End-of-service compensation often becomes a practical concern when an employment relationship ends. Employees may ask whether resignation affects the entitlement, whether they must complete a full year, and whether an end-of-service payment is due in addition to Social Security contributions. These questions are especially important where the employee was not actually covered by Jordan’s Social Security system during the period in question.
The central question is: How is end-of-service compensation calculated for employees not covered by Jordan’s Social Security system? Under the official rules identified in the Jordanian Labour Law and its amendments, the general position is that an employee who is not subject to the Social Security Law and whose service ends for any reason is entitled to compensation calculated at one month’s wage for each year of actual service, including a proportional amount for any fraction of a year.
This article is provided for general educational purposes only. It is not legal advice, does not determine the outcome of any individual claim, and does not guarantee a particular result. The position may depend on the employment records, the actual wage, the service period, and the employee’s Social Security status.
How is end-of-service compensation calculated for employees not covered by Jordan’s Social Security system?
The calculation begins with three questions: Was the employee covered by Social Security during the relevant period? What was the actual length of service? What wage should be used as the calculation basis?
The basic formula is:
End-of-service compensation = the applicable monthly wage × the employee’s actual years of service, including a proportional fraction of a year.
For example, four years and six months of service are treated as four and a half years for calculation purposes. The official material reviewed does not indicate a requirement to complete a full year before the entitlement arises. Instead, it expressly refers to calculating a fraction of a year in proportion to its length.
When does the entitlement arise?
The relevant rule applies when the service of an employee who is not subject to the Social Security Law comes to an end. The wording identified in the official material refers to service ending “for any reason.” As a result, the entitlement is not, as a general matter, limited to dismissal or the expiry of a fixed-term contract.
In principle, the rule may therefore apply where the relationship ends through resignation, expiry of the contract, dismissal, or another reason, provided the employee was not covered by Social Security for the relevant period and no separate legal issue changes the position. This does not mean that every claim is automatically accepted. Disputes may still concern the true length of service, the applicable wage, the employee’s insurance status, or the existence of a special scheme.
Does the employee have to complete one full year?
Based on the official rules described in the research material, there is no apparent requirement to complete a full year. A fraction of a year is calculated proportionally. A period of less than twelve months should therefore not be disregarded solely because it is incomplete, assuming the other conditions are established.
Which wage is used in the calculation?
The general basis is the employee’s last wage received. However, where all or part of the wage is paid by commission or piecework, the relevant rule uses the average amount actually received during the preceding twelve months, as stated in the modern official version referenced in the research material.
This distinction matters. A fixed monthly wage may be relatively straightforward to identify, while a variable wage requires attention to the amounts actually paid over the specified period. Payroll records and other reliable evidence may therefore be important, especially where the contractual figure does not reflect the employee’s actual earnings.
A simple calculation example
Assume that the employee was not covered by Social Security, worked for four years and six months, and had an applicable monthly wage of JOD 500. The illustrative calculation would be:
- Four years: 4 × JOD 500 = JOD 2,000.
- Six months: 6 ÷ 12 × JOD 500 = JOD 250.
- Illustrative total: JOD 2,250.
This example explains the method only. It does not determine whether the employee was covered by Social Security or which wage components should be included where the remuneration was variable, commission-based, or based on piecework.
What is the effect of Social Security coverage?
End-of-service compensation and Social Security are different in nature. End-of-service compensation is an employment-related entitlement payable by the employer when service ends in circumstances covered by the relevant rule. Social Security is a separate insurance system funded through employee and employer contributions and covering branches that include work injuries, old age, disability, death, and unemployment.
According to the research material, Social Security coverage generally includes employees subject to the Labour Law who are at least sixteen years old, regardless of the duration or form of the contract and the nature of the wage, subject to statutory exclusions. The identified examples include persons covered by civil or military retirement systems, certain employees of foreign missions, and certain forms of irregular work where the statutory conditions apply.
The Social Security Law also treats the employer’s obligations for old-age, disability, and death insurance as corresponding to the Labour Law end-of-service compensation for the period covered by Social Security. Accordingly, where an employee was covered throughout the relevant period, the general position is that the same period should not generate a second end-of-service claim on the basis that the employer’s insurance obligations correspond to it.
Can a claim remain available where Social Security is involved?
The relevant periods should be examined rather than relying only on a general statement that the employee was “registered” with Social Security. There may be a period before the application of the Social Security Law, a period that was not actually covered, or a dispute about registration or the employee’s legal status.
The official material states that, when service ends, the employer remains responsible for end-of-service compensation and other rights relating to periods before the Social Security Law applied. The employee may also have better rights under an internal scheme, savings fund, employment contract, collective agreement, or another special arrangement. Where those rights are more favourable than the statutory end-of-service compensation, the employer may be responsible for the difference in accordance with the applicable rules.
What facts and records should be reviewed?
A correct calculation is not only a mathematical exercise. The employment timeline, the nature of the wage, and the employee’s Social Security status for each period should be reviewed together.
- The employment start date and the date service ended.
- The employment contract and any later amendments or agreements.
- Payroll records or other evidence of amounts actually paid.
- Evidence of commission or piecework arrangements and the actual average received during the preceding twelve months.
- Social Security records showing the periods of coverage, if any.
- Any period before Social Security coverage began or any alleged gap in coverage.
- An internal employment scheme, savings arrangement, or agreement providing better rights.
- Records concerning the reason the relationship ended, while remembering that the stated reason does not, by itself, replace the other requirements.
How should the claim be reviewed before action is taken?
- Define the period claimed: Separate periods covered by Social Security from earlier or uncovered periods.
- Calculate the service period: Identify the completed years and calculate any remaining months proportionally.
- Identify the applicable wage: Use the last wage, or the actual average received over the preceding twelve months where all or part of the wage was based on commission or piecework.
- Compare contractual and statutory rights: Review any internal scheme, contract, savings arrangement, or collective agreement that may provide a better entitlement.
- Review the evidence professionally: Where the parties disagree about coverage, service, or wage, the records should be assessed before deciding on the appropriate formal step.
Frequently asked questions
Is compensation payable if the employee resigns?
The official rule described in the research material refers to service ending for any reason, so the entitlement is not, in principle, limited to dismissal. The employee’s Social Security status, the applicable period, the service duration, the wage, and any special arrangement must still be checked.
Are Social Security contributions added to the end-of-service payment?
Contributions paid into Social Security are not automatically added to end-of-service compensation for the same period. The employer’s old-age, disability, and death insurance obligations correspond to the compensation for the period covered by Social Security. A separate entitlement may nevertheless arise for an earlier or uncovered period, or a better right may apply under a special arrangement.
Is an employee with less than one year of service excluded?
The official material reviewed does not indicate a full-year requirement. It provides for a proportional calculation of a fraction of a year. The employee must still establish the other relevant elements, including the absence of Social Security coverage for the claimed period and the ending of service.
Is the wage written in the contract always decisive?
Not necessarily. Where all or part of the wage is paid by commission or piecework, the identified rule relies on the average amount actually received during the preceding twelve months. The actual payment records may therefore need to be reviewed.
A conclusion for professional review
As a general matter, an employee who was not subject to Social Security and whose service ended may be entitled to one month’s applicable wage for each year of actual service, with a proportional amount for a fraction of a year. The rule is not, in principle, limited to dismissal because it refers to service ending for any reason.
The practical outcome still depends on a careful review of Social Security coverage, periods preceding coverage, the applicable wage, the service timeline, and any contract or scheme providing better rights. A professional review of the available records can help distinguish end-of-service compensation from Social Security rights and define the scope of any potential claim more clearly.
