End-of-Service Pay: Resignation vs Termination

1. The core difference

The gratuity is always built on a single formula (Article 84), but what is actually paid depends on why the contract ended. In short:

• Resignation (the worker ends the contract): takes a fraction of the gratuity that scales with tenure (Article 85), and may take nothing at all if service is under two years.
• Termination by the employer (dismissal without an Article 80 cause): the worker takes the full gratuity regardless of tenure.
• Disciplinary dismissal (Article 80): may forfeit the gratuity entirely in specific cases.
• Leaving for the employer’s fault (Article 81): treated as a termination by the employer, so the worker takes full rights.

So resignation is not merely a personal decision; its timing relative to your years of service (2, 5, 10) changes the amount dramatically, as the numbers below show.

2. The base gratuity (Article 84)

Before applying any fraction, we compute the base gratuity on the last wage, including fixed allowances (housing and transport):

• First 5 years: half a month's wage for each year.
• After 5 years: one full month's wage for each additional year.
• Fractions: parts of a year are pro-rated by time from the value of a full year.

This base gratuity is the "ceiling"; what you actually take from it depends on why the contract ended, covered in the next two sections.

3. Resignation: entitlement fractions (Article 85)

On resignation, the worker takes the full base gratuity only after 10 years; before that, a fraction of it applies based on tenure:

Note the "jumps" at the thresholds: waiting to complete the fifth year moves you from one third to two thirds, and completing ten years moves you to the full gratuity. The fraction applies to the base gratuity after it is computed by the Article 84 formula, not to the salary directly.

4. Termination by the employer

When the employer is the party that ended the contract for a reason that does not fall under Article 80 (such as abolishing the role, restructuring, or not renewing a fixed-term contract), the worker is entitled to the full base gratuity at 100% regardless of tenure, even if it is under two years. The reduced Article 85 fractions do not apply here at all.

The only exception is a disciplinary dismissal under Article 80 (assault, gross breach of duty, forgery, disclosing work secrets, or unjustified absence for set periods), where the worker may be denied the gratuity entirely, provided the worker is allowed to state their reasons and the statutory dismissal procedure is followed.

Learn when a dismissal is "unfair" and warrants extra compensation under Article 77 in the unfair dismissal guide.

5. Worked examples side by side

Let us hold the variables constant and change only the reason: last wage = SAR 10,000, and compare what the worker takes if they resign versus what they take if the employer terminates the contract:

All amounts in Saudi riyals, based on a last wage of SAR 10,000.

Reading the results

• 3 years: resigning costs the worker SAR 10,000 compared with termination — they take one third of what they would have taken had the contract been ended for them.
• 7 years: the gap is SAR 15,000; resignation gives two thirds (30,000) instead of the full gratuity (45,000).
• 12 years: the difference disappears entirely, because a worker who resigns after 10 years is entitled to the full gratuity just like a terminated worker.

6. Exceptions: Articles 87, 80 and 81

Some cases break the general rule and grant a resigning worker the full gratuity, while others may forfeit it for a dismissed worker:

• Article 87 — force majeure: if the worker leaves for a reason beyond their control deemed force majeure, they are entitled to the full gratuity without applying the Article 85 fractions.
• Article 87 — female worker: a woman is entitled to her full gratuity if she resigns within 6 months of her marriage contract or 3 months of childbirth.
• Article 81 — leaving for the employer’s fault: treated as a termination by the employer, so the worker keeps full rights and gratuity.
• Article 80 — disciplinary dismissal: allows the employer to end the contract without gratuity in specific cases, forfeiting it even though the ending came from the employer.

These exceptions carry a large financial impact; a woman resigning after 3 years due to childbirth takes the full SAR 15,000 instead of SAR 5,000. Review the rest of the cases in the Labor Law guide.

7. Before you hand in your resignation

• Watch the thresholds: if you are close to completing 5 or 10 years, waiting a little may raise your fraction from one third to two thirds, or to the full gratuity.
• Document the reason for ending: the difference between "resignation" and "termination by the employer" in the end-of-service letter determines your fraction, so make sure it matches reality.
• Calculate before you decide: estimate your amount in both cases with the end-of-service calculator before signing the settlement.
• Check the wage base: the gratuity is computed on the last wage including fixed allowances, not the basic salary alone.

For notice periods and termination rights in detail, return to the Saudi Labor Law guide.