.

Q5: Can SNDK help with claims?
A: Yes. SNDK provides legal guidance, helps calculate entitlements, and assists in submitting claims.