Article 84 of the Saudi Labor Law

What Article 84 of the Labor Law is

Article 84 of the Saudi Labor Law (المادة 84 من نظام العمل) is the provision that obliges the employer to pay the worker an award for the period of service when the employment relationship ends, and that states the basis on which the award is calculated. It is the first article of the chapter headed End of Service Award (مكافأة نهاية الخدمة) in the consolidated version published by the Ministry of Human Resources and Social Development, and Articles 85, 86, 87 and 88 of the Labor Law follow it in the same chapter.

The aim here is to say what the provision states and what it leaves out, not to calculate a sum for a particular case. The steps of the calculation are set out under end of service calculation and are not repeated here. The provision matters to the human resources officer, the accountant and the owner of the establishment, because it sets the basis of the entitlement on which every figure is built.

What the text of Article 84 of the Labor Law says

The consolidated text of the Labor Law gives Article 84 in these words:

إذا انتهت علاقة العمل وجب على صاحب العمل أن يدفع إلى العامل مكافأة عن مدة خدمته تحسب على أساس أجر نصف شهر عن كل سنة من السنوات الخمس الأولى، وأجر شهر عن كل سنة من السنوات التالية، ويتخذ الأجر الأخير أساساً لحساب المكافأة، ويستحق العامل مكافأة عن أجزاء السنة بنسبة ما قضاه منها في العمل.

The English rendering is ours, not an official translation. If the employment relationship ends, the employer must pay the worker an award for the period of service, calculated on the basis of half a month’s wage for each of the first five years and one month’s wage for each of the following years. The last wage is taken as the basis for calculating the award, and the worker is entitled to an award for parts of a year in proportion to the time spent in work.

The text is one long sentence, but it carries a duty and the elements that fix the amount. The duty appears in the words «وجب على صاحب العمل» (the employer must). Under Article 84 of the Labor Law the award is an obligation that arises when the relationship ends, not a grant that the employer decides to give or to withhold.

The elements on which Article 84 of the Labor Law rests

• The triggering event. The text makes the end of the employment relationship the event that creates the duty. It names no particular cause of ending, so it does not say that the award is confined to resignation or to termination by the employer. Other provisions, however, modify the effect according to the cause.
• The amount. It has two stages: half a month’s wage for each of the first five years, and one month’s wage for each of the following years. The amount therefore does not run at a single rate for the whole period. It changes at the fifth year.
• The basis. It is the last wage, not the average of wages over the period and not the wage at the start of service.
• Parts of a year. The worker is entitled to an award for them in proportion to the time spent in work, so an incomplete year does not drop out and is not rounded up to a full year.

How these elements combine into one amount, with numerical examples, belongs to end of service calculation and is not repeated here. What matters here is what each element says and what it leaves open.

What the last wage in Article 84 of the Labor Law means

Article 84 of the Labor Law says the last wage without describing it. Article 2 of the Labor Law defines wage (الأجر) as the actual wage (الأجر الفعلي), so a place in the Labor Law that says wage without a qualifier means the actual wage. The basis in Article 84 of the Labor Law is therefore the actual wage and not the basic wage (الأجر الأساسي) alone. The difference changes the figure, because the actual wage is the basic wage plus the due increases that Article 2 of the Labor Law lists.

The wording elsewhere supports this. The Labor Law uses the word basic where it means basic. Article 107 of the Labor Law, on overtime hours, speaks of the worker’s basic wage (أجره الأساسي), which is a qualified expression. The Labor Law thus distinguishes the two expressions, and the unqualified wage in Article 84 of the Labor Law is not replaced by the basic wage.

Article 84 of the Labor Law does not define the word last in its own place. We found nothing in the text that shows whether it means the wage of the final month of service or the wage in force when the relationship ends, where the wage changed near the end. We therefore suggest that the dates on which the wage and its elements changed be recorded.

The period of service in Article 84 of the Labor Law

Article 84 of the Labor Law speaks of the worker’s period of service and does not define it. In our sources the period is tied to the definition of continuous service (الخدمة المستمرة) in Article 2 of the Labor Law: the worker’s uninterrupted service with the same employer or its legal successor, counted from the date service began. What breaks continuous service and what does not is set out under continuous service.

Two questions remain. What happens if service is broken and the worker returns to the same employer under a new contract? And what effect does unpaid absence have when it exceeds 20 intermittent days in the work year? Article 84 of the Labor Law does not answer either, and we found no answer to them in Article 2 of the Labor Law. We suggest that each be settled by going to the Labor Law itself or to a specialist for the case at hand.

What Article 84 of the Labor Law leaves to neighbouring provisions

Article 84 of the Labor Law sets the origin of the entitlement, its amount and its basis. It leaves to neighbouring provisions whatever changes that origin or fixes the time of payment. The table shows where the answer to each question lies.

Article 86 of the Labor Law deserves a closer look. It names commissions and percentages of the price of sales and the like, which are elements of wage that by their nature can rise and fall, and it allows the two parties to agree that all or some of them are not counted in the basis of the award. It states no form for the agreement and no time for it, so nothing is added to it that is not in the text. Article 86 of the Labor Law does not name a profit share. In the sources we reviewed we found nothing that settles whether a profit share falls within the expression and the like (ما أشبه ذلك), so the exclusion is not extended to it.

The nine cases of Article 80 of the Labor Law are not set out here. The point to note is that the duty in Article 84 of the Labor Law cannot be applied to every kind of ending in isolation from the rest of the Labor Law.

How Article 84 of the Labor Law differs from Article 77 of the Labor Law

Article 77 of the Labor Law concerns compensation where a contract is ended for an unlawful reason. Article 84 of the Labor Law concerns an award for the period of service that follows from the end of the relationship. The subjects differ, and each has its own glossary term. Compensation under Article 77 of the Labor Law, with its amounts and its minimum, is set out in the entry Article 77 of the Saudi Labor Law.

The two may be confused because both are mentioned when a contract ends and both are sums paid to the worker. The first, however, depends on how the contract was ended, and the second on the period of service and the last wage, so a rule of one is not applied to the other.

What the wording of Article 84 of the Labor Law does

The text uses verbs that each have a function. The word «وجب» (must) creates the obligation on the employer. The words «تحسب على أساس» (is calculated on the basis of) set the measure of the amount, which is wage and period of service. The words «يتخذ الأجر الأخير أساساً» (the last wage is taken as the basis) fix the wage by which the amount is measured. The word «يستحق العامل» (the worker is entitled) states the worker’s right to an award for parts of a year. Article 84 of the Labor Law thus combines an obligation, a basis of calculation and a supplementary right in one sentence, so a person who attends to one part can easily miss the rest.

The text also states no condition on the worker for entitlement to the award, such as a minimum period of service. A minimum does not appear in Article 84 of the Labor Law. It appears in the scale of Article 85 of the Labor Law on resignation. This is an observation on the drafting and not a ruling on any case.

How Article 84 of the Labor Law relates to what the parties write

Article 8 of the Labor Law provides that any term contradicting its provisions is void, and that any release or settlement of the rights that arise for the worker under the Labor Law, given while the contract is in force, is void unless it is more favourable to the worker. A term in a contract or in the establishment’s regulation that sets the award below what Article 84 of the Labor Law provides therefore has to be examined against Article 8 of the Labor Law before it is applied. We do not rule on the validity of a particular term, which is a matter for a specialist.

Among the provisions that state an exception to the basis of calculation is Article 86 of the Labor Law, and it exempts itself from Article 8 of the Labor Law expressly, in the words «استثناء من حكم المادة (الثامنة)» (by exception to the provision of Article 8 of the Labor Law). The exception in Article 86 of the Labor Law is therefore stated openly in its text and is not implied.

The amendment status of Article 84 of the Labor Law

Royal Decree M/44, in force from 19 February 2025, amended the Labor Law. That decree did not amend Article 84 of the Labor Law, and the text stands in the consolidated version published by the Ministry of Human Resources and Social Development after M/44 with no amendment mark at its place. The title page of that version lists a chain of amendments to the Labor Law as a whole, the first M/51 and the last M/44. In Chapter Four of the version we found no amendment mark that concerns Article 84 of the Labor Law. The wording quoted above is the wording in that version.

We suggest consulting the current published version before any text is carried into a contract or an internal regulation, because later decrees may change the provisions of the Labor Law.

Mistaken interpretations of Article 84 of the Labor Law

Some interpretations of Article 84 of the Labor Law may produce a figure different from the one the text gives:

• Applying half a month to the whole period. The text sets two stages, and half a month applies to the first five years alone.
• Calculating on the basic wage alone. The text says the last wage without a qualifier, and under Article 2 of the Labor Law that means the actual wage.
• Dropping the incomplete year. The text entitles the worker to an award for it in proportion to the time spent in it.
• Treating the award as a grant. The text uses the word «وجب» (must), so the award is an obligation and the employer has no choice in the matter.
• Applying Article 84 of the Labor Law alone where the relationship ends by resignation. Article 85 of the Labor Law modifies the amount, and Articles 81 and 87 of the Labor Law also bear on it.

These mistaken interpretations come from comparing the provisions with one another, not from a count of what happens in establishments, and we do not estimate how often they occur.

What an establishment can record to support Article 84 of the Labor Law

Article 84 of the Labor Law requires no particular documents, but calculating any figure on it needs recorded data. We suggest that the establishment keep the following:

• The date service began. The period is counted from it, and an error in it becomes an error in the number of years.
• A wage record with its dates and elements. The accountant can then see what formed part of the actual wage when the relationship ended and when the wage last changed.
• The reason the relationship ended, as it actually happened. The adjustment of the amount depends on it.
• Proof of any agreement to exclude variable elements. The text states no form for the agreement, and without proof it is harder to establish when there is a dispute.

These are organisational recommendations for the establishment and are not requirements of Article 84 of the Labor Law.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.