ESB in Saudi Arabia: How To Calcuate it?

ESB in Saudi Arabia (End of Service Benefits) refers to the financial and non-financial rights that an employee is entitled to receive upon termination of their employment relationship, whether due to resignation or dismissal.

Understanding the ESB system in Saudi Arabia is essential for both employers and employees, as it clearly outlines how benefits are calculated, the eligibility period, the type of salary used for computation, and the cases in which certain employees may be excluded from receiving benefits.

What is ESB in Saudi Arabia?

The term ESB in Saudi Arabia refers to all financial and non-financial rights that an employee is entitled to receive upon the termination of the employment relationship with the employer, whether due to resignation or dismissal. Understanding ESB in Saudi Arabia is essential for both employers and employees to ensure compliance with labor regulations and avoid disputes.

What are The Financial Benefits under ESB in Saudi Arabia?

• Outstanding Wages: Any unpaid salaries or allowances owed by the employer to the employee.
• Cash Compensation for Unused Leave: The monetary value of accrued but unused annual leave.
• End of Service Award: The financial amount that the employee is entitled to under ESB in Saudi Arabia, particularly according to Articles 84, 85, 86, and 87 of the Saudi Labor Law.

What are The non-Financial Benefits?

• Return of Tools and Documents: Employees have the right to reclaim all tools and documents they provided to the employer during the course of employment.
• Work or Experience Certificate: Employees are entitled to a certificate detailing the type of work performed, the duration of employment, and the salary earned.

While ESB in Saudi Arabia primarily focuses on the financial end-of-service award, which constitutes the main entitlement under Saudi Labor Law, the non-financial benefits serve to protect the employee’s rights and document their professional experience.

Read Also: How to Calculate Saudi Labor Law End of Service Benefits?

How to Calculate ESB in Saudi Arabia?

The computation of ESB in Saudi Arabia depends on the type of salary the employee receives and the length of their service. Here is how the calculation is done in different scenarios:

A. For Monthly-Salaried Employees

According to Article 84 of the Saudi Labor Law, end of service benefits are calculated based on the employee’s monthly salary:

• The first years: Half of the monthly salary is paid for each of the first years.
• Years following the initial period: A full monthly salary is paid for each year beyond the initial period.

Example
 If an employee has worked for 6 years with a monthly salary of 6,000 SAR:

• For the first five years: Half salary × 5 = 3,000 × 5 = 15,000 SAR
• For the sixth year: Full salary = 6,000 SAR

Total End of Service Benefits = 15,000 + 6,000 = 21,000 SAR

B. For Daily or Weekly-Salaried Employees

End of service benefits for employees who are paid on a daily or weekly basis are calculated based on the number of days or weeks worked, multiplying the daily or weekly wage by the actual service period.

C. Exceptions

Some employees may be excluded from receiving end of service benefits, such as:

• Disciplinary Termination: If the employee is terminated due to a serious violation or inappropriate behavior according to labor regulations, they are not entitled to end of service benefits.

Check Out: End of Service Benefits Saudi Labor Law: Rights After Contract Termination

Cases Where an Employee May Forfeit End of Service Benefits (ESB) in Saudi Arabia under Article 80

Despite the protection provided by the Saudi Labor Law for ESB in Saudi Arabia, certain situations may lead to an employee being denied these benefits, as outlined in Article 80 of the Saudi Labor Law. These cases include:

1. Assaulting the employer, their representative, or the employee’s supervisor.
2. Failure to perform contractual duties specified in the employment agreement.
3. Engaging in immoral conduct or acts violating integrity and honesty.
4. Deliberate negligence causing significant financial loss to the employer.
5. Fraud or forgery to obtain employment.
6. Being employed under a probationary period, if the contract specifies no entitlement to ESB in Saudi Arabia during this period.
7. Unjustified absence from work:
   1. More than 20 separate days within a year, after a warning issued within 10 days.
   1. More than 10 consecutive days, after a warning issued within 5 days.
8. Misusing employment for personal gain in an unlawful manner.
9. Disclosure of work-related secrets or sensitive employer information.

This ensures that both employers and employees clearly understand the circumstances under which ESB in Saudi Arabia may or may not be granted, preventing disputes and ensuring compliance with Saudi labor regulations.

Learn About: End of Service Calculator Qiwa: Complete Guide to Calculating Benefits

Conclusion

Proper knowledge and application of ESB in Saudi Arabia ensures that employees receive their rightful benefits while employers remain compliant with labor regulations. Legal guidance from experienced firms, such as Etqan Law Firm, can further assist in navigating ESB matters effectively and protecting the rights of all parties involved.

The Etqan Al Mutamayza Law Firm is ready to provide the essential support you need. You can reach their team at the following mobile numbers: +966 550600204, +966 551020060.

Additionally, feel free to visit our branches located at:

• Jeddah: Al-Aziziyah District, Mohammed bin Abdulaziz Street (Tahlia)
• Riyadh: King Abdulaziz Street, across from the Kingdom Tower
• Dammam: Al-Ashri’a Street, Al-Badeea, Dammam 32415.

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