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Saudi End-of-Service Gratuity Formula:
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The Saudi End-of-Service Gratuity is a legal entitlement under Saudi Labor Law that provides financial compensation to employees upon termination of their employment contract. It serves as a recognition of the employee's service and contribution to the organization.
The calculator uses the standard Saudi gratuity formula:
Where:
Explanation: The formula converts the monthly salary to a daily rate using 21 working days per month and multiplies by the total years of service to calculate the gratuity amount.
Details: Accurate gratuity calculation is essential for both employers and employees to ensure compliance with Saudi labor laws and to provide fair compensation for years of service. It helps in financial planning and ensures legal obligations are met.
Tips: Enter the last basic monthly salary in SAR and the total years of service. Partial years can be entered as decimals (e.g., 5.5 years). All values must be valid (salary > 0, service years > 0).
Q1: What is included in the basic salary for gratuity calculation?
A: Only the basic salary is used for gratuity calculation. Housing, transportation, and other allowances are typically excluded.
Q2: How is partial year service calculated?
A: Partial years are calculated proportionally. For example, 6 months of service would be 0.5 years in the calculation.
Q3: Are there different rates for different service periods?
A: Under Saudi labor law, the first 5 years typically receive half-month salary per year, while subsequent years receive full month salary per year.
Q4: When is gratuity payable?
A: Gratuity is payable upon termination of employment, regardless of whether the termination is by employer or employee (with valid reasons).
Q5: Is gratuity taxable in Saudi Arabia?
A: No, end-of-service benefits are generally not subject to income tax in Saudi Arabia.