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Nov 29 2011

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Saudi Labour Law – End of Service Benefit (ESB) calculation

I have been working for a MNC in Riyad as a marketing executive for the last 10 years and 3 months. My employment contract will be expired on the upcoming March 2011 and I want to go back home and intended to go by exit visa. What will be my End Service Benefit? How it will be calculated? Is there any chance to include my sales commission in E.S.B? My basic salary is SR.4000. Please explain.

Upon the end of the work relation between employer and employee, the employer shall pay an END OF SERVICE AWARD  to his employee. This is popularly known as END OF SERVICE AWARAD or ESB. The statute used the word ‘shall’. This is not a mercy of the employer but a reward to the employee.

Unfortunately, this area is very vague, complicated and, most of the employees are not aware of this benefit. Due to ignorance or carelessness some of the employees leave the kingdom without taking this legal benefit from the employer. Saudi Labour Law Chapter 5, section 4, Article 84 – 87, explain E.S.B.

Section Four: End-of-Service Award

Article 84

“Upon the end of the work relation, the employer shall pay the worker an end-of-service award of a half-month wage for each of the first five years and a one-month wage for each of the following years. The end-of-service award shall be calculated on the basis of the last wage and the worker shall be entitled to an end-of-service award for the portions of the year in proportion to the time spent on the job”.

Last month wage (LMW) of the employee is the criterion using for the calculation of his E.S.B. For the first five years, he will get half of his LMW and after five years full salary for every year. You will get ESB for the portions of the year in proportion to the time spent on the job.

Every employee is entitled for a 21 days vacation annually up to 5 years of service and 30 days per year after that. If you did not use any number of this vacation days, you can claim for the payment of those days.

The method of calculation of ESB of the portion of year is :

Firstly take your LMW and divide that amount by 365.25 to get your one day ESB.

Multiply that amount with number of days in the last year.

According to Article 86, you are not entitled to include your sales commissions in ESB because some of the commissions, sales percentages and similar wage components paid to the workers which are by their nature subject to increase or decrease will not be included in ESB calculation.

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