Saudi Arabia has no personal income tax, but nearly every private-sector employee is entitled to an end-of-service benefit calculated under specific Labor Law rules that differ sharply between resignation and termination.

How End-of-Service Benefit (EOSB) Accrues

Under Article 84 of Saudi Labor Law, EOSB accrues at half a month's basic wage for each of the first five years, then a full month's wage for each year beyond five, with pro-rata calculation for partial years. There is no personal income tax in Saudi Arabia, making EOSB the primary end-of-employment financial calculation most workers need to plan around.

Resignation Reduces the Payout — Termination Usually Doesn't

Article 85 scales resignation payouts by tenure: nothing under 2 years, one-third from 2-5 years, two-thirds from 5-10 years, and the full amount beyond 10 years. Termination by the employer (outside Article 80 serious-misconduct cases) generally entitles the employee to the full accrued amount regardless of tenure — a meaningfully different outcome from resigning.

What Counts as "Wage" for the Calculation

Article 87 defines the wage used for EOSB as basic salary plus fixed allowances that are part of the contracted wage — discretionary bonuses and variable commissions are typically excluded.

Common Mistakes

  • Assuming resignation always pays the full amount. Article 85 reduces the payout unless you've completed at least 10 years — resignation and termination are calculated very differently.
  • Including bonuses and commissions in the wage base. Only basic salary and fixed contractual allowances count under Article 87's definition.

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Frequently Asked Questions

Do I get less EOSB if I resign in Saudi Arabia?

Yes, under Article 85: less than 2 years of service gets nothing, 2-5 years gets one-third of the full amount, 5-10 years gets two-thirds, and more than 10 years gets the full amount. Termination by the employer generally entitles you to the full amount regardless of tenure.

Is EOSB taxed in Saudi Arabia?

No — Saudi Arabia has no personal income tax on employment income, so end-of-service benefits aren't subject to income tax.