Holiday Pay Calculation in Saudi Arabia (An Employer's Guide)

Holiday Pay Calculation in Saudi Arabia (An Employer's Guide)

When employees take leave, they often wonder how much they’ll be paid. Holiday pay is an employee’s entitlement to compensation for unused annual leave. This is particularly important when an employee leaves employment with unused holiday entitlement.

Accurately calculating holiday pay ensures employees receive what they are owed and supports compliance with labour laws. Implementing a global HR system can help organizations efficiently manage holiday pay calculations and stay up to date with regulatory changes across different countries. In this article, we’ll explore how holiday pay is calculated in Saudi Arabia, including recent updates to labour regulations.

Saudi Labour Law on Annual Leave Pay

The Kingdom of Saudi Arabia’s labour law outlines a clear and structured approach to annual leave pay, ensuring transparency between employers and employees. These provisions support employee rest while allowing businesses to manage operational requirements effectively.

Annual Leave Entitlement (Article 109)

Employees are entitled to a minimum of 21 days of fully paid annual leave each year. After five consecutive years of service with the same employer, this entitlement increases to 30 days. 

Employees are expected to take this leave within the year it is accrued. Employers may arrange leave according to operational requirements but must provide at least 30 days' notice. Employees cannot waive their leave or request a cash payment in lieu while still employed.

Postponement of Leave (Article 110)

Employees may postpone their leave to the following year with the employer’s approval. Employers may also postpone annual leave, but only for up to 90 days after the end of the leave year, unless a further extension is agreed in writing by the employee. In any case, leave must be taken by the end of the following year.

Payment for Unused Leave (Article 111)

While employees cannot receive compensation for unused leave during their employment, they are entitled to payment for any untaken leave when they leave the company. This includes leave carried forward from previous years and any accrued portion of the current leave year, calculated on a pro-rata basis according to the period worked.

Public Holidays and Annual Leave (Article 112)

Public holidays, including Eid and other official days, are granted with full remuneration and do not count towards annual leave. If a public holiday occurs during an employee’s annual leave, the leave period is extended to reflect this.

Definition of Wages (Article 2)

To calculate holiday pay, “wages” include the basic salary along with allowances, commissions, and performance-related bonuses where applicable. This ensures employees are paid their full entitlements during leave.

Holiday Pay Frameworks and Organisational Compliance in Saudi Arabia

Saudi Arabia’s approach to holiday pay reflects a clear legal framework that supports employee welfare and enables employers to plan effectively. By establishing defined entitlements and processes, the law fosters a stable and well-regulated work environment throughout the Kingdom.

Related Reading

• Public Holidays in UAE
• Holidays in Egypt

Holiday Pay Calculation in Saudi Arabia

Calculating holiday pay in Saudi Arabia is a straightforward process that ensures employees receive proper compensation during their annual leave. The Labour Law provides clear guidance, enabling both employers and employees to plan leave periods and payments with certainty.

Employees with fewer than five years of continuous service are entitled to 21 days of paid annual leave. This increases to 30 days once they have completed five years of service. Holiday pay is calculated based on the employee’s full monthly wage, which includes basic salary, regular allowances, commissions, and other consistent forms of compensation, as outlined in Article 2 of the Saudi Labour Law.

Holiday Pay: A Practical Calculation Guide

To calculate holiday pay:

• Identify the applicable leave entitlement: 21 or 30 days, depending on years of service.
• Calculate the employee’s daily wage by dividing the total monthly wage by 30.
• Multiply the daily wage by the number of annual leave days.

Example:
If an employee earns SAR 8,500 per month and has completed six years of service, they are entitled to 30 days of paid leave.

Daily wage = SAR 8,500 ÷ 30 days = SAR 283.33
Holiday pay = SAR 283.33 × 30 = SAR 8,499.90

Aligning Payroll and Leave Policies with Saudi Labour Law

This method ensures employees receive their full entitlements during leave, as required by Saudi law. Employers must pay this amount in advance of the employee’s leave, in line with Article 109’s requirement for prepaid annual holidays.

This approach fosters a fair working environment, enabling employees to take time off while ensuring they are fully compensated during their absence. It also provides employers with a clear framework for planning workforce availability and payroll, thereby helping to maintain operational continuity within the Kingdom.

Streamlined HR Solutions for Businesses in the UAE and MENA Region

Cercli supports HR operations in line with the UAE’s focus on efficient and business-friendly practices. Cercli provides a platform tailored for MENA businesses, integrating workforce management functions within a single system. Manage your team, whether local or international, with the ability to process payments in more than 150 countries. The platform supports multi-currency payroll, leave tracking, employee onboarding, and local compliance requirements, all tailored to the specific requirements of the MENA region.

Whether you're managing a growing team of 25 or coordinating 500+ employees across multiple countries, Cercli provides the localised expertise and streamlined processes MENA businesses require to support growth and manage remote teams effectively. Discover an HR platform suited to the needs of companies operating in the Middle East. Arrange a demonstration today to speak with our team about our global HR system. 

Best Practices for Employers to Ensure Accurate Holiday Pay Calculation in Saudi Arabia

In Saudi Arabia, accurate holiday pay calculation is both a legal obligation and a key aspect of fair employment practice. Employers who follow clear procedures and maintain detailed records are better equipped to comply with Saudi Labour Law while supporting employee satisfaction.

Use Technology For Efficient Leave Management

Employers are encouraged to adopt software tools, such as Cercli, that support annual leave tracking and payroll accuracy. These systems help calculate holiday pay based on current salary, monitor leave balances in real-time, and generate clear reports. They also reduce manual errors and ensure timely, compliant leave payments.

Ensure Proper Leave Settlement On Contract Termination

If an employee’s contract ends before they take their entitled annual leave, they must be compensated for any unused days. Under Article 111 of the Labour Law, this is calculated in the same way as regular holiday pay, based on the most recent wage and inclusive of all standard allowances.

Check Employment Contracts And Special Agreements

Some organisations have collective or individual agreements that include additional or alternative terms for holiday pay. Before calculating leave entitlements, employers should review employment contracts to ensure compliance with both internal agreements and national legislation.

Maintain Clear Holiday Records

Maintaining clear records is essential for accurate holiday pay. Employers should log each employee’s leave history, including the start and end dates of leave taken, leave balances, and details of paid compensation. This transparency helps maintain compliance and avoids disputes.

Give Timely Notice And Communicate Leave Plans

The Labour Law requires employers to provide at least 30 days’ notice before an employee’s scheduled leave begins. This not only supports workforce planning but also ensures that holiday pay is processed in advance, promoting a clear and efficient process for all parties.

Supporting HR Operations In The Mena Region

Cercli is a workforce management platform built for businesses in the MENA region. It helps streamline leave tracking and payroll while meeting local compliance requirements, including those in Saudi Arabia. Speak to our team to learn how Cercli can support your HR processes across more than 150 countries.

Other Pay Regulations in Saudi Arabia You Need to Know About

Saudi Arabia has established clear regulations governing employee pay. These rules aim to promote fairness in the labour market, improve clarity in wage payments, and improve employment conditions for both Saudi nationals and expatriates.

Businesses operating in the Kingdom should understand these pay-related rules to ensure compliance and fair practice.

1. Minimum Wage and Saudisation (Nitaqat Programme)

There is no standard minimum wage set for the private sector. Public sector roles have a minimum monthly salary of SAR 3,000, as established by the government. Specific sectors, including construction and domestic work, also have specific monthly minimum wage requirements. 

The Ministry of Human Resources and Social Development sets the minimum wage for Saudi nationals registered under the Nitaqat programme at SAR 4,000. 

Saudisation Compliance: Wage Thresholds and Their Role in Workforce Localisation

This threshold is used to assess an organisation’s compliance with the Saudisation policy.

• A Saudi employee earning SAR 4,000 or more counts fully towards the company’s Saudisation quota.
• An employee earning between SAR 3,000 and SAR 4,000 is counted as half a Saudi national.
• Employees earning less than SAR 3,000 are not counted towards the quota.

This structure is designed to promote fairer pay for Saudi workers while enabling businesses to meet their local workforce targets.

2. Overtime Pay

Under Saudi labour law, overtime is paid for hours worked beyond 8 hours per day or 48 hours per week.

• Weekday Overtime: 1.5 times the regular hourly rate
• Fridays and Public Holidays: Double the regular hourly rate

Employers should ensure overtime pay is calculated correctly, especially in sectors with changing shift schedules.

3. End of Service Gratuity

Saudi law requires employers to provide end-of-service benefits to employees who complete at least two years of continuous service. 

These benefits act as end-of-service compensation and are calculated as follows:

• 15 days’ wage for each of the first five years
• One month’s wage for each additional year thereafter

If an employee has served more than six months of a year, it is usually rounded up to a full year for calculation purposes. These benefits are paid upon resignation, contract termination, or retirement, offering financial recognition for long service.

4. Wage Protection System (WPS)

Saudi Arabia’s Wage Protection System (WPS) is designed to ensure that salaries are paid on time and in full.

• Employers must transfer all salaries to employees’ registered bank accounts.
• The Ministry monitors salary payments, spot inconsistencies, and address any delays or underpayments.

Compliance with WPS is mandatory and promotes a transparent payroll system.

Ensuring Compliance with Wage Regulations for Sustainable Workforce Management in Saudi Arabia

These wage regulations aim to promote fair pay, clarity, and alignment with recognised labour standards. For businesses in Saudi Arabia, complying with these rules supports both legal requirements and effective workforce management.

Book a Demonstration to Speak with Our Team about Our Global HR System

Cercli supports HR operations in line with the UAE’s commitment to efficient, business-friendly practices. Cercli offers a platform designed for MENA businesses, integrating workforce management functions within one system. Manage your team, whether local or international, with the ability to process payments in more than 150 countries. The platform supports multi-currency payroll, leave tracking, employee onboarding, and local compliance requirements, all tailored to the specific requirements of the MENA region.

Whether you're managing a growing team of 25 or coordinating 500+ employees across multiple countries, Cercli provides the localised expertise and streamlined processes MENA businesses require to support growth and manage remote teams effectively. Discover an HR platform suited to the needs of businesses operating in the Middle East. Arrange a demonstration today to speak with our team about our global HR system. 

Related Reading

• National Holidays in Saudi Arabia

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