Annual leave dues are one of the most important items every employer and HR manager in Saudi Arabia must calculate accurately. The Saudi Labor Law defines the number of days, the calculation method, the carry-forward rules, and the cash settlement of unused leave at end of service. Any small error in the formula turns into an accumulated financial liability on the company, and sometimes into a labor dispute before the Labor Court.
This template gives you a simplified way to calculate each employee’s leave balance and the cash value of accrued leave, with a full explanation of the formula and practical examples under Article 109 of the Saudi Labor Law, aligned with the Qiwa platform and the requirements of the Ministry of Human Resources and Social Development (MHRSD).
1. The legal framework for annual leave in Saudi Arabia
The Saudi Labor Law issued by Royal Decree No. M/51 regulates annual leave in Articles 109 to 113. These articles set the minimum leave entitlement, the timing of leave, the carry-forward mechanism, and the cash compensation at end of service. Any clause in an employment contract granting the employee less than this minimum is void, and any clause granting more is an extra benefit that the employer is bound to honor.
Article 109 of the Saudi Labor Law: minimum annual leave
- 21 working days per year for every employee with less than 5 years of service with the employer.
- 30 working days per year for every employee who has completed 5 years or more of service.
- Leave is paid at full wage, payable in advance before the leave begins.
- The employee earns the leave for each year of service and has the right to use it within the year of entitlement.
Before moving to the formula, review our guide on leave types under Saudi Labor Law to distinguish between annual, sick, emergency, and maternity leave, since each type has a different formula.
Annual leave balance under Article 109
21 days
For employees in their first 5 years of service
30 days
For employees after completing 5 years of service
Article 110 of the Saudi Labor Law: timing of leave
The employer sets the timing of the annual leave based on business needs, provided the employee is notified at least 30 days in advance. The employee may not waive the leave in exchange for cash while still in service. This protects the employee’s health-related right to rest. The only exception is at end of service, where cash compensation is paid for the unused balance.
Article 111 of the Saudi Labor Law: carry-forward
The employee has the right to consent in writing to deferring the annual leave, or part of it, to the following year. Leave may not be carried forward for more than one year, and the carried balance lapses if the employee does not use it during the following year, unless both parties agree otherwise in writing.
2. The full formula for calculating the annual leave balance
The formula used in this template is based on daily accrual. Each day the employee works earns a proportional share of the leave balance. This is the method adopted by MHRSD and by most accounting systems, because it reflects the actual length of service.
The core formula
Accrued leave balance = (annual leave days / 365) x actual days of service Leave cash value = (total salary / 30) x unused balance days
Variables required before the calculation
- Annual leave days: 21 days in the first 5 years, 30 days afterward.
- Actual days of service: from the joining date to the calculation date (or the end-of-service date).
- Total salary: basic salary plus the fixed allowances (housing, transport, nature of work) defined in the contract.
- Days of leave actually taken by the employee: from the attendance record.
- Days carried forward from the previous year (if any).
How to calculate the total salary
This is where many employers make a common mistake. Leave cash value is not calculated on the basic salary alone, but on the total salary. The total salary includes:
- The basic salary stated in the contract.
- Housing allowance (cash or in-kind housing with assessed value).
- Fixed monthly transport allowance.
- Any other permanent allowance clearly defined in the contract and paid monthly.
Variable allowances (commissions, performance incentives, temporary assignment bonuses) are not included in the leave calculation unless the contract explicitly says so. For more detail on salary components, see our Saudi salary scale guide and the salary calculator.
3. Three practical calculation examples
Each example assumes a company operating under the Saudi Labor Law, and uses realistic figures reflecting average Saudi market salaries.
Example 1: employee in the first 5 years of service
Inputs:
- Employee: Ahmed A.
- Joining date: 1 January 2024.
- Calculation date: 31 December 2024.
- Years of service: 1 year.
- Basic salary: 7,000 SAR.
- Monthly housing allowance: 1,750 SAR.
- Monthly transport allowance: 500 SAR.
- Total salary: 9,250 SAR.
- Annual leave days: 21 days.
- Leave days actually taken: 14 days.
Calculation:
- Accrued leave balance = (21 / 365) x 365 = 21 days.
- Remaining balance = 21 minus 14 = 7 days.
- Daily value = 9,250 / 30 = 308.33 SAR.
- Cash value of remaining balance = 308.33 x 7 = 2,158.33 SAR.
This balance is carried forward to the next year by written agreement, or paid in cash at end of service. The employer is not required to pay it in cash while the employee is still in service.
Example 2: employee with 6 completed years of service
Inputs:
- Employee: Sarah M.
- Joining date: 1 March 2018.
- Calculation date: 1 March 2025.
- Years of service: 7 full years.
- Basic salary: 12,000 SAR.
- Monthly housing allowance: 3,000 SAR.
- Total salary: 15,000 SAR.
- Annual leave days: 30 (service exceeds 5 years).
- Leave taken in the calculation year: 20 days.
- Carried forward balance from previous year (by written agreement): 5 days.
Calculation:
- Current year balance = 30 days.
- Remaining current year balance = 30 minus 20 = 10 days.
- Total balance = 10 (current year) plus 5 (carried forward) = 15 days.
- Daily value = 15,000 / 30 = 500 SAR.
- Cash value of total balance = 500 x 15 = 7,500 SAR.
If Sarah does not use her carried-forward 5 days during the current year, they lapse unless a new written agreement extends the carry-forward. This point is often overlooked and costs the employee a real financial right.
Example 3: employee leaving service with an open leave balance
Inputs:
- Employee: Khaled R.
- Joining date: 1 January 2022.
- End-of-service date: 30 September 2025.
- Total service duration: 3 years and 9 months (1,368 days).
- Total salary: 8,500 SAR.
- Annual leave days: 21.
- Total leave taken across the full service: 50 days.
Calculation:
- Total accrued balance across service = (21 / 365) x 1,368 = 78.67 days.
- Unused balance = 78.67 minus 50 = 28.67 days.
- Daily value = 8,500 / 30 = 283.33 SAR.
- Leave cash value due at end of service = 283.33 x 28.67 = 8,123.05 SAR.
This amount is added to the end-of-service entitlements (end-of-service benefit, last salary, and any other dues). The employer must pay all entitlements within one week of the end-of-service date under Article 88 of the Saudi Labor Law.
How to calculate leave cash value in 4 steps
A clear sequence that works for any employee, any service length, any salary.
Calculate the accrued leave balance
(annual leave days / 365) x actual days of service.
Deduct the days already taken
Subtract every leave day the employee actually used, and add any balance carried forward by written agreement.
Calculate the daily value
Total salary / 30. Total salary = basic plus housing plus transport plus other fixed allowances.
Multiply balance by daily value
The result is the leave cash value payable at end of service or at the agreed balance settlement.
4. Used leave vs. deferred leave
Many employers confuse these two terms, and the confusion sometimes doubles the cost at end of service. The distinction is subtle but decisive.
Used leave
Days the employee actually took off work. The start and end dates are logged in the attendance record, and the wage is paid in advance before the leave begins. These days are deducted directly from the year’s balance and are not later counted within end-of-service dues.
Deferred (carried-forward) leave
Days the employee did not use during the year of entitlement and which were carried forward in writing to the following year. They fall under Article 111 of the Saudi Labor Law:
- They may not be carried forward for more than one year.
- They lapse if the employee does not use them during the following year, unless extended by written agreement.
- They remain part of the cumulative balance at end of service and are paid in cash.
Unused balance at end of service
Days the employee earned based on length of service but never took. They are calculated using the formula in section 3, and the cash value is paid at contract end. This right does not lapse regardless of how long the service was, and it cannot be waived in the employment contract.
5. The impact of leave on salary
An employee on annual leave is entitled to the full salary exactly as if still working. The Saudi Labor Law is strict on this point, and any deduction from the salary during annual leave is a labor violation. The rule:
- Basic salary: paid in full.
- Fixed allowances (housing, transport, nature of work): paid in full as part of the total wage.
- Commissions and performance incentives: not paid for leave days, unless the contract states otherwise.
- Social insurance: contributions to the General Organization for Social Insurance (GOSI) continue during leave at the same total salary value.
Any deduction during leave (such as a prior tardiness deduction or salary advance) must be documented and agreed in writing, and must not exceed the legal deduction limit under Article 92 of the Saudi Labor Law. For more detail, see our guide on absence and deduction rules.
6. Paying leave cash value at end of service
When the employment contract ends (whether by resignation, termination, contract expiry, or mutual consent), paying the cash value of the unused leave balance becomes a binding legal obligation. This right is protected by Article 111 of the Saudi Labor Law, and neither the employee nor the employer may waive or ignore it.
When is the cash value paid?
Under Article 88 of the Saudi Labor Law, the employer must pay all employee dues within one week of the end-of-service date. End-of-service entitlements include:
- The total salary for the remaining period up to the end-of-service date.
- The end-of-service benefit (EOSB) under Article 84.
- Annual leave cash value for the unused balance.
- Any other allowances or dues stated in the contract.
- The return ticket to the home country for non-Saudi employees (if the contract provides for it).
Any delay in payment exposes the employer to a labor complaint before the Labor Court and may carry additional compensation. For more detail, see our guide on ending an employment contract by mutual consent.
7. The Qiwa platform and the employee’s role in protecting their rights
MHRSD launched the Qiwa platform to unify all labor market services in one digital interface. The platform lets the employee:
- View the employment contract registered with the official authorities.
- Track the annual leave balance if the employer keeps it updated on the platform.
- File a complaint if leave dues are not paid at end of service.
- Obtain a verified length-of-service certificate, useful in later balance calculations.
- Request amicable settlement through the labor service offices before going to court.
HR experts recommend that every employee keep a copy of their employment contract, a log of approved leave days, and monthly payslips. These documents are the first evidence in any dispute. For a broader view of employment matters, see our human resources management guide.
8. Common mistakes in calculating the leave balance
HR teams in many Saudi companies have reviewed hundreds of payroll records and found these mistakes recur at a high rate. Each one translates into a financial claim or a double payment.
1) Using basic salary instead of total salary
The most common mistake. The employer calculates leave cash value on the basic salary alone and strips the employee of their share of the housing and transport allowances. The shortfall can reach 30% of the due value.
2) Using 365 days instead of 30 days for the daily rate
The daily value is calculated on a 30-day basis (because the salary is monthly), not 365. Getting this wrong shrinks the cash value to roughly one third.
3) Dropping the carried-forward balance without written agreement
A carried-forward balance lapses only after the following year ends without the employee using it. If the employer cancels it earlier or without notice, the employer becomes obligated to pay it in cash.
4) Ignoring fractional periods
If the employee worked only 7 months in the year, the entitlement is (7 / 12) of the annual leave. Many payroll records count a full year or skip it entirely. The correct approach: use (annual leave days / 365) x actual days of service.
5) Mixing annual leave with sick leave
Sick leave follows a different formula (30 days at full pay, 60 days at three-quarters, 30 days unpaid). Merging the two balances is a common error, especially in companies without specialized accounting software.
6) Missing the move from 21 to 30 days
An employee who completes 5 years moves automatically into the 30-day bracket. Many companies forget to update this transition, and the employee keeps accruing at 21 days per year for additional years. The cumulative gap becomes very large by end of service.
7) Not documenting waived leave days
If the employee chose to work during their leave days with written approval, they earn double pay for those days under Article 113 of the Saudi Labor Law. Skipping this documentation exposes the employer to a later claim for the double wages.
9. Comparison table of balance calculation by years of service
| Years of service | Annual leave days | Daily formula | Example on 10,000 SAR total salary |
|---|---|---|---|
| Less than 5 years | 21 days | 21 / 365 = 0.0575 day per service day | Full balance value = 7,000 SAR |
| 5 years or more | 30 days | 30 / 365 = 0.0822 day per service day | Full balance value = 10,000 SAR |
| At end of service | Only the unused balance is calculated | (salary / 30) x balance days | Paid within one week |
10. How Qoyod helps you manage and calculate leave balances automatically
Manual calculation is possible, but it breaks down once you have more than five or six employees. Each employee has a different joining date, a different accrued balance, a different total salary, and a contract that may carry special clauses. This is where Qoyod fits in.
Qoyod provides an integrated accounting and finance system designed specifically for the Saudi environment, and it handles leave cash value as part of the payroll and dues cycle. What the system does:
- Automatic balance accrual: calculates each employee’s leave balance based on joining date and actual years of service, with automatic switching from the 21-day bracket to the 30-day bracket on completion of 5 years.
- Real-time balance updates: the system updates the balance the moment a leave day is logged in the attendance record, so the remaining value is always accurate.
- Total salary calculation: derives the approved total salary and applies it automatically in the leave formula, so there is no way to mistakenly use the basic salary.
- Automatic journal entry (JE): every leave cash payment is posted to the employee liabilities account, with no manual entries.
- Ready end-of-service report: a full PDF statement covering EOSB, leave cash value, and last salary.
- Invoice and payment linking: ties dues to each employee and reflects them on the balance sheet, so leave liabilities are visible at any time.
- GOSI integration: contributions update automatically on the total salary basis during leave periods.
To learn more about managing payroll and employee files in the system, see the Qoyod accounting software page, and the professional bookkeeping service if you prefer to hand the full processing to a certified accountant. If you run a restaurant or a chain with a large operational workforce, see Qoyod Q.Flavours for restaurants, designed to manage daily operations teams.
What Qoyod does for you in leave management
Automatic balance accrual
The daily formula runs in the background for every employee, with no paperwork and no Excel sheets.
30-day bracket alert
The system moves the employee automatically on completion of 5 years of service.
Automatic journal entry
Every leave cash payment posts to the employee liabilities account in real time.
End-of-service report
A full PDF statement covering EOSB, leave cash value, and last salary.
11. Frequently asked questions about annual leave dues
Can an employee combine annual leave with sick leave?
Yes. If the employee becomes medically ill during the annual leave with documented proof, the annual leave is paused and the illness days are counted as separate sick leave. The annual leave resumes after the sick leave ends.
What if the employee refuses to take annual leave?
The employer is obligated to ensure the employee takes the leave during the year. The employee may not waive the leave in exchange for cash while the contract is active. The rule: taking leave is a health right; cash payment is a financial right only at end of service.
Does leave differ during Ramadan?
Annual leave is fixed at 21 or 30 days regardless of the month. Working hours are reduced during Ramadan for Muslim employees to 6 hours per day under Article 98, but this does not affect the annual leave balance.
How are Fridays and public holidays treated during the leave?
Article 109 of the Saudi Labor Law refers to “working days”, meaning net working days. Fridays and public holidays falling within the leave period are not deducted from the leave balance, and the leave is extended by the same number of days.
Can the employer split the leave into separate periods?
Yes, the leave may be split by mutual agreement, provided one of the parts is no less than 6 consecutive working days under Article 110 of the Saudi Labor Law. This rule guarantees the employee at least one real, if short, rest period.
What about trainees and employees under probation?
An employee under probation (90 days, extendable to 180) earns annual leave proportional to the period worked. Once employment is confirmed, the probation period counts toward total service.
12. Practical takeaway
Annual leave dues are not a side detail on the payslip. They are a legal right protected by the Saudi Labor Law, and any calculation error translates into financial and legal risk. The rule that summarizes this entire template:
21 days in the first 5 years, 30 days afterward, daily accrual based on the total salary, cash payment only at end of service.
Apply the formula to every employee, log every leave day in the attendance record, and keep a written agreement for every carried-forward balance. This trio protects the employer from claims and protects the employee from losing what they earned.