A guide to calculate annual leaves according to the Saudi labor law.

Annual leave is one of the fundamental rights enjoyed by employees under the Saudi Labor Law, as it gives them the opportunity to rest and recharge, which enhances productivity and ensures a healthy work-life balance. As the end of the year approaches, employees and employers alike are increasingly interested in how to calculate annual leave and how to organize it in a way that ensures fairness and maintains a stable work environment.

In this article, we will discuss how to calculate annual leave in accordance with the laws in effect in the Kingdom of Saudi Arabia, in addition to reviewing the most important regulations and procedures that ensure its proper implementation, thereby guaranteeing compliance with the law and protecting the rights of all parties.

What is the concept of annual leave under the Saudi Labor Law?

Annual leave under the Saudi Labor Law is a periodic, paid annual break granted to employees as an inalienable right that cannot be waived or substituted with wages. The purpose of annual leave is to achieve a balance between an employee’s professional and personal life, enhance their productivity and mental and physical well-being, and increase their job satisfaction. 

Why does the Saudi Labor Law emphasize the need to grant employees annual leave?

Under Saudi labor law, annual leave is considered a cornerstone for promoting employee well-being and achieving a balance between work demands and employees’ needs by providing the following benefits to both the employee and the organization:

Promoting Mental and Physical Health

Annual leave under the Saudi Labor Law is a fundamental right aimed at promoting employees’ mental and physical health, as it provides them with a respite from the burdens and pressures of work, thereby contributing to an improved quality of life and their ability to recharge. This period also gives employees the opportunity to recover from stress and reduce anxiety and tension, enabling them to return to work with greater determination and enthusiasm.

Achieving Work-Life Balance

 Annual leave provides employees with an ideal opportunity to achieve a balance between their professional and personal lives. It allows them to spend quality time with their families and friends and strengthen family and social bonds away from work pressures, which increases their sense of personal and professional satisfaction and contributes to creating a stable and balanced work environment.

Increasing Productivity and Improving Performance

 Annual leave is not just a temporary break; it is an investment in recharging employees’ energy and enhancing their efficiency. Employees who receive long, regular periods of rest are more focused and creative, which positively impacts the quality of their performance and their morale. Annual leave also demonstrates the organization’s commitment to the well-being of its employees, which increases their loyalty and sense of belonging and contributes to building a positive organizational culture that encourages continuity and innovation.

Reducing Absenteeism Rates

Annual leave helps reduce absenteeism rates resulting from the physical and mental exhaustion employees may experience due to constant work pressures. When employees receive sufficient annual leave, the likelihood of unplanned absences decreases. In addition, a full and extended period of rest reduces the risk of stress- and tension-related illnesses and strengthens employees’ commitment to attendance and discipline upon their return to work.

Building a Balanced Community

Annual leave contributes to building a more balanced, happier, and productive society where individuals have sufficient time for rest and recreation, and where workers’ rights are upheld by giving them adequate time for themselves away from work.

The Legal Framework for Calculating Annual Leave for Employees in Saudi Arabia

The Saudi Labor Law regulates the calculation of annual leave and its provisions in Articles 109 and 110. Article 109 states: “A worker is entitled to annual leave of not less than twenty-one days for each year of service, which shall be increased to a period of not less than thirty days if the worker has completed five consecutive years of service with the employer; such leave shall be paid in advance. The employee must take his or her leave in the year in which it is earned; it may not be waived, nor may the employee receive a cash payment in lieu of taking it during the course of employment. The employer may schedule these leave periods in accordance with the requirements of the business or grant them on a rotating basis to ensure the smooth operation of the business, and must notify the employee of the specific dates for taking the leave with sufficient advance notice of no less than thirty days.”

Article 110 of the Saudi Labor Law stipulates that: “With the employer’s consent, an employee may postpone his annual leave, or part thereof, to the following year. The employer has the right to postpone the employee’s leave beyond the end of the year in which it is earned if work circumstances so require, for a period not exceeding ninety days; if work circumstances require a further postponement, the employer must obtain the employee’s written consent, provided that the postponement does not extend beyond the end of the year following the year in which the leave was earned.”

How is annual leave calculated under the Saudi Labor Law?

An employee is entitled to annual leave after completing one full year of employment with the organization or establishment. According to the preceding provisions, the calculation of annual leave entitlement depends on the employee’s length of service with the company, as follows:

• An employee who has worked continuously at the establishment for a full year but has not yet completed five consecutive years is entitled to annual leave of no less than twenty-one days.
• An employee who has spent five consecutive years or more with the same employer is entitled to annual leave of no less than thirty days.

But the question here is: What if the employer and the employee mutually agree in writing in the employment contract not to grant annual leave, or to set it at a duration shorter or longer than the aforementioned period?

The answer is clear from the very essence of the annual leave entitlement and the text of Article 109: the Saudi Labor Law does not grant the employer the right to deny an employee annual leave or to reduce it below the stipulated limit. Therefore, upon becoming eligible for annual leave—that is, after completing one full year of employment with the employer—the employee is entitled to at least 21 days of paid annual leave each year. The employer must increase this leave to thirty days upon the employee’s completion of five consecutive years of service with the employer. This leave may never be waived or reduced in duration, in recognition of the value of long-term service, as a reward for loyal employees, and to guarantee their right to enjoy days of rest from the pressures of work.

However, if the employer wishes, in the employment contract or as part of the company’s established policies, to grant employees annual leave exceeding the aforementioned duration, the employer may do so, whether on an annual basis or for a single year, provided that the leave is paid in order to qualify as annual leave.

Neither party is entitled to substitute annual leave for a cash allowance, as it is the employee’s right to rest from the strain of work and they must take advantage of it; therefore, while it may be deferred in accordance with legal regulations, it may not be canceled or substituted.

How does an employer determine the dates for annual leave?

Scheduling annual leave in Saudi Arabia requires striking a careful balance between legal compliance, business needs, and employee preferences. Employers play a key role in implementing and managing the annual leave policy, as they have the authority to schedule leave in accordance with business needs, subject to the following guidelines:

• Scheduling Annual Leave: The employer has the right to determine the dates for calculating employees’ annual leave in accordance with work requirements and conditions, in a manner that ensures the continuity of operations within the establishment without disruption. This may be implemented by rotating the granting of leave among employees to avoid any negative impact on the workflow.
• Granting Leave in the Year It Is Earned: The employer must ensure that the employee is granted annual leave in the year it is earned; but may postpone it if work circumstances so require, for a period not exceeding ninety days after the end of the year in which the leave is earned. If the work circumstances requiring the postponement persist, the employer must obtain the employee’s written consent to postpone the annual leave beyond that period, provided that it does not, under any circumstances, extend beyond the end of the year following the year in which the leave was earned.
• Advance Notice to the Employee of the Leave Date: The employer must notify the employee of the leave dates at least 30 days in advance; this is a mandatory requirement to ensure that leave is scheduled in a manner that does not interfere with the employee’s personal and professional obligations and to ensure that the employee can fully enjoy the leave.
• Wages Due: Paid leave shall be granted with advance pay equal to the employee’s actual wages, which, as defined in Article 2 of the Labor Law, consists of the basic wage under the employment contract, plus allowances and all other increases due to the employee in recognition of his or her efforts or the risks incurred in the course of performing work for the employer, such as mandatory and optional allowances, commissions, increases, grants, bonuses, and benefits in kind.

To efficiently organize annual leave, you can use an annual leave plan template and schedule that distributes leave among employees in a balanced manner over time, taking into account the individual priorities and needs of employees as well as the needs of the company or organization. The elements of the annual leave schedule template for employees include:

• Names of employees.
• Calculation of Annual Leave Balance.
• Proposed leave dates by day and month.
• Special notes, such as peak work periods and the reasons for scheduling according to the method used in the schedule.

Employers are also advised to follow these procedures and practices when calculating and scheduling annual leave:

• Clear Communication: Establish a clear annual leave policy that includes eligibility requirements, leave entitlements, and application procedures, and communicate it to employees to ensure transparency.
• Flexibility in Scheduling: Take employee preferences into account alongside business needs and adjust accordingly to achieve employee satisfaction and enhance productivity.
• Coverage Planning: Prepare contingency plans to manage work during employee absences, such as training staff on tasks or hiring temporary replacements.
• Documentation and Compliance: Ensure that all leave is documented in accordance with legal requirements
• Use of Technology: Utilize annual leave calculation software to streamline the process of managing leave, calculating leave balances, requesting and approving leave, and ensuring compliance with laws and regulations. One of the most important of these programs is Jisr Human Resources Management System, which offers comprehensive management of annual leave calculations and entitlements, along with an automated mechanism for requesting and postponing leave and notifying employees of their leave dates via email or Jisr app, as well as managing vacation and business trips
• To learn more about Jisr, the optimal human resources management system in the Kingdom of Saudi Arabia, you can now request a trial version and schedule a meeting with Jisr’s team of experts.

Are days off included in the calculation of annual leave?

The Saudi Labor Law stipulates that annual leave is calculated based on calendar days. This means that, due to the vacation schedule or internal work regulations, weekly days off, holidays, special occasions, or even sick leave may overlap with annual leave. How is annual leave calculated when it overlaps with other types of leave?

• Weekly Days Off: If a weekly day off overlaps with annual leave days, those days are counted as part of the annual leave if they fall within it, as annual leave is considered to include weekly days off. However, if the weekend precedes the start of the leave or follows it, those days are not counted toward the annual leave. For example, if an employee’s leave begins on Sunday or ends on Thursday, Friday and Saturday—if they are weekly days off—are not included in the calculation of their annual leave. However, if their leave begins on Monday and ends on Sunday, all weekly days off within this period are counted as part of their annual leave and are not compensated.
• Holidays and Special Occasions: According to Article 25 of the Executive Regulations of the Saudi Labor Law, which governs the procedures for implementing Article 112 of the Internal Regulations, if holidays and special occasions overlap with annual leave, the employee is entitled to extend their annual leave by the number of days of such holidays and special occasions. It should be noted that the Regulatory Regulations of the Saudi Labor Law have exhaustively listed the holidays and special occasions as follows:
  • Eid al-Fitr holiday for four days, beginning on the day following the 29th day of Ramadan.
  • Eid al-Adha holiday: four days, beginning on the Day of Arafat.
  • The Kingdom’s National Day holiday, lasting one day, on the first day of Libra.
  • A one-day Founding Day holiday on February 22.

• Sick Leave: Article 27 of the Executive Regulations of the Saudi Labor Law specifies the procedures for calculating annual leave when it overlaps with sick leave, as provided for in Article 117 of the Saudi Labor Law. It states that if sick leave days occur during annual leave, annual leave is suspended until the end of the sick leave and then resumes thereafter; that is, the annual leave period is extended by the number of sick leave days that fell within it.

Is an employee entitled to carry over their annual leave to the following year?

According to Article 110 of the Saudi Labor Law, an employee is entitled to carry over their annual leave, or a portion thereof, to the year following the year in which it is earned, provided the employer agrees. The law stipulates that annual leave must be taken during the same year in which the employee is entitled to it, and any deferral by the employer must comply with the regulations mentioned earlier. As for an employee’s decision to carry over annual leave based on their personal circumstances and to schedule it in a way that maximizes its benefit, the following rules apply:

• Employee Initiative: An employee may request to postpone his or her annual leave and must submit a request to that effect to the employer
• Employer’s Approval: For an employee to postpone all or part of their annual leave, they must obtain the employer’s permission and approval of the postponement request

Is an employee permitted to work for another employer during his or her annual leave?

Article 118 of the Labor Law stipulates that: “An employee may not, while on any of the leaves provided for in this chapter, work for another employer; if the employer proves that the employee has violated this provision, the employer may withhold the employee’s wages for the duration of the leave or any portion of such wages previously paid to the employee.”

In addition to the preceding article, the recognition of annual leave and the Labor Law’s insistence on the employee’s entitlement to it and his right to take it properly with full pay—without any right to waive it or substitute it with a monetary value—necessarily precludes the employee from working for another employer during that period. Consequently, the employer may prove this through all acceptable means of evidence and recover the wages paid for the annual leave, as they were paid in advance.

How does Jisr provide you with comprehensive management of your employees’ annual leave?

Given the variety of leave types and the differences in their conditions and balances, organizations face significant challenges in managing them accurately and effectively to ensure that employees’ rights are not compromised or that the organization incurs additional costs due to errors in leave calculations—errors that may lead to financial and administrative losses affecting employees, the organization, and HR professionals alike.

Therefore, Jisr is the ideal solution, as it offers a fully integrated electronic system compliant with the Saudi Labor Law to effectively manage all types of leave, including annual leave. Jisr provides smart tools to update balances, track leave, and generate reports quickly and easily, while automatically enforcing leave conditions in accordance with the organization’s policies. The system also ensures that required procedures are followed precisely through a matrix of electronic approvals and defined authorizations, which reduce human intervention and enhance efficiency and accuracy in human resources management.

Specifically regarding annual leave, Jisr provides various details that clarify the different elements related to leave balances, helping to offer a comprehensive overview of an employee’s annual leave and ensuring that entitlements are managed in an organized and transparent manner. These include:

• Base Balance: This represents the number of days initially added when the system was activated
• Annual Entitlement: Refers to the number of leave days an employee is entitled to annually based on the terms of the contract
• Carried-Over Days: Includes unused leave carried over from the previous year to the current year
• Used Leave: Includes the days the employee has taken during the current year
• Total remaining balance: Represents the total number of vacation days expected to remain until the end of the year
• Reserved days: Refers to days that have been set aside for future leave and have not yet been used
• Balance Accrued to Date: Calculated by adding the carried-over days to those accrued since the beginning of the year

What Are Annual Leave Entitlements?

Annual leave entitlements refers to the monetary amounts an employee is entitled to in exchange for unused days of annual leave. Although, as mentioned, the Labor Law does not permit the substitution of leave for a cash allowance, there are special cases in which the employment relationship between the employee and the employer ends before the employee has used all of their annual leave. Therefore, the employee is entitled to a cash allowance equivalent to the number of unused leave days.

Settling the annual leave balance or paying the annual leave allowance upon the termination of the employee’s service with the company is an essential part of the employee’s right to a full annual leave entitlement. Employers must settle these entitlements in a fair and transparent manner by adhering to the proper procedures and laws stipulated in Article 111 of the Labor Law, which states:

“An employee is entitled to receive wages for accrued leave days if he leaves employment before taking them, in proportion to the period for which he did not take his leave; he is also entitled to leave pay for portions of the year in proportion to the time he spent working during that period.”

The Importance of Annual Leave Pay in the Saudi Labor System?

Annual leave pay is a fundamental component in promoting workplace equity, safeguarding the rights of workers in the Kingdom of Saudi Arabia, and striking a balance between the rights of employees and employers. Its importance is highlighted in the following points:

• Achieving Job Stability and Increasing Employee Motivation: Annual leave compensation plays a major role in enhancing employees’ psychological and financial stability, as they know their rights are protected—especially if they do not use their annual leave—which strengthens their commitment and dedication to productivity. Furthermore, receiving monetary compensation for unused leave provides them with greater motivation to perform at their best and successfully achieve the organization’s goals.

• Ensuring Compliance with Laws and Protecting Both Parties: The Saudi Labor Law requires employers to pay annual leave entitlements to employees who were unable to take their leave under certain conditions and circumstances. Therefore, compliance with the compensation stipulated in Article 111 ensures the organization’s compliance with the law and prevents any violations or legal disputes.
• Strengthening Trust in the Workplace: Fairly granting annual leave compensation strengthens trust between the employee and the employer and gives the employee a sense that their rights are respected, which encourages cooperation and loyalty to the company, improves its reputation, and makes it an attractive workplace.

When is an employee entitled to cash compensation for unused annual leave?

Labor regulations in the Kingdom of Saudi Arabia guarantee workers’ rights regarding unused annual leave entitlements in the following cases:

• Termination of the Employment Relationship: The employee receives payment for unused annual leave upon termination of the employment contract, regardless of the reason for termination—whether due to the expiration of the contract term, resignation, dismissal, or other circumstances. Annual leave is a right of the employee, not compensation or a bonus; therefore, the employer is obligated to settle these entitlements as part of the employee’s final benefits.

• Employee Transfer Between Companies: When an employee transfers to another company—whether within the same group or outside it—the remaining leave balance must be settled through financial compensation, or transferred to the new employer if so agreed.

• Death of the Employee: In the event of an employee’s death, the annual leave balance becomes part of the employee’s financial entitlements to be paid to the heirs, as part of the settlement of rights arising from the employment relationship.

How to Calculate Annual Leave Entitlements

First, the annual leave balance is calculated by determining the employee’s accrued annual leave based on the ratio of the number of months the employee has worked to the total number of months in the year. Any remaining days from the previous year, if any, are then added to this total. Next, the days the employee has taken during the year are subtracted from the total leave balance to arrive at the remaining annual leave balance.

For example, if an employee resigns six months into the year and has been with the employer for 7 years, the calculation is as follows:

• Number of annual leave days for a full year: 30 days

• Number of annual leave days for 6 months: 15 days

• Remaining balance from the previous year: the number of days remaining—let’s say 5 days

• Days used by the employee during the last 6 months: Let’s assume he has not taken any annual leave days yet

To ensure efficiency, speed, and accuracy of results, as well as compliance with the law, I recommend Jisr —the optimal human resources management software in the Kingdom. Thanks to Jisr, all of the above processes will be automated and accurately recorded in the employee’s personal file, which enables automatic calculation of employees’ used and remaining annual leave, as well as a precise system for calculating financial entitlements and disbursing them easily and efficiently within a fully automated payroll system.

In conclusion, the annual leave system under Saudi labor law  a comprehensive legal framework that prioritizes workers’ health and safety while ensuring business continuity and organizational balance. Therefore, we recommend  satisfaction with both their professional and personal lives.