How to Manage Annual Leave, Sick Leave, and Public Holiday Pay in Saudi Payroll

Managing employee leave correctly is an important part of Saudi payroll compliance. Annual leave, sick leave, Eid holidays, National Day, and Founding Day can all affect attendance records, payroll calculations, leave balances, and employee payments.

For employers, the key is to maintain accurate leave records and ensure that payroll applies the correct pay treatment when different types of leave overlap.

1. Managing Annual Leave in Saudi Arabia

Under Saudi Labour Law, an employee is entitled to annual leave of at least 21 days for each year of service. This increases to at least 30 days after the employee completes five consecutive years of service with the same employer. Annual leave is paid and the leave pay is to be paid in advance.

Employers should maintain an annual-leave balance for every employee.

For example:

Employee Service	Minimum Annual Leave
Less than 5 consecutive years	21 days per year
5 or more consecutive years	30 days per year

The employment contract or company policy may provide a more generous entitlement where permitted.

Annual Leave Scheduling

Employees should generally take annual leave during the year in which it becomes due. Employers may schedule leave according to operational requirements and should notify employees of the scheduled date at least 30 days in advance.

Under the Labour Law, an employee may postpone annual leave, or part of it, to the following year with the employer's approval. An employer may also postpone leave for up to 90 days when work circumstances require it; a longer postponement requires the employee's written consent subject to the statutory limits.

2. Annual Leave Pay

Annual leave is paid leave, and the applicable leave wage should be paid in advance.

Payroll teams should therefore ensure that an employee taking annual leave continues to receive the applicable leave pay rather than being incorrectly treated as absent without pay.

A payroll system should track:

• Annual leave entitlement
• Leave taken
• Remaining balance
• Leave approval
• Leave dates
• Leave payment
• Carry-forward or postponement
• Accrued leave at termination

If an employee leaves the company with accrued unused annual leave, the employee is entitled to payment for those accrued days according to the applicable rules.

3. Managing Sick Leave

Saudi Labour Law provides sick-leave entitlement for an employee whose illness is proven.

For the applicable annual sick-leave period, the general statutory treatment is:

Sick Leave Period	Pay Treatment
First 30 days	Full wage
Following 60 days	75% of wage
Following 30 days	Without pay

The 120-day entitlement can be continuous or intermittent, and the one-year period begins from the date of the first sick leave.

Payroll should therefore maintain a rolling sick-leave calculation rather than simply resetting the employee's balance on January 1.

Example

Suppose an employee takes:

• 20 days of sick leave initially
• Another 20 days later in the applicable one-year period
• Another 30 days afterward

The payroll system needs to recognize that the first 30 qualifying days fall within the full-pay category, while the subsequent days move into the 75%-pay category.

This prevents payroll from incorrectly paying every sick-leave day at 100%.

4. Sick Leave and Annual Leave Overlap

Leave overlap is an important payroll issue.

According to MHRSD guidance, when sick leave overlaps with annual leave, the annual leave is placed on hold until the sick leave ends. The employee's annual leave then resumes afterward.

Payroll and HR systems should therefore avoid deducting annual-leave days for a period that is properly recorded as sick leave.

For example:

Annual leave: 10–20 September
Employee becomes sick: 13–16 September

The applicable sick-leave period should be recorded separately, with the annual-leave balance adjusted according to the statutory treatment.

5. Public Holidays in Saudi Arabia

Saudi employees are entitled to paid holidays and occasions specified under the applicable regulations.

The MHRSD's current guidance identifies:

• Eid Al-Fitr: 4 days
• Eid Al-Adha: 4 days
• Saudi National Day: 1 day
• Founding Day: 1 day

The dates for the Eid holidays are determined according to the applicable calendar provisions, while National Day is September 23 and Founding Day is February 22.

Payroll calendars should be updated each year to reflect the applicable holiday dates.

6. What Happens When a Public Holiday Overlaps With Leave?

Public-holiday overlap needs to be handled carefully.

MHRSD guidance states that when official holidays overlap with annual leave, the annual leave is extended by the number of overlapping holiday days. When an official holiday overlaps with sick leave, the worker receives full wages for the overlapping holiday days without reducing the sick-leave entitlement for those days.

Where an official holiday overlaps with a weekly rest day, the employee should receive an equivalent compensatory day before or after the holiday, subject to the applicable rules.

Payroll software should therefore have an overlap rule rather than simply counting every calendar day as annual or sick leave.

7. Working on Public Holidays

If an employee is required to work during an official holiday, the working hours can be treated as overtime under the applicable Saudi rules. MHRSD states that hours worked on public holidays are considered additional working hours.

Payroll should record:

• Holiday date
• Scheduled hours
• Actual hours worked
• Employee's basic wage
• Applicable overtime calculation
• Any approved compensatory arrangement

This is especially important for businesses that operate during Eid holidays or other public holidays.

8. Leave Accrual and Payroll Integration

A reliable payroll system should connect the employee's leave management and payroll records.

A typical workflow is:

Employee requests leave → Manager approves → Leave balance updated → Attendance updated → Payroll receives leave status → Correct pay calculated

For annual leave, the system should reduce the employee's available balance.

For sick leave, it should determine which portion falls within the applicable full-pay, partial-pay, or unpaid categories.

For public holidays, the system should automatically recognize the holiday rather than treating the employee as absent.

9. Handling Leave During Payroll Processing

Before closing monthly payroll, HR and payroll teams should reconcile leave records.

Annual Leave

Check:

• Approved leave dates
• Available balance
• Leave pay
• Carry-forward
• Accrued entitlement

Sick Leave

Check:

• Medical documentation where required
• Sick-leave dates
• Cumulative sick leave during the applicable one-year period
• Applicable pay percentage
• Overlap with annual leave

Public Holidays

Check:

• Applicable holiday calendar
• Employee work schedule
• Holiday attendance
• Holiday overtime
• Overlap with annual or sick leave

10. Common Saudi Leave Payroll Errors

Treating Annual Leave as Unpaid Absence

Annual leave is paid leave and should not normally reduce an employee's salary as an unpaid absence.

Resetting Sick Leave at the Wrong Time

The applicable sick-leave year begins from the date of the first sick leave rather than simply following the calendar year.

Deducting Annual Leave During Sick Leave

Where sick leave overlaps annual leave, the annual leave should be handled according to the statutory overlap rule.

Ignoring Public-Holiday Overlaps

Holiday overlaps can affect leave balances and employee pay, so they should be handled automatically where possible.

Paying Incorrect Holiday Overtime

Working during public holidays should be evaluated under the applicable overtime rules.

11. Using Payroll Software to Manage Leave

Payroll software can simplify Saudi leave administration by integrating attendance, leave, and salary calculations.

Useful features include:

• Annual leave accrual
• Sick-leave tracking
• Public-holiday calendars
• Leave approval workflows
• Automatic leave-balance updates
• Holiday overtime calculation
• Leave and payroll integration
• Employee self-service
• Leave reports
• Payroll audit trails

For businesses with multiple locations and large workforces, automation can help reduce manual leave calculations and payroll errors.

12. Saudi Payroll Leave Checklist

Before finalizing payroll, employers can review:

• Annual leave entitlement
• Employee service period
• Annual leave taken
• Remaining leave balance
• Accrued unused leave
• Sick-leave dates
• Applicable sick-leave pay category
• Medical documentation where required
• Public holidays
• Holiday and annual-leave overlaps
• Holiday and sick-leave overlaps
• Employees working on public holidays
• Applicable overtime payments
• Payroll and attendance reconciliation

Conclusion

Managing annual leave, sick leave, and public holiday pay requires accurate employee records and payroll rules. In Saudi Arabia, employees generally receive at least 21 days of annual leave, increasing to 30 days after five consecutive years, while proven sick leave is subject to a graduated pay structure of full wage, 75% of wage, and unpaid leave within the applicable one-year period.

Public holidays also require careful treatment, particularly when they overlap with annual leave, sick leave, weekly rest days, or actual work.

The most effective payroll process is to integrate leave management, attendance, holiday calendars, and payroll calculations so that every leave event is reflected correctly in the employee's salary and leave balance. Employers should verify the latest MHRSD requirements and applicable Labour Law provisions before implementing payroll rules.

Annual leave, sick leave, and public-holiday attendance can be managed through InnBuilt Leave and Payroll Software. Approved leave status and eligible pay treatment are reflected automatically in attendance and monthly salary processing.