How to Prepare for Year-End Payroll & EOSB Settlements in Saudi Arabia (2025 Guide)

As the year comes to an end, HR and payroll teams across Saudi Arabia shift their focus to one of the most important and often stressful tasks of the year: closing payroll and calculating End-of-Service Benefits (EOSB).

Whether you’re finalizing payments, reconciling GOSI reports, or preparing EOSB settlements for resignations and terminations, accuracy and compliance are key.

In this guide, we’ll walk you through everything you need to know about year-end payroll and EOSB in Saudi Arabia, including step-by-step processes, compliance checklists, and how automation can simplify it all.

What Is Year-End Payroll in Saudi Arabia?

Year-end payroll refers to the process of reviewing, reconciling, and finalizing all salary payments, allowances, deductions, and benefits before closing your company’s books for the fiscal year.

This includes:

• Verifying employee records
• Finalizing salary payments and bonuses
• Calculating accrued leave and EOSB
• Submitting accurate GOSI and Mudad reports
• Ensuring compliance with Saudi labor laws
  
  

The goal is to ensure every employee receives what they’re entitled to accurately, on time, and in full compliance with KSA regulations.

What Are End-of-Service Benefits (EOSB) in Saudi Arabia?

In Saudi Arabia, End-of-Service Benefits (EOSB) are mandatory payments made to employees when their service with a company ends, whether through resignation, termination, or contract completion.

EOSB acts as a form of financial security and appreciation for years of service.

How EOSB Is Calculated

The formula depends on the type of separation (resignation or termination) and years of service:

• Less than 2 years: No EOSB entitlement
  
  
• 2 to 5 years: One-third of half a month’s wage for each year of service
  
  
• 5 to 10 years: Two-thirds of half a month’s wage for each year of the first 5 years, plus a full month’s wage for each year after the fifth
  
  
• More than 10 years: Full month’s wage for each year of service
  
  

Example:
EOSB = (½ month salary × first 5 years) + (1 month salary × remaining years)

To make it easier, you can use ZenHR’s built-in EOSB calculator, which automatically applies Saudi labor law formulas and calculates accurate settlements in seconds.

Why Year-End Payroll & EOSB Preparation Matters

Closing payroll and EOSB correctly at year-end ensures:

• Regulatory compliance with the Saudi Labor Law and Mudad/WPS
  
  
• Accurate employee payouts and EOSB settlements
  
  
• Accurate financial reporting for audits and accounting
  
  
• Employee trust and satisfaction, as delays or errors can impact morale
  
  

Errors in EOSB or payroll can lead to compliance violations, fines, and loss of credibility, which is why it’s worth investing the time or automation tools to get it right.

Step-by-Step Guide: How to Prepare for Year-End Payroll in Saudi Arabia

Here’s a simple, actionable roadmap you can follow before closing your 2025 payroll.

Step 1: Review Employee Data

Start by verifying all employee records in your HR and payroll systems:

• Job titles, salaries, and benefits
• Joining and resignation dates
• GOSI registration numbers
• Leave balances
• Loan or deduction details

ZenHR’s HR and Payroll modules can automatically update and sync employee data across branches and departments.

Step 2: Verify Payroll Components

Cross-check every component that affects the final payroll:

• Basic salary
• Allowances (housing, transport, etc.)
• Deductions (GOSI, absences, penalties, loans)
• Bonuses and incentives
• Unpaid leaves

Make sure these elements are correctly reflected in your system before running the final payroll cycle of 2025.

Step 3: Process Pending Leave & Accruals

Check all pending vacation and leave accruals. Employees who are leaving at the end of the year must have their unused leave days encashed according to the labor law.

ZenHR automatically calculates leave balances, encashments, and payouts so you don’t have to do it manually.

Step 4: Calculate EOSB for Exiting Employees

For employees resigning or terminated during Q4:

1. Confirm their last working day
2. Identify the type of termination (resignation, redundancy, etc.)
3. Calculate EOSB using the official formula.
4. Include unpaid salary, leave encashment, and bonuses.
5. Deduct any outstanding loans or advances.
   
   

Step 5: Generate Year-End Reports

Compile all necessary reports for internal and external audits:

• Payroll summaries
• GOSI submissions
• Mudad compliance reports
• EOSB settlements
• Tax and accounting summaries

With ZenHR, you can generate these in one click, reducing manual effort and human error.

Step 6: Reconcile GOSI & WPS

Ensure all GOSI contributions and WPS payments are accurately reflected:

• Verify employee registration and salary alignment in GOSI
• Ensure payroll data uploaded to Mudad matches what’s paid to employees.
• Rectify any discrepancies before year-end reporting.
  
  

Step 7: Communicate with Employees

Send clear internal communication about:

• Payroll cutoff dates
• Bonus payment dates
• EOSB settlements (for exiting staff)
• Any holiday pay schedules

Transparent communication builds trust and avoids confusion at the busiest time of year.

Year-End Payroll Compliance Checklist (KSA)

Use this checklist to stay fully compliant before closing your 2025 books:

How ZenHR Simplifies Year-End Payroll & EOSB

ZenHR’s localized HR and Payroll system is designed to make Saudi payroll compliance effortless, especially at year-end.

Here’s how ZenHR helps:

• Automated payroll cycles with GOSI and Mudad compliance
• Built-in EOSB calculator aligned with Saudi labor law
• Auto-generated reports for audit and reconciliation
• Multi-branch payroll management for companies operating across KSA
• Integrated leave encashment and accrual tracking
  
  

Instead of juggling spreadsheets, ZenHR handles the math, policies, and compliance for you so your HR team can close the year with confidence.

Learn more about ZenHR Payroll Automation or explore our End-of-Service Management features.

Common Year-End Payroll & EOSB Questions (FAQs)

1. When should companies start year-end payroll preparation in Saudi Arabia?

Ideally, start in November to allow enough time to reconcile payroll data, finalize bonuses, and process EOSB for any exiting employees before the December closing.

2. How do I calculate EOSB for employees who resigned mid-year?

You should calculate the benefit based on the actual service period in months or years using the standard EOSB formula. ZenHR’s EOSB module automatically prorates the benefit for partial years.

3. Are bonuses included in the EOSB calculation?

No, bonuses are not part of the EOSB base unless stated in the employee’s contract as part of the fixed wage.

4. How do I handle EOSB when an employee is terminated?

Terminated employees (non-resigned) are entitled to a full EOSB based on years of service, regardless of cause, unless termination is for gross misconduct.

5. What happens if GOSI or WPS data doesn’t match payroll?

You’ll need to reconcile records immediately in both systems before submitting year-end reports to avoid potential fines or delays from the Ministry of Human Resources and Social Development (MHRSD).

Final Thoughts

Year-end payroll and EOSB processing can feel overwhelming, especially with compliance deadlines, data checks, and last-minute updates.

But with the right tools and preparation, it doesn’t have to be stressful.
By following a clear step-by-step plan and automating your payroll processes with ZenHR, you can:

• Save hours of manual work
• Ensure full compliance with Saudi regulations
• Deliver a seamless employee experience
  
  

As you wrap up 2025, remember that year-end payroll is more than just numbers. It’s a reflection of your company’s culture of accuracy, trust, and care.

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