What are End-of-Service Benefits (ESB)? A Complete Guide for the MENA Region

Whether you're an employee preparing to leave your job or an employer trying to stay compliant, understanding End-of-Service Benefits (ESB) is key. If you work in Saudi Arabia or anywhere else in the MENA region, ESB is more than just a farewell bonus; it’s a legal entitlement that impacts your finances, HR planning, and more.

In this article, we’ll break down what End-of-Service Benefits (ESB) are, how it works in Saudi Arabia and other MENA countries, who’s eligible, how it's calculated, and how it compares to severance pay. We’ll also answer your most frequently asked questions on End-of-Service Benefits (ESB).

What are End-of-Service Benefits (ESB)?

End-of-Service Benefits, often abbreviated as ESB, refer to the lump-sum compensation an employee receives when their employment contract ends, whether due to resignation, termination, or the end of a fixed-term contract.

In many countries across the Middle East, ESB is mandatory by law, designed to reward employees for their service and to provide financial security after leaving a job.

In Saudi Arabia and many other MENA countries, ESB is a legal obligation that employers must fulfill upon the end of an employee's service, based on length of service, salary, and reason for leaving.

How to Calculate End-of-Service Benefits (ESB)

ESB in Saudi Arabia: What the Law Says

In Saudi Arabia, End-of-Service Benefits are governed by Article 84 of the Saudi Labor Law. Every employee working under an official contract, whether Saudi national or expat, is eligible for ESB, as long as they’ve completed at least 2 years of service (with some exceptions for early resignation).

ESB Calculation in Saudi Arabia:

• Half a month's wage for the first five years of service.
  
  
• One whole month's wage for every year beyond five years.
  
  
• The final amount is based on the last basic salary, excluding allowances.
  
  
  

Eligibility Based on Reason for Leaving:

Want to calculate your ESB? Check out ZenHR’s ESB Calculator.

How is ESB Different from Severance Pay?

Many people confuse End-of-Service Benefits with severance pay. While they may sound similar, they’re not the same.

• ESB is a standard legal obligation, due at the end of service, regardless of the reason (resignation or termination).
  
  
• Severance pay is typically additional compensation offered during layoffs, unjust dismissal, or redundancy, and is not legally mandated in most MENA countries.
  
  

In Saudi Arabia, ESB is always required under the labor law, while severance pay is optional and based on company policy or individual contracts.

ESB in Other MENA Countries

ESB rules aren’t just limited to Saudi Arabia. Let’s briefly tour how they work in other countries across the region.

United Arab Emirates (UAE)

• Employees are entitled to 21 days’ basic salary per year for the first 5 years, and 30 days per year thereafter.
• Expats and UAE nationals qualify under the UAE Labor Law (Federal Decree-Law No. 33 of 2021).
  
  

Qatar

• Workers are entitled to at least 3 weeks’ wages for every year of service (after one full year).
• Governed by the Qatar Labor Law No. 14 of 2004.
  
  

Oman

• Eligible employees get 15 days’ wages per year for the first 3 years, and 30 days per year afterward.
• Based on Article 39 of the Omani Labor Law.
  
  

Bahrain

• ESB equals 15 days’ wages for each year of service (up to 3 years), and 30 days per year thereafter.
• Applies to both national and expat workers.
  
  

Kuwait

• Employees are entitled to 15 days’ salary per year (for the first 5 years) and one month per year after that.
• Specific rules differ slightly for monthly-paid vs. daily-paid workers.
  
  

Why Do ESB Laws Exist?

Governments across the MENA region enforce ESB policies for several reasons:

1. Protect Employees: It provides financial support during the transition to new jobs.
   
   
2. Encourage Retention: Long-service rewards motivate employees to stay longer.
   
   
3. Maintain Labor Market Balance: It creates fairer treatment of expatriates and citizens.
   
   
4. Avoid Legal Disputes: Clear policies help employers and employees avoid lawsuits.
   
   
   

Do All Employees Get ESB?

Not necessarily. The following conditions typically apply:

✅ Must be working under an official, registered contract.
✅ Must complete the minimum required years of service.
✅ Must not be terminated for gross misconduct (as defined by law).

Some temporary or part-time roles may have different rules depending on the country.

Common Misconceptions About ESB

Let’s bust a few myths.

❌ "You only get ESB if you're terminated."
✅ Nope. Resigning employees in most MENA countries are also entitled to the same, based on the length of service.

❌ "ESB includes my housing and travel allowance."
✅ Usually not. ESB is typically calculated based only on basic salary unless the contract says otherwise.

❌ "Expats don’t get ESB."
✅ Wrong again. Expatriate employees are legally entitled to ESB across most of the Gulf.

What Happens if Employers Don’t Pay ESB?

In countries like Saudi Arabia, non-payment of ESB is a labor law violation and may lead to:

• Labor court cases
• Fines
• Business license suspensions

Employees can file a formal complaint with the Ministry of Human Resources and Social Development (HRSD) in Saudi Arabia or the equivalent authority in their country.

How ZenHR Helps with ESB Management

Tracking ESB manually? It can be confusing and error-prone. With ZenHR, you can:

✅ Automatically calculate ESB based on country-specific laws
✅ Factor in resignations, terminations, or end-of-contract rules
✅ Generate accurate ESB reports and sync with payroll
✅ Stay compliant with evolving labor laws in Saudi Arabia, UAE, Qatar, and more

ZenHR’s localized HR software is built for companies across the MENA region so that you can manage end-of-service benefits confidently and transparently.

FAQs About End-of-Service Benefits

1. Is ESB mandatory in Saudi Arabia?

Yes. Under Article 84 of the Saudi Labor Law, employers must pay ESB to eligible employees.

2. Do I get ESB if I resign?

Yes, but the amount depends on how long you’ve worked. In Saudi Arabia:

• < 2 years: No ESB
  
  
• 2–5 years: 1/3 ESB
  
  
• 5–10 years: 2/3 ESB
  
  
• 10+ years: Full ESB
  
  

3. Is ESB taxable in Saudi Arabia?

No, ESB is not subject to income tax in Saudi Arabia. However, employees should check local laws in other countries.

4. Is ESB part of my monthly salary?

No. ESB is a separate lump-sum payment due at the end of your employment.

5. Can employers delay ESB payments?

ESB should be paid within 2 weeks after the employee’s last working day. Delays can lead to legal action.

Final Thoughts

End-of-Service Benefits aren’t just a formality but a key part of employee rights and employer responsibility across the MENA region. Whether you’re in Saudi Arabia, the UAE, or beyond, understanding your ESB rights can help you plan smarter for your financial future and keep your workplace fair and compliant.

If you're looking for a better way to manage ESB calculations, paperwork, and compliance, ZenHR is here to make it easier.