Actuarial valuation of end-of-service benefits in Saudi Arabia and the GCC

IAS 19 requires a rate based on yields on high-quality corporate bonds, or on government bonds where there is no deep market in such bonds, at the end of the reporting period, matching the currency and term of the benefits. We publish Saudi riyal discount curves every trading day, with a report each quarter. Your valuation report sets out the basis for your rate.

Yes. Under the Saudi Labour Law, an employee who resigns receives nothing before two years' service, a third of the award after two to five years, two-thirds after five to ten, and the full award after ten. We value resignation and termination exits separately, so your withdrawal data should distinguish them where it can.

Yes. Each country's end-of-service benefit follows its own labour law and currency. We value each plan on its own terms, keep assumptions consistent across the group where the economics allow, and report each entity separately with a summary for consolidation.

EOSB stands for end-of-service benefit: the amount due to an employee when service ends, usually paid by the employer as a lump sum under the country's labour law. In Saudi Arabia the full award is half a month's wage for each of the first five years and a full month for each year after. Under IAS 19 an employer-paid EOSB like this is a defined benefit plan, so the liability is measured by actuarial valuation. Where an employer instead pays into a funded scheme, as in Bahrain for expatriates since March 2024 or under the UAE's optional savings scheme, earlier service usually stays a defined benefit and later service depends on the scheme's terms.

IAS 19 is the IFRS standard on employee benefits. In Saudi Arabia, listed companies and other publicly accountable entities must apply it, through IFRS as endorsed there. Other companies use IFRS for SMEs as endorsed there, unless they choose full IFRS. Under IAS 19, end-of-service benefits (EOSB) are a defined benefit plan, so compliance means measuring the liability by actuarial valuation and making the required disclosures. Our article explains how IAS 19 applies to EOSB in Saudi Arabia.

IAS 19 prescribes the projected unit credit method: project each employee's end-of-service benefit, attribute it to service, then discount it. Saudi EOSB accrues twice as fast after five years, so IAS 19 requires attribution on a straight line, not by the Labour Law formula. The figure below shows the difference. We explain when the straight-line approach applies and work through a Saudi example.

They are your company's best estimates, and our governance framework sets out who decides what. IAS 19 bases the discount rate on high-quality corporate bonds or, with no deep market, government bonds in the same currency: see setting the discount rate for Saudi EOSB and our Saudi riyal discount curves. Salary escalation and attrition rest on your own experience and expectations, with resignations and terminations kept apart.

Start with the reconciliation of the defined benefit obligation, which shows why the liability moved over the year. Remeasurements are the line to question: our article on actuarial gains and losses explains what drives them. Treat the report as something to challenge, as your auditors will. We list seven things to check when auditing an actuarial report, written for Ind AS 19 but useful under IAS 19.