End of Service Gratuity in the GCC: Comparing Saudi Arabia (Art. 84) and Qatar Formulas

Statutory Principles of GCC End of Service Benefits

In Gulf Cooperation Council (GCC) countries with 0% personal income tax, the End of Service Gratuity (known as EOSB in Saudi Arabia and EOSG in Qatar and the UAE) represents the primary statutory severance and deferred compensation mechanism:

1. Saudi Arabia: Article 84 and 85 of Saudi Labour Law

Under the Saudi Ministry of Human Resources and Social Development (MHRSD) regulations:

• Tenure for first 5 years: Half a month's basic wage for each of the first five years.
• Tenure beyond 5 years: One full month's basic wage for each subsequent year.
• Basis: Last basic wage paid to the employee.
• Resignation Deductions (Article 85):
  • Less than 2 years of service: 0% entitlement.
  • Between 2 and 5 years: One-third (33.3%) of the calculated gratuity.
  • Between 5 and 10 years: Two-thirds (66.7%) of the calculated gratuity.
  • 10 years or more: 100% of the full entitlement.

2. Qatar: Article 54 of Qatar Labour Law No. 14 of 2004

Under Qatari regulations:

• Statutory Minimum: At least three weeks' basic wage for each completed year of service.
• Minimum Qualifying Period: One full year of continuous employment.
• Pro-rata entitlement: Payable for fractions of a year served.

Concrete Comparative Example: 7 Years of Service at 24,000 SAR / QAR Basic Salary

Assume an executive contract ends upon completion of 7 full years of service with a base salary of 24,000 SAR / QAR per month:

1. Saudi Arabia Calculation (Employer Termination / Normal Expiry):

   • First 5 years: 5 × (24,000 / 2) = 60,000 SAR.
   • Next 2 years: 2 × 24,000 = 48,000 SAR.
   • Total Saudi EOSB: 108,000 SAR.
   • (Note: If the employee voluntarily resigned at 7 years, Article 85 applies a 2/3 factor: 108,000 × 2/3 = 72,000 SAR).

2. Qatar Calculation (Article 54 Minimum):

   • Weekly basic wage = 24,000 / 4.333 = ~5,538 QAR.
   • Annual gratuity (3 weeks) = 3 × 5,538 = 16,615 QAR per year.
   • Over 7 years = 7 × 16,615 = 116,300 QAR.

Why the Basic Salary Ratio is Critical

Because gratuity is anchored solely to the basic salary, negotiating a contract with 65% basic salary and 35% allowances yields a drastically higher payout upon departure than an offer structured as 40% basic and 60% allowances.