How to calculate annual leave pay for employees in Saudi Arabia
Steps to calculate pay for unused annual leave in Saudi Arabia: the monthly wage and fixed allowances, the number of leave days and the daily wage.
In short
- Base annual leave pay on the actual wage, including fixed allowances.
- Confirm unused leave days and calculate entitlement for part-years in proportion to service.
- Multiply the daily wage by the unused annual leave days owed to calculate the payment.
Annual leave is a basic part of the Saudi Labour Law and one of the employee's rights, and it comes with its own entitlements. In this article you will learn what annual leave pay means and how annual leave differs from other types of leave.
You will also learn how to calculate annual leave pay, how Dawmt helps you work out annual leave pay, why its reports matter in this process, and how Dawmt helps you calculate and track annual leave.
What is annual leave pay?
Annual leave pay is the amount an employee receives for leave they did not take while working at the company. It is one of the employee's financial rights, like salary and bonuses. An employee is entitled to annual leave pay if their service ends before they have taken all their leave days. If they have, say, ten days left, they receive payment for those days when their service ends, and if they never used any of their leave, they are paid for all of it.
The employee receives this pay when their service ends, under Article 111 of the Labour Law. During employment, Article 109 of the Labour Law does not allow them to take cash in place of their leave.
The difference between annual leave and other types of leave
Annual leave differs from other types of leave in clear and fundamental ways, because it has several features no other leave shares. Here is how they compare:
Annual leave | Other types of leave |
|---|---|
Annual leave is a fixed entitlement: an employee cannot stay with a company without receiving it, and under the Saudi Labour Law it is the employee's right. - Each day taken from the annual leave balance is paid in advance under Article 109 of the Labour Law, with nothing deducted from the salary. - The employee is entitled to annual leave for every year of service under Article 109 of the Labour Law, and the employer may set its dates according to the needs of the work, provided the employee is notified at least 30 days in advance. - If the employee's service ends before they have used all their annual leave, they are entitled to payment for it, known as annual leave pay. This is the employee's right under Article 111 of the Labour Law, and it includes leave pay for parts of a year in proportion to the time worked. | These include sick leave and casual leave. The employee takes them for a specific reason; they are not a fixed entitlement. - The Labour Law sets the pay for some of them: under Article 117 of the Labour Law, sick leave is on full pay for the first 30 days, three-quarters of pay for the next 60 days and without pay for the 30 days after that, within one year. Unpaid leave is agreed between the employee and the employer under Article 116 of the Labour Law. - These types of leave do not require a minimum period of service: they only need documents or evidence of the reason for the leave, and the leave is then granted with the company's approval. - The employee is not paid for this type of leave if they do not take it. |
How to calculate annual leave pay step by step
To calculate annual leave pay, follow the steps below:
Calculate the monthly wage
First, calculate the monthly wage precisely. Leave is paid at the actual wage as Article 2 of the Labour Law defines it, which includes the fixed salary and fixed allowances such as transport or housing allowance, and any other allowance paid with the salary every month. Getting this right makes the remaining steps accurate.
Work out the number of leave days
You need to know exactly how many days of annual leave the employee is entitled to, because the next steps depend on it. Under Article 109 of the Saudi Labour Law, an employee is entitled to at least 21 days of annual leave for each year, rising to at least 30 days once they have completed 5 consecutive years of service with the employer.
Calculate the daily wage
Next, calculate the daily wage by dividing the monthly salary plus allowances, as worked out above, by 30, because Article 2 of the Labour Law treats a month as 30 days unless the employment contract or work regulations say otherwise. The result is the daily wage.
Calculate annual leave pay
Finally, multiply the daily wage by the number of annual leave days owed and not taken. The result is the annual leave pay, with leave pay for parts of a year calculated in proportion to the time the employee worked, under Article 111 of the Labour Law.
Read more: HR automation: the future of business management in Saudi Arabia
How Dawmt helps you work out annual leave pay
Now that you know how to calculate annual leave pay, here is how Dawmt, a human resources (HR) system that covers HR administration end to end, helps you calculate and track annual leave accurately, through these tools:
Leave management
Dawmt lets you manage every type of leave in full detail, including annual leave. Those details help you follow up on each period of leave, see how many days it covers and calculate the pay.
Integration
Dawmt links leave management to payroll in the same system. That gives you the salary details you need, such as the monthly wage and allowances, which makes annual leave pay easier to calculate.
Payroll management
Dawmt lets you record each employee's salary details and apply raises, both during employment and when their service ends. Those details include the employee's leave and the entitlements tied to it.
Customisation
Your company can configure Dawmt to match its policy for every type of leave, whether annual, casual, sick or any other, along with its other policies, and Dawmt works according to that policy.
Why Dawmt's reports make annual leave calculation simpler
Dawmt provides regular reports with salary and leave details. These reports support the calculation steps above, because they show each employee's salary and full allowances accurately, so you can calculate annual leave and the pay owed for it without long manual calculations. The reports are detailed, regular and based on your company's policy, which saves a lot of time and effort.
Read more: HR reports: types, why they matter and how Dawmt helps
How Dawmt handles calculating and tracking annual leave pay
Dawmt helps companies track their processes accurately and easily, including annual leave pay and other employee finances. Here is how Dawmt helps companies calculate and track annual leave pay:
- Applying leave policies: Dawmt applies the leave policies your company configures in line with the Labour Law, and calculates each employee's leave days according to the entitlement set for them, whether 21 days or 30 days as described above. That makes calculating and tracking annual leave easier.
- Automation: Dawmt automates wage and leave calculations, which makes them faster, easier and more accurate, and saves time and effort in the other processes that depend on them.
- Regular reports: Dawmt generates regular monthly and annual reports with the employee details your company needs, such as the employee's salary, leave days and leave taken, and other data that makes calculating annual leave pay easy.
- Employee self-service: Dawmt lets employees use the system themselves: they submit leave requests, see whether they were approved or rejected, and view the leave days they have taken and the days they have left. It also shows each employee their salary details, so they can work out their own entitlements easily.
- Customisation: As mentioned above, your company can configure Dawmt to match its leave policies, and Dawmt applies them automatically to the processes it runs.
- Fewer errors: Dawmt reduces errors across processes, which prevents losses for your company and keeps calculations correct and accurate.
Sign up for the Dawmt HR system for accurate, easy calculations and fast processes that reduce errors and help you calculate annual leave pay professionally.
Sources
This information was reviewed in October 2026. Regulations can change, so check the official source before relying on it.
Frequently asked questions
Are weekly rest days counted as part of annual leave?
Article 104 of the Labour Law sets Friday as the weekly rest day, fully paid and lasting at least 24 consecutive hours, and the employer may, after notifying the competent labour office, replace it with another day for some workers. The annual leave articles (Article 109 to Article 111 of the Labour Law) do not say how weekly rest days that fall within the leave are counted, so check the employment contract, your company's work regulations and the Ministry of Human Resources and Social Development's guidance before adopting a method.
How do I calculate the value of my leave balance?
Calculate your daily wage by dividing your monthly wage plus fixed allowances by 30, because Article 2 of the Labour Law treats a month as 30 days unless the employment contract or work regulations say otherwise. The result is your daily wage. Then multiply the daily wage by the number of leave days you have left, and that is the value of your leave balance.
Are allowances included when calculating annual leave pay?
Yes. Under the Labour Law, the wage is the actual wage as Article 2 defines it: the basic wage plus the increments the worker is entitled to under the employment contract or work regulations. Fixed allowances that the employee receives with their salary every month are therefore part of the annual leave pay calculation and are used when calculating the daily wage.