How to Calculate Gratuity in Saudi Arabia? [Updated 2024]

Gratuity in Saudi Arabia

Surely you want to learn about Gratuity in Saudi Arabia, both what it is, why it is important, and what its main function with us workers, let me tell you that here you will have a fully updated guide on this important topic.

In this article we will explore different points to take into account when calculating Gratuity in Saudi Arabia, the cases that are presented to us, and why it is a right among other extremely important things when calculating Gratuity in Saudi Arabia, so let us see what this incredible topic of conversation has to offer us.

What is gratuity and why is it important in Saudi Arabia?

Gratuity in Saudi Arabia

Our employer in Saudi Arabia makes a one-time payment as gratuity at the end of our employment contract. Saudi labor law stipulates gratuity as an important aspect of labor law.

The importance of the minimum wage in Saudi Arabia lies in its role as a financial guarantee for employees at the end of their employment relationship. Here are some examples of why gratuity is so important in Saudi Arabia:

  • Employee Recognition: Gratuity is a meaningful tribute to our performance, acknowledging our importance and loyalty to an organization.
  • Financial Security: The bonus not only strengthens the bond between employees and employers but also provides financial security.
  • Legal Obligation: This is an employee’s right to the employer in case of termination of the contract.

Workers must also remember that the bonus is a vital part for us as it provides us with compensation at the end of the contract from our employer as an end-of-service benefit in Saudi labor law.

Eligible Criteria for End of Service Benefits (Gratuity) in KSA

To obtain the Gratuity in Saudi Arabia, we must take into account the evaluation criteria. To know how to calculate the gratuity in Saudi Arabia, it is necessary to have these notes to determine eligibility in obtaining end of service benefits Saudi labor law.

  • Termination of employment: Upon termination of our employment, we must receive the Gratuity in Saudi Arabia from our employer.
  • Calculation based on salary: The company calculates the gratuity based on the last salary in force.
  • Length of our service: if our service ends due to our resignation and our working years were better than (2) years and up to (5), we will not be entitled to one-third of the gratuity.
  • More than 5 years of work: if our work ends due to our resignation and we worked for more than (5) years and it is less than (10) years, we will be entitled to two-thirds of the Gratuity in Saudi Arabia.
  • Married workers or workers who give birth: We will be entitled to our reward if our work ends within (6) months of our marriage or three months since we gave birth.
  • Our Rights: Our bonus is a right as a workers. Saudi labor law obliges our employer to pay us at the end of our employment contract, whether it is a fixed-term or non-fixed-term contract.

Factors Of Affecting the Benefits of Gratuity in Saudi Arabia

Several factors directly affect our calculation of Gratuity in Saudi Arabia. But here we will tell you the main approaches that can affect your gratuity calculation.

  1. Basic Salary:

Our final basic salary is the basis for calculating our gratuity. In other words, any salary increase or raise can affect our gratuity in Saudi Arabia amount.

  1. Length of Service:

For each year of service, we will receive half a month’s salary during the first (5) years. After working for (5) years, the amount will increase to one month’s salary for each subsequent year.

  1. Employment status:

We influence our contract, whether it is permanent, fixed term, or temporary, but it should be remembered that employees with permanent contracts usually receive more benefits when it comes to compensation.

  1. Compliance with labor laws:

We must comply with Saudi labor laws. Compliance with all will ensure that we can receive our gratuity.

  1. Termination of Employment:

If you resign or leave the company due to misconduct, we will not give you the gratuity. If you have worked less than two (2) years, please note that you will not be entitled to service.

Case of Resignation

In case of resignation on our part, it could affect how to calculate gratuity in Saudi Arabia, depending on these factors:

  • Length of service.
  • Reason for resignation.
  • Total fulfillment of the contract.
  • Notification period.
  • Final settlement.

When using an end-of-service benefits calculator Saudi Arabia remember to take into account your factors.

Case of Termination

In the case of termination by contract, either by us or by our employer, we must take into account several factors when calculating gratuity in Saudi Arabia:

  • Reason for termination.
  • Duration of employment.
  • Compliance with labor laws.
  • Termination procedures.
  • Verification of our employment contract.

As above we must take into account our factors when using an end of service benefits calculator Saudi Arabia.

What is Included in the End of Service

The end-of-service Saudi labor law may include various components for us as employees in Saudi Arabia. These may vary depending on the specific terms of our contract and applicable regulations. However, the most common ones are:

  • Gratuity payment: We receive a one-time payment upon termination of our contract, usually calculated based on our length of employment.
  • Accrued Vacation Days: This includes payments for unused annual vacation days that we have accrued during our employment.
  • End of Service Award: Some employers may give end of service bonuses. This is an additional monetary gift as a token of appreciation to us.
  • Repatriation Expenses: For foreigners, this may include expenses such as airfare or transportation back to our country at the end of our contract.
  • Other Entitlements: depending on our cases, we may have further compensation entitlements such as unused sick days, bonuses, or commissions from our domain.

Employees receive a handful of benefits called PFS at the end of their focused employment. The company designed these benefits to recognize employees’ service and ensure their financial security at the end of their service, called end of service Saudi labor law.

ESB for Domestic Workers

The end of service benefits for household workers such as maids, chauffeurs, and other domestic employees are in effect. Saudi labor law contains specific provisions to ensure that end of service benefits for household workers are provided by the following parameters:

  • Length of service: we become eligible upon completion of a certain period of continuous service. The longer we have worked the greater our Gratuity in Saudi Arabia.
  • Calculation of benefits: We calculate gratuity based on our basic salary and length of service.
  • Termination or Resignation: We are entitled to severance pay upon termination, whether initiated by us or our employer. In case of resignation, the contract or domestic labor regulations may bind this benefit.
  • Legal compliance: We must follow Saudi labor laws, this includes proper documentation of contracts and compliance with the minimum wage.
  • Dispute resolution: In case of disputes related to gratuity, we should seek recourse through legal channels, file complaints with the relevant authorities, and seek mediation and arbitration services.

We qualify for the bonus because they treat us, as housekeepers, fairly and equitably.

See More: Gratuity in Oman: The Comprehensive Guide

How Payroll Middle Assist you in calculating Gratuity in Saudi Arabia?

Gratuity in Saudi Arabia

As the leading payroll service provider in Middle East, Payroll Middle East offers you the opportunity to connect with experts who have in-depth knowledge of the Middle East market. This way, you will have a much wider range of payroll professionals and companies to meet your end of service benefits Saudi labor law.

We vet all payroll companies listed in our software to ensure they consistently meet standards of reliability and customer satisfaction.

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