An employee’s departure is one of the most sensitive milestones in the HR lifecycle. It is not merely the termination of a contract but the final impression a company leaves on its former employee—an impression that can last for years. At the heart of this moment lies the End-of-Service Benefit (EOSB) calculation, a precise and complex process governed by the stringent articles of Saudi Labor Law. Any error not only costs the company financially but also damages its reputation as a reliable and trustworthy employer.

This comprehensive guide aims to deconstruct this entire process, from reviewing the legal texts and dissecting the critical mistakes many companies make, to showcasing how integrated tech solutions can transform this administrative challenge into an opportunity to reinforce professionalism and leave a positive, lasting final impression.

Part 1: The Legal Compass – Decoding the Core Articles of the Labor Law

No HR professional can navigate this process without a deep understanding of the legal compass that guides it. Three key articles in the law form the cornerstone of all EOSB calculations:

Article 84: The Golden Rule for Full Entitlement

This article establishes the foundational formula for the gratuity in a standard scenario (contract completion or termination by the employer). The formula is clearly defined:

• For the first five years of service: Half a month’s salary for each year.
• For subsequent years: A full month’s salary for each year.
• The Calculation Basis: The gratuity is calculated based on the “last full salary,” which presents the first challenge. This is not just the basic salary; it includes all fixed and regular allowances (such as housing and transportation).
• Prorated Years: The employee is entitled to a prorated benefit for any fraction of a year served.

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."

Article 85: The Complexities of Resignation

This article is the most intricate and the source of most calculation errors. It defines the employee’s entitlement in the event of resignation, which is tiered based on the length of service:

• Service of less than 2 years: No gratuity is due.
• Service between 2 and 5 years: Entitled to one-third (⅓) of the full gratuity.
• Service between 5 and 10 years: Entitled to two-thirds (⅔) of the full gratuity.
• Service of 10 years or more: Entitled to the full gratuity, as recognition for long-term loyalty.

Article 85:
"If the work relation ends due to the worker’s resignation, the worker shall, in this case, be entitled to one-third of the award after a service of not less than two consecutive years and not more than five years, to two-thirds of the award if his service is more than five consecutive years but less than ten years, and to the full award if his service is ten years or more."

Article 87: Exceptions that Restore Full Entitlement

In this article, the Saudi legislator shows flexibility by granting the resigning employee their full gratuity under specific circumstances. This includes leaving due to force majeure or, for a female employee, terminating her contract within six months of her marriage or three months of giving birth.

Article 87:
"As an exception to the provisions of Article (85) of this Law, the worker shall be entitled to the full award if he leaves the work due to a force majeure beyond his control. A female worker shall be entitled to the full award if she ends her contract within six months from the date of her marriage or three months from the date of giving birth."

Part 2: Anatomy of Errors – The Minefield of Manual Processing

Despite the clarity of the law, manual application opens the door to widespread errors that can lead to labor disputes. Here are the most common pitfalls:

1. The Classic Mistake: Ignoring the “Full Salary”: Relying solely on the basic salary is the most frequent and costly error. It unlawfully reduces the employee’s entitlements and is a direct violation of Article 84.
2. The Rounding Error: Neglecting Prorated Years: Calculating the gratuity based only on full years of service is an incorrect simplification. The law guarantees an employee’s right for every day worked, and ignoring the remaining months or days is a rights infringement.
3. The Chaos of Offboarding Obligations: The real challenge begins with the employee clearance process. A manual journey of emails between HR, Finance, IT, and Asset Management ensues to confirm the return of company property (laptops, cars, credit cards) and the absence of outstanding loans. This slow, fragmented process is a primary cause of delayed payments.
4. Confusing Termination and Resignation Formulas: Applying the one-third or two-thirds reduction (Article 85) to an employee whose contract has ended (Article 84) is a common mix-up that leads to completely incorrect calculations.
5. Delays in Issuing Documentation: After everything is settled, the issuance of the Experience Certificate is often delayed, leaving the former employee waiting and giving a final impression of disorganization.

Part 3: The Digital Solution – From Chaos to Integrated Precision

To overcome these multifaceted challenges, spreadsheets and manual processes are no longer sufficient. The solution lies in adopting an integrated digital HR ecosystem. A modern system like Ektifaa not only automates calculations but re-engineers the entire process to be intelligent, seamless, and reliable.

How Do These Systems Revolutionize the Process?

• Centralized, End-to-End Processing: The journey begins with an electronic end-of-service request submitted through the system. From a central dashboard, a manager can review the request, access the complete employee file, and make an informed decision. Every step is documented, eliminating ambiguity and paperwork.
• Smart and Automated Clearance: This is where the true power lies. Instead of a manual chase between departments, a system like Ektifaa performs a comprehensive and automatic check before final approval. It verifies that no company assets are outstanding, no loans are due, and no active system permissions remain. If it detects any pending obligation, it pauses the process and alerts the relevant stakeholder, guaranteeing a 100% clean and secure offboarding.
• Legally-Guaranteed Calculation Accuracy: The system’s core is its calculation engine, meticulously programmed to reflect the texts of Articles 84, 85, and 87. It automatically distinguishes between resignation and termination, calculates prorated years down to the day, and uses the last full salary recorded in the employee’s profile, completely eliminating human error.
• Direct & Secure Payroll Integration: To ensure a professional exit experience, the system integrates with payroll. This guarantees not only the accuracy of the final salary and dues but also enables their prompt and organized disbursement upon final approval, reinforcing the company’s image as one that honors its commitments on time.
• The Final Touch: Instant Experience Certificates: With a single click after the process is complete, a professional, branded Experience Certificate can be generated. This swift final touch leaves a powerful impression of appreciation and efficiency.

Part 4: Beyond Compliance – The Strategic Value of a Professional Experience

Adopting such advanced technical solutions elevates an organization from simply “complying with the law” to “excelling in its application.” This delivers profound strategic benefits:

1. Fortifying Reputation and Employer Brand: A departing employee is an ambassador for your employer brand. A smooth, respectful offboarding experience generates positive word-of-mouth and attracts future talent.
2. Massive Savings in Time and Effort: The HR team is liberated from repetitive and complex administrative tasks, freeing them to focus on value-added activities like talent development and strategic planning.
3. Minimizing Legal Risks to Zero: Automation and electronic documentation create a precise digital audit trail for every step, providing robust protection for the company in any future disputes.

Conclusion: An Employee’s Departure Isn’t the End—It’s the Start of a New Reputation

In the modern business world, calculating the end-of-service benefit is no longer just another item on HR’s checklist. It has become an indicator of a company’s digital maturity, its deep respect for its people, and the strength of its employer brand. The transition from risk-laden manual systems to an integrated platform that guarantees accuracy, speed, and transparency is no longer an option—it is a fundamental investment in building a reputation that endures long after the last employee has departed.