Demystifying End of Service Benefit Calculation as per Saudi Labor Law

Are you an expat living and working in Saudi Arabia? Are you looking for a way to calculate your End of Service Benefit (ESB) in Saudi Arabia? If so, you might be familiar with the concept of End of Service Benefits (ESB).

End of Service Benefit in Saudi Arabia

The Saudi Ministry of Human Resources and Social Development has set out regulations that govern ESB in the Kingdom. 

End of Service Benefit (ESB) is a type of payment that an employee is entitled to after completing a contract with their employer.

It is a type of severance package that is intended to provide financial assistance as you transition to your next job or home country.

According to these regulations, an employee who has worked for an employer for more than one year or 90 days in the year prior to the date of termination in order to be eligible for Employment Separation Benefit.

The amount of ESB an employee is entitled to is based on the length of service and the salary that they earned while working.

The calculations are complex, but the basic formula is two weeks of pay for every year served, up to a maximum of twenty-four months.

When it comes to the timing of payment, an employer must pay ESB to an employee within ten days of the date of termination.

If the employer fails to do this, they can be fined and the employee may be able to bring a claim against them.

Employers should make sure that they are aware of the rules and regulations regarding the ESB calculation, in order to ensure that the correct amount is paid to the employee.

ESB Calculation

ESB is a mandatory system that employers must pay in order to cover the social and health benefits of their employees.

The Saudi Labor Law states that the end of service benefit is calculated as follows:

The ESB calculation for employees who have worked for:

1. For less than 1 year is calculated based on the employee’s wage for the last month of employment.
2. For more than 1 year is calculated based on the employee’s wage for the last month of employment, plus the average of the wages received during the last three years of service
3.  For less than 5 years of service: 1/3 of the average monthly salary for each year of service.
4.  For 5 or more years of service: 2/3 of the average monthly salary for each year of service.
5.  For 15 or more years of service: 1/2 of the average monthly salary for each year of service.

Using ESB calculator

Calculating the amount of End of Service Benefit due can be a tricky endeavor, but luckily there is a helpful calculator that can make the process much easier.

There may be many websites for ESB calculation but two main calculator to use are

Labor Education ESB calculator

The ESB calculator allows you to easily calculate the total amount of benefits you are entitled to receive when you leave your job provided by Ministry of Human Resource and Social Development 2023.

This includes any accrued vacation or sick pay, medical insurance, retirement plan contributions, and any other benefits you may be entitled to receive.

The calculator is easy to use and is available in both Arabic and English.

To use the calculator

• Go to website of Labor Education.
• Write details such as
  • Type of contract
  • Reason, Salary
  • duration of Service years
  • Number of months or days if remember but optional

You can then use this information to pay the correct amount of ESB for your employee.

MHRSD ESB calculator

The MHRSD ESB calculator is also free online tool provided by the Ministry of Human Resource and Social Development.

From these calculators you’ll be able to calculate your end of service benefits with just a few clicks.

It is important to note that employers must pay the ESB for each employee on a monthly basis. In addition, the ESB amount due must be paid before the 15th of the month for it to be considered valid.

In addition to the calculation of the end of service benefit, the Saudi Labor Law also states that the employer is required to pay additional benefits such as transportation and medical expenses for the worker.

Types of End-of Services

Employees in Saudi Arabia are fortunate to have various types of end-of-service benefits available to them. It is a form of compensation that employers are legally obligated to provide to employees when they leave their jobs.

End-of-service benefits are typically broken up into two categories

• Statutory benefits are benefits that are required by law
• Contractual benefits are those that are negotiated between the employer and the employee.

It is important for employees to understand the different types of benefits that are available to them so they can ensure that they receive the compensation they are entitled to.

Resignation and Benefits of End-of Services for Employee

When an employee resigns, it can be a stressful experience for both the employee and the employer.

There are a few reasons why an employee might choose to resign.

• desire for a change of pace
• a better opportunity elsewhere
• the need to take care of a family member or relative.

No matter the reason, it is important to ensure that the employee is treated fairly and that all the necessary paperwork is completed in a timely manner.

For this, ESB benefit is calculated based on the employee’s length of service and salary. In most cases, the longer the employee has been employed, the higher the benefit.

Years	Entitlement	Award	%Salary
Less than 2 yrs	No	No	No
2-5 years	1/3	Half Salary	16.67%
5-10 years	2/3	Full Salary	First 5 year=33.3% After 5 years=16.67%
Above 10 years		Full Salary	First 5 year=50% After 5 years=100%

The End of Service Benefit (ESB) is an important component of the resignation process. In order to ensure that the process is handled fairly, it is important to understand how the employee’s ESB is calculated, and any associated benefits and reasons.

It is important to note that the amount of the Employment Separation Benefit is not based on the reason for the resignation.

Special Cases of Employees

This blog post will also discuss the processes and calculations associated with calculating an employee’s entitlements in the case of their death, employee is imprisoned or terminated including how much an employee’s estate may be entitled to receive through an employee service benefit (ESB).

ESB is only available for employees who have been terminated or Imprisoned through no fault of their own, and the amount of the benefit is calculated differently than standard benefits. It is important for employers and employees to understand the calculation of ESB in these circumstances in order to ensure that they receive the correct amount of benefits.

If Employee Died

When an employee passes away, it can be a difficult and emotional time for their family and friends. It’s also important to consider the financial implications of the death of an employee for their employer.

When an employee dies, their employer is required to make certain payments to their estate. These payments may include any unpaid wages, vacation pay, or other benefits. In some cases, the employer may also be required to pay an employee service benefit (ESB) to the deceased employee’s estate or to their survivors.

In some cases, the ESB may be payable to the survivors of the deceased employee in the form of a life insurance policy. The amount of the life insurance policy will depend on the terms of the policy and the amount of the employee’s salary.

It is important for employers to remember that the payment of an ESB is a legal requirement. If an employer fails to pay the ESB, they may be subject to fines or other penalties.

Knowing the financial implications of the death of an employee can help make the process a little easier. Employers should be aware of their legal obligations to pay an ESB when an employee passes away.

If Employee Terminated

When an employee is terminated, the calculation of their ESB depends on the length of their employment, the amount of wages earned, and the amount of insurance payments they have made.

Years	Entitlement	Award	% Salary
Less than 5 yrs	Full	Half Salary	50%
Above 5 years	Full	Full Salary	First 5 year=50% After 5 years=100%

Generally, the longer the employee was employed and the higher the wages earned, the higher the ESB will be.

If the employee terminated for reasons that is described below then there will be different ESB conditions like as.

• Gratuity: This is an amount of money that must be paid to the employee upon the termination of the employment contract. Depending on the length of the employment, the gratuity can range from three weeks’ salary to one year’s salary.
• Severance Pays: This is a sum of money that is paid to the employee when the employment contract is terminated due to the employer’s fault, such as layoffs or the closure of the business. The amount of severance pay is typically dependent upon the length of the employment.
• Lieu of notice: Another type of end-of-service benefit is the payment in lieu of notice. This is a payment made to the employee if the employment contract is terminated before the due date. The amount of the payment is typically based on the length of the employment and the salary of the employee.

ESB is calculated using the employee’s highest quarter wages or the total wages earned in the base period, whichever is higher. The maximum benefit amount for terminated employees is half of the total wages earned in the base period, multiplied by the number of weeks of benefits to which the employee is entitled.

If Person is Imprisoned

For employees who are imprisoned, the calculation of their ESB is slightly different. In this situation, the employee is not eligible for ESB until their release from prison. At that time, they will be eligible for a maximum of 26 weeks of benefits, calculated using their total wages earned in the base period.

ESB for Domestic Workers

In order for employers to calculate the end of service benefits for domestic workers, they must provide wages, benefits, and other forms of compensation to a domestic worker upon the termination of employment.

The employer must then determine the number of years the employee has been in service, based on the start date of the job.

This number of years determines the length of the ESB period.

The End of Service Benefit period is calculated by multiplying the number of years of service by the current minimum wage rate.

 This rate is set by the government and is usually updated annually.

The rate is then multiplied by 21 days, which is the number of days employers are required to provide employees with their end of service benefits.

The ESB period also includes any unused vacation time that the employee has accrued. If the employee has not taken all of their accrued vacation days, then the employer must calculate the value of the unused vacation days and add it to the total ESB amount.

The ESB calculation also includes any additional benefits include medical coverage, housing allowance, and other forms of compensation. These benefits must be added to the total ESB amount.

Once the ESB calculation is complete, the employer must then pay the employee the total amount due. This payment must be made in full within one month of the employee’s last day of work. In some cases, the employer may be able to withhold the ESB payment until the employee’s final paycheck is received.

By taking the time to calculate the ESB amount, employers can ensure that their domestic workers are properly compensated for their service.

Wages in Saudi Arabia

Employee wages in Saudi Arabia are determined by a variety of factors. These include the employee’s job title, experience, and qualifications. The Saudi government has set a minimum wage for all employees in the Kingdom, which is currently SAR 3000 per month. This minimum wage does not include any type of allowances, which are provided to employees for things such as travel, housing, and food.

When it comes to employee wages, the employer has the responsibility of ensuring that the wages provided are fair and reasonable. Generally speaking, wages should be based on the employee’s job performance, qualifications, and experience. Additionally, wages should be in line with the current market rate for employees in the same position.

Employees in Saudi Arabia are also entitled to certain benefits and allowances. These benefits and allowances can vary depending on the employer and the length of employment. The most common benefits are Annual Leave, Sick Leave, and End of Service Benefits. Employees are also eligible for bonuses and other incentives depending on the employer.

When it comes to deductions from employee wages, employees in Saudi Arabia are subject to a number of taxes. These taxes include Zakat, a religious tax, and income tax. Additionally, employers may deduct certain fees from employee wages, such as recruitment fees or medical costs.

Conclusion

End of Service Benefits in Saudi Arabia is a type of payment that an employee is entitled to after completing a contract with their employer. ESB is based on the length of service and the salary that was earned while working. An employee who has worked for an employer for more than one year is eligible for ESB, and the employer must pay ESB to an employee within ten days of the date of termination. Employee wages in Saudi Arabia are determined by the employee’s job title, experience, and qualifications. Employees in Saudi Arabia are also entitled to certain benefits and allowances, and may be subject to certain deductions from their wages.

If you have any questions, please do not hesitate to reach out to us.

We are happy to help you find the right solution for your situation.

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