How do I calculate end of service in Saudi Arabia?
| Intagya ERP
Work it out from the start date, the last wage and the reason the employment ends: half a month's wage for each of the first five years and a full month for each year after, then apply the resignation share if there is one. In Intagya ERP the Saudi HR app does it for you, adds the leave balance and tickets, deducts loans, custody and penalties, and gives the settlement and its journal entry.
A site engineer resigned after seven years and eight months. The HR manager opened an old Excel sheet, worked out the full award, and forgot the loan still unpaid and the laptop never returned. The paper reached finance, and the accountant found the mistake after it was signed.
The mistake keeps happening because the calculation is spread over three places: the employee file, the loans sheet and the custody book. The fix is to keep them in one place the calculation reads from.
How is the end-of-service award calculated under Saudi Labour Law?
Article 84 gives half a month's wage for each of the first five years and a full month for each year after, with parts of a year in proportion. The wage is the last actual wage, unless your company policy is more generous.
A hypothetical example: an employee earns 9,000 riyals and served seven years. Five years at half a month make 22,500, two years at a full month make 18,000, so 40,500 riyals when the contract ends or the company ends it.
Does an employee who resigns get the full award?
Usually not. Article 85 gives a third after two to less than five years, two thirds from five to less than ten, the full award after ten years, and nothing before two.
- End of contract or ended by the company: the full award.
- Resignation under article 87, such as force majeure: full as well.
- Dismissal under article 80, or ending during probation: no award.
In Intagya ERP you pick the reason from a list and the amount changes in front of you, with a written breakdown: years of service, wage, full award and the share owed.
What goes into the final settlement besides the award?
The unused leave balance, the tickets earned and the salary for days worked after the last payroll. Then what the employee owes comes off: the loan balance, custody not returned and approved penalties not yet deducted.
The system pulls these deductions from the loans, custody and penalties lists by itself. The settlement then goes to the HR manager for approval, finance posts it as a journal entry, and you print a page the employee signs.
Before you start on the system, enter each employee's last leave settlement date. The leave balance counts from it; without it the balance looks larger than it is.
How do I know what I owe my staff each month before they leave?
With monthly provisions. Every month the system works out leave pay, air tickets and the growth of the end-of-service award for each employee, and posts them as one entry. When someone leaves, the money is already set aside and the settlement does not surprise your monthly results.
The entry is split over your dimensions: region, project type, project, department and client. So you see what the waterfront project costs you in salaries and provisions, not just what the whole company costs.
And the leave settlement every year?
Same idea, smaller. Pick the employee and the day the leave starts: leave pay, the salary of worked days, tickets for the employee and dependants, and the exit and re-entry visa for non-Saudis show up, and loan installments falling due during the leave are deducted. After posting, a new balance starts from the day they return.
Will the system remind me before permits and contracts expire?
Yes. Residency permits, passports, IDs, contracts and medical cover sit in one list, and each kind has its own alert days, such as 60 days for residency permits. The HR responsible gets an alert, and another list shows who is missing a document you made required.
What does the system not do?
It does not send data to Mudad, GOSI, Qiwa or Muqeem by itself. It makes the files after checking the data, such as IBANs and residency numbers, and you upload them. The fingerprint device imports from a CSV file the device exports. And you enter the Nitaqat thresholds from the Ministry of Human Resources table for your activity, because they differ from one activity to another.
Start tomorrow with one step: enter each employee's start date and last leave settlement, then open the Saudi HR dashboard and look at what you owe your team today. That number alone is worth the hour.
Read the Saudi HR steps in the user guide
FAQ
Can I change how the end-of-service award is calculated?
Yes. In Settings you choose the full wage, the basic wage or basic plus housing, and change the first years and their rate if your policy is more generous than the law.
Are loans deducted from the settlement by themselves?
Yes. The unpaid balance of approved loans shows as a deduction line, and after posting its installments are marked paid so payroll does not deduct them again.
Does the system send the payroll file to Mudad directly?
No. It makes a file after checking IBANs, IDs and confirmed payslips, and you upload it. Compare its first rows with your bank template before the first upload.
Does the system show my Nitaqat band?
It always shows your Saudization rate, and shows the band once you enter the thresholds for your activity and size from the Ministry of Human Resources table.
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