Encashment of Annual Leave

I would really appreciate some insights on the encashment of annual leave. Can an employee be paid for leave that he has not taken for the year? If not how many years can leave be accumulated?

Really hope to get some advice as my understanding of the law may not be precise.

Thank you

I am a Filipino nurse working under government of Saudi Arabia , and as far as I know u cannot be paid for your leave that u never took as cash . Instead,   if you reach the date of your next yearly contract renewal, your vacation days are forfeit and your back to zero. No cash, no nothing . I don't know if this applies to you and your situation though. But that's how it worked with mine . I lost 40 days of my vacation days , they were forfeited . No money was compensated for me . So you should really take ur annual leave than let it pass . Anyway as far as I know in my case , I still receive my monthly salary pay even on my annual leave . But, recently I was informed next month they will hold all salaries to staff who are on annual leave and their salaries will be given at the time they report back to duty on salary day. I don't know if this helps u . Hope it does

Thank you very much for the information.

In the case of termination of employment and the employee has not utilised all his leave, can he be paid all unused leave then?

My friend applied for letter of resignation, thus ending her contract . She was told she cannot be compensated in cash for her vacation she never took. Rather instead they let her took all her remaining vacation days she never took as vacation. She decided to stay here in Saudi to pass the time until she finished all her vacation days , she was recieving still her monthly salary pay . Finally she completed her days and left after wards. I had another friend who was terminated of her contract by the hospital she worked in due to some coe discrepancies of some sort, I'm not sure what. If your terminated , all what you have even vacation days you never had taken will not be given to you to take nor it would be compensated as cash, all Will be null and void and should leave as soon as possible . That's what I know so far.

Thank you so much for the information. Really appreciate the assistance.

This is incorrect information.   Please don't comment on labor law matters if you don't know the facts as you may misguide people. You are basing the advice on policies of your employer which are not in line with labor law.

Saudi labor law does not allow for forfeit or expiry of leave.  We studied this in depth in our company as our accumulated leave balances were sitting on the balance sheet and going up every year.

Encashment is also not allowed unless of course the employee accepts encashment of his entitled leave in writing.  Similarly, when you leave a company, you should be paid for leave that you earned but never took.

Employers use the lack of knowledge of employees to abuse this.  The example you gave above of withholding pay until employee returns from leave is also not in line with labor law but seems to be the policy of your employer.

So, at the end of the employment, they should be paid the leave that they never took. However, is there a limit to the number of days - perhaps only entitlement for two (2) years maximum? Surely they cannot request for encashment of leave that they have accrued for years?

This is the part that I was confused about based on references made to the different articles under the Law.

Theoretically, an employee is entitled to all accrued leave as it cannot be "expired" or "forfeited".  Some employers send the employee on garden leave on resignation i.e. he gets paid while sitting at home vs. paying out accrued leave.

And just for your knowledge, the relevant articles of the labor law.  As you can see, there is nothing in the law about expiry or forfeiting leave.  Encashment is also not there but if the employee consents, it is legally defensible - we did it in the past and it stood up in court.  And article (111) reads as encashment of ALL leave on departure.

Article (109):
(1) A worker shall be entitled to a prepaid annual leave of not less
than twenty one days, to be increased to a period of not less than
thirty days if the worker spends five consecutive years in the
service of the employer.
(2) A worker shall enjoy his leave in the year it is due. He may not
forgo it or receive cash in lieu during his period of service. The
employer may set the dates of such leave according to work
requirements or may grant them in rotation to ensure smooth
progress of work. The employer shall notify the worker of the
date of his leave in sufficient time of not less than thirty days.

Article (110):
(1) A worker may, with the employer’s approval, postpone his
annual leave or days thereof to the following year.
(2) An employer may postpone, for a period of not more than
ninety days, the worker’s leave after the end of the year it is
due if required by work conditions. If work conditions require
extension of the postponement, the worker’s consent must be
obtained in writing. Such postponement shall not, however,
exceed the end of the year following the year the leave is due.

Article (111):
A worker shall be entitled to a wage for the accrued days of the
leave if he leaves the work without using such leave. This applies
to the period of work for which he has not used his leave. He is also
entitled to a leave pay for the parts of the year in proportion to the
part he spent at work.

Thank you very much for taking the time to answer my questions. Really appreciate it

Sorry to following on an old thread. Do you know how leave pay is calculated? Is it on basic salary or base plus HRA (Housing, transport)? I understand that there is new labor laws effective 2020. If you can provide some insight that would be great. Thank you.

Best practice : All elements are included
Common practice: Only on basic

Are you talking about when you go on final exit only visa; or on a repat, i.e. exit/re-entry visa. Two different thing and must read thoroughly your employment contract. It must be stipulated somewhere there.

He is referring to a completely different topic.  Leave encashment is only done when the employee leaves.  The manner of leaving is immaterial i.e. whether local transfer or final exit.  The basic requirement is that you resign and leave the company - if not the country.

Thank you. I understand it is based gross pay but no one gives it. Is there a way claim that at labor court?
Another question, I read that notice period has been made to 60 days instead of 30 is that on effect?

So far on their site, it still has the 30 day notice from what I can see.  You can claim it in labor court but will take time and lots of efforts.

Thanks XTang as always you are doing a great job providing genuine info. Keep it up.

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