Blog · HR and payroll
Payroll and end-of-service in Saudi Arabia: from the monthly run to the final settlement
A monthly provision that matches the liability, a payroll that books its own entry, a wage file to specification, and a settlement under the Labour Law — no surprises.
Payroll is the most frequent process in a business and the most sensitive: a small error reaches every employee and shows up in their bank account before it shows up in the books. End-of-service benefit is the largest liability that builds up quietly; if it is not provided for every month, it arrives in one lump on the day a long-serving employee leaves.
End-of-service benefit under the Saudi Labour Law
When employment ends, the worker is entitled to an award calculated on their last wage: half a month’s wage for each of the first five years of service and a full month’s wage for each year after that, with part-years counted proportionally.
- Where the worker resigns: no award before two years of service, one third from two to under five years, two thirds from five to under ten, and the full award after ten years.
- The full award is due in cases the law specifies even though the worker left, such as leaving because of force majeure.
- It is not due in the cases of termination for cause that the law specifies.
Annual leave is twenty-one days, rising to thirty after five consecutive years, and any unused balance is paid out when employment ends. The definition of the wage on which the award is calculated, and the details of special cases, are set by the text of the law and its regulations.
Why provide for it every month?
The award is a cost of every month the employee worked, not of the month they left. So a monthly provision is charged to expenses for it, and likewise for leave pay. When the employee leaves, their liability is already in the books at its value, and past months’ profits were honest rather than inflated. It is good practice to reconcile the provision balance with the calculated liability per employee at least once a quarter.
The monthly payroll cycle
- Close attendance, leave, permissions and decisions before building the payroll, not after.
- Calculate the employee and employer social insurance shares from each employee’s file, prorated for anyone who joined or left during the month.
- Deduct advances by their scheduled instalments, and review differences from the previous month before approval.
- Approve the payroll; its entry enters the books and the wage protection file for the bank is built from it.
- Distribute payslips to employees and answer their questions from the payroll itself.
Common payroll mistakes
- An employee who joined mid-month paid a full month, or one who left not paid for the days they worked.
- An allowance added to the contract but not to the employee file, so the difference surfaces in the final settlement years later.
- An advance paid without recording its instalments, so it is never deducted and nobody knows the balance.
- Unpaid leave that did not reach the payroll before it was closed.
- A wrong IBAN or an expired ID in the employee file, so the bank rejects that line in the wage protection file.
Most of these mistakes are not in the calculation itself but in the data that comes before it. Fifteen minutes reviewing changes to employee files before building the payroll saves a full day of corrections afterwards.
The final settlement, step by step
When employment ends, everything owed to and by the employee is brought together in one document: the type of separation and its reason, the last working day, the length of service in years, months and days, the award according to the type of separation, payment for the leave balance, and the final period’s salary after the social insurance share — then deductions such as outstanding advances. The document is approved before payment, and a clear statement is printed for the employee to sign.
Before paying the settlement: a checklist
- Confirm the actual last working day and the type of separation as documented, because the award changes with it.
- Recover the employee’s custody items — devices, keys, documents — or document what is deducted for them.
- Settle outstanding advances and any pending amounts from previous months.
- Update the social insurance end date, medical insurance end date and contract end date in the employee file.
- Remove the employee’s access to company systems on their last day.
- Have the employee sign the settlement statement on payment, and keep it attached to the settlement.
How Arttop 360 handles it
Labour Law rules are derived from the establishment’s country: annual leave, award brackets and resignation rules. In payroll, both social insurance shares are calculated from the employee’s file and prorated to the insured part of the month; end-of-service and leave provisions are built monthly; and when the payroll is saved, its entry is created pending approval and updated with it until approval. Payslips print for every employee, and the wage protection file is generated from the approved payroll to the published technical specification, after checking each employee’s IBAN, ID and wage components.
«Final Settlements» provides a wizard that calculates the length of service and the award according to the type of separation and the relevant articles, routes it through approval, prints the statement on the establishment’s letterhead, then creates the payment voucher and updates the employee’s dates in their file. «Data Audit» flags cases where the provision does not match the liability due.
Employees can submit leave, advance and permission requests from their portal, and a text message can be enabled to tell them the decision on each request. Where Arttop 360 AI is enabled, the «HR» persona reads employee files and documents nearing expiry, and prepares requests and documents for you to review.
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