The Saudi Resignation Rule — How 1/3 and 2/3 Cut Your End of Service Award

In Saudi Arabia, the end of service benefit (ESB) you have earned does not always reach your hand in full when you resign. The Saudi Labour Law (Royal Decree No. M/51) sets two separate rules that work together: one builds the award up over time, and the other can scale it back down if you are the one who chooses to leave.

The build-up rule is Article 84 — it sets how the award accrues for each year of service. The reduction rule is Article 85 — it decides how much of that accrued award you actually receive when you resign. This second rule is the one workers most often miss, because the cut is invisible until the final settlement lands and the figure is smaller than expected.

The reduction works on a sliding scale tied to your total years of service, and the thresholds matter enormously. Crossing from one tier to the next can change your payout by tens of thousands of riyals for the sake of a few extra months on the job. This guide explains the tiers, shows the math at each one, and covers the two situations where you keep the full award even though you resigned.

To see your own figures with the resignation reduction applied step by step, use our KSA EOSB Calculator.

Under Article 85, the share of the end of service award you receive on resignation depends on how long you have served:

Two points are easy to get wrong. First, "the award" in this table is the full figure calculated under Article 84 first — the reduction is applied on top of that accrued amount, not instead of it. Second, these tiers apply only when you resign. If your employer terminates you, or a fixed-term contract simply expires, Article 85 does not bite at all — you receive the full Article 84 award regardless of length of service (subject to the misconduct exceptions in Article 80).

How the Award Accrues First (Article 84)

Before any reduction, the gross award builds up under Article 84, based on your last actual wage (basic pay plus fixed, regular allowances — not basic salary alone):

• Half a month's wage for each of the first 5 years of service.
• One full month's wage for each year after the fifth.
• Partial years count pro-rata.

So the order of operations is always: Article 84 builds the gross award → Article 85 applies the resignation share → that is your ESB. Get that sequence straight and the rest is arithmetic.

All four examples below use a last total monthly wage of SAR 9,000 (basic + fixed allowances), so you can see the tier effect cleanly.

Under 2 years — nothing

You resign after 18 months. Article 84 would accrue roughly 1.5 × 0.5 × SAR 9,000 = SAR 6,750 gross — but because you have served less than 2 years and you resigned, Article 85 reduces your share to nil. Final ESB: SAR 0.

2 to under 5 years — one third

You resign after 4 years. Article 84 accrues 4 × 0.5 × SAR 9,000 = SAR 18,000 gross. The 1/3 tier applies: SAR 18,000 × 1/3 = SAR 6,000.

5 to under 10 years — two thirds

You resign after 7 years. Article 84 accrues (5 × 0.5 × SAR 9,000) + (2 × 1.0 × SAR 9,000) = SAR 22,500 + SAR 18,000 = SAR 40,500 gross. The 2/3 tier applies: SAR 40,500 × 2/3 = SAR 27,000.

10 years or more — full award

You resign after 11 years. Article 84 accrues (5 × 0.5 × SAR 9,000) + (6 × 1.0 × SAR 9,000) = SAR 22,500 + SAR 54,000 = SAR 76,500 gross. At 10+ years there is no reduction at all, so you receive the full SAR 76,500.

Notice how the gross award and the share both climb as service lengthens — which is exactly why the months either side of a threshold are worth real money. Run your own numbers in the KSA EOSB Calculator to confirm where you sit.

This is the part of the rule worth real money: because the resignation share jumps in steps rather than rising smoothly, a short delay in your resignation date can be worth far more than the extra salary you earn in that time.

Crossing the 5-year line (1/3 → 2/3)

Take a worker on SAR 9,000 who is 4 years and 9 months into the job and thinking of resigning.

• Resign now (4.75 years, 1/3 tier): gross ≈ 4.75 × 0.5 × SAR 9,000 = SAR 21,375, then × 1/3 = ≈ SAR 7,125.
• Wait 3 months to hit 5 years (2/3 tier): gross = 5 × 0.5 × SAR 9,000 = SAR 22,500, then × 2/3 = SAR 15,000.

Three extra months on the job roughly doubles the award — a swing of about SAR 7,875 — on top of the salary you earn in those months. The jump comes almost entirely from moving from the 1/3 share to the 2/3 share, not from the small extra accrual.

Crossing the 10-year line (2/3 → full)

The effect at the 10-year mark is even larger, because you both unlock the full (rather than 2/3) share and each year past the fifth now accrues a full month instead of half. A worker who resigns at 9 years and 8 months takes the 2/3 share of their accrued award; the same worker who waits to 10 years takes 100% of a larger accrued award. The few months can be worth a substantial five-figure sum.

How to use this

This is not advice to stay in a job you should leave — it is information so your resignation date is a deliberate choice, not an accident. If you are within a few months of a tier (the 2-year, 5-year, or 10-year line), it is worth modelling both dates before you hand in your notice. Our Stay-or-Go tool compares "resign now" against "resign after crossing the next threshold" so you can see the difference in riyals.

Article 85 carries an important carve-out: if you leave your job because of a force majeure beyond your control, you receive the full end of service award regardless of the 1/3 and 2/3 tiers — as though the reduction never applied.

"Force majeure" here means a compelling circumstance outside your control that forces the departure, rather than an ordinary voluntary resignation. Because it overrides the standard reduction, how a separation is recorded matters: a departure logged as a plain "resignation" will have the tier reduction applied automatically, even where a force-majeure basis may exist. If you believe your departure was forced by circumstances beyond your control, this should be documented at the time, not argued after the settlement is paid.

This is a narrower exception than it sounds and turns on the specific facts, so where the basis for leaving is genuinely outside the ordinary, it is worth confirming how the exit is being categorised before you sign. If your settlement applied a 1/3 or 2/3 reduction and you think the full award was due, use our Settlement Checker to pinpoint the gap and read the plain-language breakdown of the law in our Saudi Labour Law end of service guide.

A separate provision, Article 87, gives a female employee the full end of service award — with no Article 85 resignation reduction — when she resigns within a set window around a major life event:

• Within 6 months of her marriage, or
• Within 3 months of giving birth.

Where Article 87 applies, the resignation is still a resignation in every other respect, but the 1/3, 2/3 and under-2-year tiers do not reduce the award — she receives the full amount accrued under Article 84. The key practical points are the timing windows and the documentation: the resignation needs to fall inside the 6-month (marriage) or 3-month (childbirth) window, and the connection to that event should be evidenced.

This means a female employee with, say, 3 years of service who would otherwise receive only 1/3 of her award on resignation can instead receive the full amount if she resigns within the qualifying window — a material difference. If this could apply to you, model the full-award figure in the KSA EOSB Calculator and check it against what your employer offers.