In the Kingdom of Saudi Arabia, the End-of-Service Award (EOSA) is a statutory right granted to employees upon the termination of their employment. This benefit is governed by the Saudi Labor Law, which is enforced by the Ministry of Human Resources and Social Development (HRSD). A common question arises among business owners: Can a Saudi national who owns a company and is also registered as an employee opt out of receiving the End-of-Service Award?
Let’s explore this question in light of the current legal framework.
Understanding the End-of-Service Award
According to Article 84 of the Saudi Labor Law, the employer is obligated to pay the employee an EOSA upon the termination of the employment relationship. The award is calculated as follows:
- Half-month wage for each of the first five years of service.
- One-month wage for each additional year thereafter.
- The calculation is based on the last wage received by the employee [1].
This entitlement applies whether the employment contract is fixed-term or indefinite, and it is considered a non-waivable right under the law.
Can a Company Owner Opt Out?
The answer depends on the nature of the relationship between the owner and the company:
✅ If the Owner is Not a Registered Employee:
If the Saudi national owner does not have a formal employment contract, is not registered with GOSI (General Organization for Social Insurance), and does not receive a salary, then there is no employer-employee relationship. In this case, the EOSA does not apply, and there is no legal obligation to pay or receive it.
❌ If the Owner is a Registered Employee:
If the owner is formally employed by their own company, meaning:
- They are registered with GOSI,
- They receive a monthly salary, and
- They have a formal employment contract,
then they are considered an employee under the law, and the EOSA becomes mandatory. The law does not allow any employee, including owners, to waive this right, as it is considered part of the employee’s accrued benefits [1].
Legal Reference
The HRSD clearly states:
“The end-of-service award shall be considered to be the worker's entitlements, which the employer shall pay in the event of the termination of the work contract; the Saudi labor law makes it obligatory for the employer to pay it to the worker at the end of the work contract, whether the work contract is of a fixed or non-fixed term.” [1]
This regulation applies uniformly, regardless of the employee’s nationality or ownership status.
Conclusion
A Saudi national company owner cannot opt out of the End-of-Service Award if they are formally employed by their own company. The EOSA is a mandatory entitlement under Saudi Labor Law and cannot be waived or excluded by agreement. However, if the owner is not registered as an employee, then the EOSA does not apply.
For business owners, it is crucial to clearly define roles and employment status to ensure compliance with labor regulations and avoid legal complications.
References
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