Saudi Arabia’s labour framework changed materially when a package of amendments to the Labour Law took effect on 19 February 2025, updating rules on notice, probation, resignation and leave. This guide explains how the end-of-service award is calculated in 2026, what the amendments actually changed, and how GOSI social insurance applies differently to Saudis and expatriates. Always confirm your own case against the Ministry of Human Resources and Social Development (HRSD) or GOSI, as your contract may offer more than the legal minimum.
How the end-of-service award is calculated in 2026
The end-of-service award (often called gratuity or ESB) is a statutory payment the employer owes when the employment relationship ends. Under the Labour Law it is calculated on your last wage as follows:
- First five years: half a month’s wage for each year of service.
- After five years: one full month’s wage for each additional year.
Partial years are paid pro rata. For example, a worker on SAR 8,000 per month who completes eight years would receive roughly 2.5 months for the first five years (5 x half) plus 3 months for years six to eight, totalling about 5.5 months, or around SAR 44,000. The principle mirrors gratuity elsewhere in the Gulf, though the formula differs from the one in our UAE gratuity guide.
What happens when you resign
The award is reduced if you resign, based on how long you served:
- Less than two years: no award.
- Two to five years: one-third of the award.
- Over five and under ten years: two-thirds of the award.
- Ten years or more: the full award.
These reductions apply only to resignation. If the employer terminates the contract (other than for cause under Article 80), you receive the full award regardless of length of service.
What the 2025 amendments changed
The amendments that came into force on 19 February 2025 remain the current law in 2026. The main practical changes are:
- Notice periods. For indefinite-term contracts, an employer must give at least 60 days’ written notice, while a worker resigning must give at least 30 days’ notice.
- Resignation procedure. A formal written resignation must be submitted. The employer has 30 days to respond; if it does not, the resignation is deemed accepted automatically. The worker may withdraw the resignation within 7 days.
- Probation. The maximum probation period is now 180 days, up from 90. Either party may end the contract during probation without compensation, and no end-of-service award accrues for that period.
- Leave. The reforms strengthened several leave entitlements, and the framework now provides clearer rules on maternity and bereavement leave alongside the standard annual entitlement.
Working hours and leave
Standard working time is capped at 8 hours per day or 48 hours per week. During Ramadan, actual working hours for Muslim employees are reduced to a maximum of 6 hours per day or 36 hours per week. Overtime is paid at 150% of the normal hourly wage.
On paid annual leave, a worker is entitled to 21 days after completing one year of service, rising to 30 days once total service reaches five years. Weekly rest is normally Friday, and public holidays are granted separately.
GOSI: how social insurance differs for Saudis and expats
GOSI (the General Organization for Social Insurance) is where the treatment of Saudis and non-Saudis differs most sharply. Contributions are calculated on the contributable wage — basic salary plus housing allowance — capped at SAR 45,000 per month.
Saudi nationals
Saudis are covered for pensions (annuities), occupational hazards and the SANED unemployment scheme. Employees registered before 3 July 2024 stay on the existing system, where the combined rate is 21.5% (employer 11.75% and employee 9.75%). Those who entered under the new system introduced in July 2024 are on a rate that rises gradually: it stands at 22.5% in the first half of 2026 and increases to 23.5% from 1 July 2026, split between employer and employee.
Expatriate workers
Non-Saudi employees do not pay any GOSI deduction from their salary. Instead, the employer alone pays 2% of the contributable wage for occupational hazards insurance only. Expatriates are not part of the pension or SANED unemployment schemes, which is why the end-of-service award is the main statutory lump sum an expat receives on leaving. If you are budgeting a package, our GCC salary guide shows how these deductions sit against typical pay by role.
Your core rights as a worker
Beyond pay, the Labour Law guarantees a written contract, timely wage payment through the Wage Protection System, safe working conditions and protection against arbitrary dismissal. Wages must be paid in Saudi riyals, and unjustified termination can entitle a worker to compensation. Keeping your residency and labour records current in Absher and Muqeem is essential, since your iqama status is tied to your employment and affects your ability to transfer jobs or exit the country. Disputes can be raised with the labour offices under HRSD, which handle mediation before matters reach the labour courts.
Frequently Asked Questions
Is the end-of-service award based on my basic salary or full salary?
The award is calculated on your last full wage, which generally includes basic pay plus regular allowances such as housing, rather than basic salary alone. Because contracts vary, check how your employer defines wage and confirm the figure with HRSD if you are unsure.
Do expats pay into GOSI in Saudi Arabia?
No. Expatriate employees make no GOSI salary deduction. The employer pays 2% of the contributable wage for occupational hazards coverage only, and expats are not enrolled in the pension or SANED unemployment schemes.
How much notice must I give if I resign in 2026?
For an indefinite-term contract, a resigning worker must give at least 30 days’ written notice, while an employer terminating such a contract must give at least 60 days. Fixed-term contracts follow the notice terms stated in the contract itself.
