Annual Leave Balance: Accrual, Carry-Over and End-of-Service Settlement

The annual leave balance is not a number that surfaces at the end of the year; it is an obligation that accrues day by day from the first day of work, and it is governed by three connected articles of the Saudi Labor Law: Article 109, which sets the entitlement; Article 110, which regulates carry-over; and Article 111, which requires settlement at the end of service. Many leave-management errors arise from reading one of them in isolation from the other two.

This guide explains how the annual leave balance is built, carried over and settled, where the limits that may not be exceeded fall, and what your system needs to record at each stage so the number is correct on the day it is questioned.

1. Annual leave entitlement: 21 days or 30?

Article 109 provides for annual leave of not less than 21 days, rising to not less than 30 days once the worker has completed 5 continuous years in the service of the same employer. The wording “not less than” is deliberate: this is a floor, not a ceiling, and the employer may grant more than it in the contract or in the work-organisation regulation, and whatever is granted in excess becomes a contractual right the employer is bound by.

Three elements in this article determine every calculation that follows:

• “Continuous”: moving from the lower floor to the higher one is conditional on continuity of service with the same employer. Interrupted service is not automatically aggregated to reach the five years.
• Advance payment: leave pay is disbursed before the leave begins, not with the following month’s salary. This is a disbursement obligation that does not appear in many schedules, and whoever prepares the payroll needs to know it.
• The accrual year: the text ties the taking of leave to its accrual year, and does not specify whether that year starts from the worker’s joining date or from the beginning of the calendar year. An establishment that aligns balances to the calendar year therefore needs a written policy in its regulation explaining how it handles each employee’s first and last year.

Who sets the leave date?

Setting the date is the employer’s right, not the worker’s. But it is a right restricted by an explicit obligation in the same article: to notify the worker of the date at least 30 days in advance.

Accordingly, late notice is a breach of an explicit text, not merely poor administrative practice. As for cancelling leave that has already been scheduled, the text does not detail it, and its handling is regulated in the internal regulation.

In practice, this means your system needs to retain the notice date itself, not the leave date alone. If a dispute arises later, the question will be: when was the worker notified? And there is no answer to it except a dated record.

2. Does unused leave balance lapse?

Article 109 also provides that the worker takes their leave in its accrual year, and that they may not waive it or receive cash in place of taking it during service.

That sentence is entirely correct, and read on its own it gives a completely wrong impression: that the unused balance lapses. It does not lapse. Article 111 stands directly opposite it and provides that the worker is entitled to pay for the days of accrued leave if they leave work before using them, and that they are likewise entitled to leave pay for parts of a year in proportion to the part of it spent at work.

The two articles are consistent, not contradictory, and the distinction between them is temporal:

• During service: leave is taken as rest, and it may not be substituted by money. The purpose is plain: annual rest is owed to the worker’s body, not to their pocket.
• At the end of service: what was not taken must be paid. There is no choice in it and no waiver of it.

Any contract template or internal regulation that reproduces the text of Article 109 without Article 111 has written half the rule, and left the reader to understand the opposite of what the law provides. That is precisely what you need to avoid when drafting your own leave policy.

3. Carrying the annual leave balance into the following year, and its limits

Article 110 addresses what happens when leave is not used in its year, and sets three different routes, each with its own condition:

1. Carry-over at the worker’s request: the worker may defer their leave, or days of it, to the following year, with the employer’s consent. Deferral here is a joint decision, not a unilateral right.
2. Deferral by the employer’s decision: the employer may defer the worker’s leave after the end of its accrual year if the requirements of work so demand, and within a limit of 90 days.
3. Beyond 90 days: deferral further than that is valid only with the worker’s written consent, and to a maximum not exceeding the end of the year following the accrual year.

The last limit is the most important in practice, because it is an absolute ceiling: there is no route in the article that permits carrying a balance of two or three years forward indefinitely. An establishment that lets an employee’s balance accumulate over years is building an inflated financial obligation outside the framework the law drew for deferral.

A distinction is required here, and many conflate the two: the ceiling in Article 110 restricts lawful deferral; it does not extinguish the entitlement itself. An establishment that exceeds the deferral limits commits a breach in leave administration, but the days the worker did not take remain standing and are settled in cash at the end of service under Article 111. In other words, the establishment gains nothing by exceeding the ceiling; it merely adds a breach to a deferred financial obligation.

A worked example of the carry-over ceiling

Assume an employee whose accrual year starts on 1 March 2025 and ends on 28 February 2026, and who has 21 days of which none have been used. The routes run as follows:

• Until 28 February 2026: this is the accrual year itself, and the rule is that leave is taken within it.
• From 1 March 2026 until 29 May 2026: the 90-day window Article 110 allows the employer if the requirements of work demand deferral. This window does not require written consent from the worker.
• After 29 May 2026: continuing to defer is valid only with the worker’s written consent.
• 28 February 2027: the end of the year following the accrual year, which is the absolute ceiling. There is no route in the article that extends these days beyond it.

The practical value of drawing out these dates is that your system can raise an alert before each limit is reached, instead of discovering the breach after it has happened. The useful alert here is not “you have an accumulated balance”, but “the 2025 days reach their ceiling on 28 February 2027”.

What your system should record here

Three elements, without which knowing the balance alone is not enough:

• The accrual year of each carried-over day, not merely its total. Without it there is no way to know which days have reached their ceiling.
• The basis of the carry-over: did it come at the worker’s request with the employer’s consent, or by the employer’s decision for the requirements of work? The two routes differ in their conditions.
• The written consent whenever deferral exceeds 90 days. It is a document that needs to be attached in the employee file, not a verbal understanding.

4. Settling the leave balance in cash at the end of service

When the employment relationship ends, accrued unused days are settled in cash, whatever the reason the relationship ended. Article 111 adds a second element that is often overlooked: leave pay for parts of a year in proportion to the part of it the worker spent at work.

That is, an employee who leaves work in the middle of their accrual year does not walk away with nothing for that year; they are entitled to a proportion of it. A calculation that ignores the part-year and confines itself to whole years produces a figure lower than what is due.

A limit that has to be stated plainly appears here: the Labor Law does not lay down a single arithmetical formula for converting leave days into an amount. The text establishes the entitlement, not the method of calculating it in detail. Practice usually rests on the daily wage multiplied by the number of accrued days, but determining the wage on which the single day is built is a matter settled by the internal regulation and the contract. So if you are designing a policy, write the basis into it explicitly instead of leaving it to judgement at every entitlement.

For calculating the other entitlements that accompany the end of service, the end-of-service award calculator will help you, and you can estimate the remaining balance through the leave balance calculator.

5. The leave record is a document, not a cell

Everything above assumes the existence of a record that can be referred back to. In a dispute, the question is not about the balance showing today, but about how it arrived at what it arrived at. That is why the record needs to preserve the facts, not the result alone:

• The employee’s joining date, because it is the origin for measuring the five continuous years, and the basis of the accrual year whenever your regulation adopts the joining date as its basis.
• Every leave request with its date: when it was submitted, who reviewed it, when it was approved or refused, and the reason for refusal if one occurred.
• The date the employee was notified of the leave date the employer set, which is what the 30-day period measures.
• The days actually used against the days approved, since a request may be approved and then the full period not used.
• The type of each leave, kept separate: annual, sick, marriage or bereavement, maternity. Mixing them corrupts the annual balance in both directions.
• Carry-over decisions with their basis and dates, and the written consent whenever it is required.

The difference between a record that preserves these facts and a sheet that preserves a single number is the difference between answering a question and rebuilding the answer from memory years later.

How the record connects to attendance and to payroll

The leave balance is not an isolated record. An approved leave day must not appear as an absence in the attendance record, and it needs to be treated in the payroll on its correct basis rather than as a deduction. When these three records are managed in separate files, the familiar gap opens: leave approved in one file, an absence logged in another, and a deduction that showed up in the payroll on the basis of the second.

Leave pay itself is disbursed in advance under Article 109, and this is a disbursement obligation with a different timing from the monthly salary cycle, which whoever prepares the payroll needs to know before it is approved, not after.

6. Other leave types are independent of the annual balance

A recurrent administrative error is deducting from the annual balance days of leave the law provided for independently. These leave types stand on their own:

• Sick leave (Article 117): the year is counted from the first sick leave, and it carries 30 days at full pay, then a following 60 days at three quarters of pay, then 30 days without pay, whether continuous or intermittent.
• Marriage and bereavement leave (Article 113): 5 days on marriage, or on the death of a spouse or an ascendant or descendant, and 3 days on the death of a brother or sister.
• Maternity leave (Article 151): 12 weeks at full pay, of which 6 weeks after the birth are mandatory, and the female worker may distribute the remaining six as she sees fit starting from a period not exceeding 4 weeks before the expected date, extendable by one month without pay.
• Weekly rest (Article 104): Friday as the rule, paid, not less than 24 continuous hours, and it may not be compensated with money. The employer may substitute another day for it for some workers after notifying the competent labour office.
• Eid and occasion days (Article 112): paid leave on the occasions the regulation specifies.

Because each type has its own record and its own reckoning, a system that mixes them all into one counter produces an annual balance that is wrong in both directions at once.

7. Statutory working hours and their effect on reckoning a leave day

The balance is measured in days, but the day itself rests on a defined framework of hours. Article 98 sets a maximum of 8 hours a day or forty-eight hours a week, reduced for Muslim workers in Ramadan to 6 hours a day or 36 a week. Article 102 provides that rest, prayer and meal periods do not count within actual working hours.

This means that calculating the pay for a leave day in an establishment working on an hours basis does not hold up without a written definition of its standard day. That is a matter settled in the internal regulation, because the law sets the maximum and does not define the accounting day for you.

8. Cases in reckoning the leave balance

Practical ambiguity sits in the edge cases, not in the general rule. Here are some of them, and what the text provides in each:

An employee who joined mid-year

The worker does not wait a full year before their entitlement begins. Article 111 explicitly provides for entitlement to leave pay for parts of a year in proportion to the part of it the worker spent at work. The entitlement therefore accrues proportionally from the start, and what is regulated is the timing of taking it, not the origin of its arising.

An employee who resigned before completing 5 years

The floor applied to their balance is 21 days, not 30, because the rise to 30 is conditional on completing 5 continuous years. As for settling what accrued on that floor, it is fully due under Article 111, and it has nothing to do with the reason for leaving work. A distinction is required here: the reduction in Article 85 on resignation bears on the end-of-service award, not on the leave balance, and that reduction itself has exceptions provided by Articles 87 and 81 which this guide does not cover. The award and the leave balance are two different entitlements, each subject to its own articles, and mixing them produces a wrong figure.

An employee who reached five years mid-accrual-year

The text ties the rise to the completion of 5 continuous years, and does not detail how the year in which that completion falls is treated. This is a matter settled by the internal regulation with a written policy, and it needs to be written before the case arises, not after.

An employee asked to work during their leave

The law makes leave a rest rather than an amount, and prohibits cash substitution during service, so recalling an employee from their leave does not convert their days into a cash allowance. As for how the days they did not take are rescheduled, that is a matter the text does not detail, and it is regulated in the internal regulation in advance.

An official holiday falling within annual leave

Eid and occasion days are provided for independently in Article 112, and weekly rest is provided for in Article 104 and may not be compensated with money. The treatment of these days when they fall inside a period of annual leave is a matter the cited text does not detail, so it is regulated in the internal regulation. What matters is that the rule be one rule, applied to everyone, and written in advance.

9. A checklist before approving an employee’s leave balance

Before you approve an employee’s leave balance, make sure your system answers these questions with a document rather than from memory:

• Is the applied floor correct: 21 days, or 30 after 5 continuous years?
• Is the part-year entitlement reckoned for those who join and those whose service ends mid-year?
• Is the date the employee was notified of their leave date recorded, and does it precede it by 30 days?
• Is the accrual year known for each carried-over day, so that anything past the end-of-following-year ceiling can be detected?
• Is the written consent kept whenever deferral exceeded 90 days?
• Are sick, marriage, bereavement and maternity leave entirely separated from the annual balance?
• Is leave pay disbursed in advance as Article 109 requires?
• Is the basis for reckoning the daily wage written into the internal regulation instead of being left to judgement?

10. Why a wrong leave balance turns into a problem

A wrong balance does not show its effect at the time it occurs. It shows at the end of an employee’s service, when days accumulated over years turn into a single amount due for payment, and when the question becomes one of a document rather than an estimate. At that moment the gap between what the establishment recorded and what the law provides has itself been accumulating too.

Most of these gaps do not arise from intent, but from leave balances being managed in a file separate from the attendance record, separate from the payroll, and separate from the employee file. Every amendment is written more than once, one copy lags behind another, and nobody knows which copy is the right one.

This is what Qoyod HR addresses: one workflow from the leave request through to its approval, a balance deducted automatically on approval, and a full record of every request in the same employee file that carries their contract, attendance and salary. Leave-balance, end-of-service and overtime calculations are built into the system. It is a standalone HR system with its own subscription, and the link with Qoyod accounting is available now.

For sick leave and occasion leave, see Sick leave and occasion leave.

For more guides and templates on managing personnel affairs, browse the HR Resource Centre.

Frequently asked questions

How many days of annual leave is an employee entitled to?

Article 109 of the Saudi Labor Law provides for annual leave of not less than 21 days, rising to not less than 30 days once the worker has completed 5 continuous years in the service of the same employer. Leave pay is paid in advance, before it begins.

Does the leave balance lapse if the employee does not use it?

It does not lapse. Article 109 prohibits waiving leave or taking cash in place of it during service, but Article 111 provides that the worker is entitled to pay for the days of accrued leave if they leave work before using them. The prohibition concerns cash substitution during service, and settlement is due at its end.

How long may the leave balance be carried into the following year?

Article 110 sets three routes: deferral at the worker’s request and with the employer’s consent; deferral by the employer’s decision for the requirements of work within a limit of 90 days after the accrual year; and beyond that, deferral is valid only with the worker’s written consent and to a maximum not exceeding the end of the year following the accrual year.

Is sick leave deducted from the annual balance?

No. Sick leave is provided for independently in Article 117, and it carries 30 days at full pay, then a following 60 days at three quarters of pay, then 30 days without pay. Likewise marriage and bereavement leave in Article 113 and maternity leave in Article 151 are all independent of the annual balance.

When is annual leave pay disbursed?

Article 109 provides that leave pay is paid in advance, that is, before the leave begins and not with the following month’s salary. This is a disbursement obligation with a different timing from the monthly salary cycle.

Does the Labor Law set a formula for converting leave days into an amount?

No. The law establishes the entitlement and does not lay down a single arithmetical formula for reckoning it, nor does it define the accounting day on which the single day’s wage is built. This is a matter settled in the employment contract and the work-organisation regulation, and it is better written into them explicitly than left to judgement at every entitlement.

Statutory references

Everything in this guide rests on the Saudi Labor Law: Article 81 and Article 87 (exceptions to the reduction of the end-of-service award), Article 85 (reduction of the award on resignation), Article 98 (working hours), Article 102 (rest periods), Article 104 (weekly rest), Article 109 (annual entitlement, setting the date, the prohibition on waiver, and advance disbursement), Article 110 (carry-over and its limits), Article 111 (settlement on leaving work and parts of a year), Article 112 (Eid days), Article 113 (marriage and bereavement leave), Article 117 (sick leave) and Article 151 (maternity leave).

On the effect of the amendments made by Royal Decree M/44 of 1446 AH, in force since 19 February 2025: Articles 98, 104, 109, 111, 81 and 87 were not touched by amendments, while Article 151 was amended by it. As for Article 110, on which this guide rests, and Articles 102, 112, 113, 117 and 85, this guide has not established an explicit amendment status for them, so it is not sound to assert that they were or were not amended. Reference on that point goes to the updated statutory text.

This guide is a regulatory explanation, not legal advice. In an existing dispute or a particular case, the statutory text and the competent authority remain the reference.