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4-Oct-2004 Arab News  ( Law & You )

J.R. from Riyadh I just want to know if the end-of-service benefit (ESB) stated in my contract is legal and within the rule of law. (1) My contract states that: In case the service is not less than two years and not more than five years, the employee shall be entitled to receive at the end of service a service award equal to fifteen days salary. For service of more than five years, the employee shall be entitled to receive at the end of service beyond the fifth year, a service award of one-month salary. I am working with the company with a two-year contract. (2) Is it possible for me to get service award every time I finish my two-year contract?

(1) The timing is correct but the basis of calculation of your company is not. The law also stipulates that only after two years of service is an employee entitled to ESB. The basis of calculation in the law is not the monthly salary, but the last monthly wage (LMW).

LMW is more than the salary. It is the total of the salary added to it with all other personal allowances monthly averaged. If your salary is SR1,000, your housing is SR400 per month and food allowance is SR300 per month, then your LMW is SR1,700. This LMW is the basis of calculation for your ESB.

If you work for five years you will get SR4,250. If you work for ten years, you will get SR4,250 for the first five years, and above that you will get a full LMW, i.e., SR1,700, for each of the next five years. Your total ESB for ten years will be SR12.750. If you work for only two years of your present two-year contract, you will get SR1,700 as ESB.

(2) By law, ESB can only be calculated and finally given at the end of the service of an employee. It is possible that an employee may take advances of amounts, big or small, a one-time payment or periodical, but these may only be considered as advances on account of ESB. They are not final. ESB can only be final when calculated at the end of the service, when the company stops work or when the employee leaves the company. The employee must then be given the difference between what he took as advance and the actual calculation of ESB to which he is entitled according to the law, as described above.



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