Employment contract termination
In one sentenceThe end of the relationship between the business and the employee when the contract term expires, by agreement of both parties, by resignation or by dismissal. It leads to calculating the employee's final entitlements.
Simply put
The reason for termination matters to the accountant, because it decides what the employee is entitled to: the full end-of-service benefit or part of it, pay for the remaining leave, and pay for the last days.
Bring these amounts together in the final settlement, record its entry, then remove the employee from the payroll and from GOSI. Check the Saudi Labor Law and its regulations for the rules on each reason.
Worked example
A restaurant employee's contract ended when its term expired after 4 years. His wage is 8,000 SAR, he has a leave balance of 10 days, and he worked 15 days of the last month (based on 30 days a month for illustration).
End-of-service benefit: 4 × ½ × 8,00016,000
Pay for the leave balance: 8,000 ÷ 30 × 102,666.67
Pay for the last days: 8,000 ÷ 30 × 154,000
Total final entitlements22,666.67 SAR
Formula: Benefit + pay for remaining leave + pay for the days of the last month
Don't confuse it with
Compensation for unjustified terminationFinal entitlements are due in almost every termination, while compensation is due only when the contract is ended without a legitimate reason.