by Expatguru - 04/27/2012
"This article describes the End of Service Benefits which expatriates working in Saudi Arabia are entitled when they complete their contract."
Much has been written about the tax-free salary in Saudi Arabia and Gulf in particular. However, not much information is available about the benefits expats are entitled to receive upon completion of their work contract. This article tries to throw some light on this.
Expatriates planning to work in Saudi Arabia usually pay attention to their contract terms and conditions, but most of them focus only on the salary package and benefits such as housing, etc. I would like to specifically point out that when you sign a contract with your employer, you must also pay close attention to your gratuity or what is officially known as End of Service Benefits (ESB). When you complete your contract and are ready to leave the kingdom for good, you are entitled to certain monetary compensation which is directly related to the amount of time you had spent with your employer.
Saudi Labor Law has specific provisions for End of Service Benefits. Article 84 of the labor law explicitly states these. For the first five years of service which an expatriate puts in with an employer, he/she is entitled to half a month's salary for each completed year. Beyond the fifth year, this becomes one month's salary. The word "salary" in this context has also been clearly defined in the Saudi Labor Law.
The ESB calculation is based on the last pay drawn by the employee before leaving the kingdom. This includes basic salary plus all other allowances. However, these allowances do not include sales commissions, performance incentives, etc., unless explicitly mentioned in your contract.
Now what happens when you change your sponsorship from one employer to another. In that case, the first employer is the one who is responsible for paying your benefits upto your last day of service with him and the onus on the subsequent employer will be only from the date you start your next employment with him. In other words, your work with each sponsor is unique and falls under a different contract, so if you work with 2 employers in 10 years, you cannot demand that the second employer pay your ESB from the day you started employment in the kingdom.
Finally, note that if tangible benefits such as accommodation are provided by your employer, you cannot claim your benefits against this, unless you are actually paid a house rent allowance in lieu of accommodation. Also, if your contract has a provision for overtime, this also is not part of ESB because overtime is not considered as part of a regular salary but compensation paid towards extra amount of work you have put in. Please note that ESB always applies to “completed years of service” which means if you leave after 11 months of a year, you get nothing for that particular year.
This is why it is so important to read and understand your contract thoroughly, otherwise you might end up with a hole in your pocket if you miscalculate your potential savings.