How to Calculate Leave Pay in South Africa

Last updated: October 19, 2026

Leave pay is one of the few payroll figures that almost everybody gets wrong on the first attempt, and it is usually because two different things are being confused. The first is the pay you receive while you are on holiday. The second is the lump sum you receive when your employment ends and you have unused annual leave standing to your name. They are calculated in different ways, they are taxed differently in practice, and mixing them up produces payslips that are wrong in both directions.

This guide sets out the statutory rules in the Basic Conditions of Employment Act, works through the ordinary rate of pay, shows how to convert a monthly salary into a daily figure, and ends with a worked example you can follow line by line.

What the Law Says About Annual Leave

The Act gives every employee who works more than 24 hours a month the right to at least 21 consecutive days of paid annual leave in each annual leave cycle. A cycle is twelve months of employment measured from the date the employee started, or from a date agreed in a contract.

Twenty-one consecutive days is the statutory floor, and it is expressed in consecutive days rather than in working days for a reason. For an employee who works a five-day week, 21 consecutive days translates into 15 working days of leave. For an employee who works a six-day week, the same 21 consecutive days translates into 18 working days. Both employees get the same 21 days off in a row; the number of shifts they are absent for is different.

An employer and employee may agree to more leave, and many contracts do. They may not agree to less, and any agreement that reduces the statutory minimum is invalid.

The Difference Between Leave Pay and Annual Leave

Annual leave is time. Leave pay is the money that goes with it. When an employee takes leave, the employer must pay them for the leave period, and the amount must not be less than what the employee would have earned for the equivalent period had they been working.

On termination of employment, the picture changes. The employee is entitled to be paid for any accrued but untaken annual leave. That payment is a debt owed by the employer at the end of the employment relationship, and it must be settled.

The practical consequence is that leave pay in the ordinary course of employment is a continuation of normal wages, while leave pay on termination is an additional amount that appears on the final payslip alongside notice pay.

The Ordinary Rate of Pay

Everything depends on the ordinary rate of pay. The Act defines it as the rate of pay an employee receives for their ordinary hours of work, and it is expressed as an hourly rate.

The definition excludes certain payments. Overtime pay is not part of the ordinary rate. Sunday and public holiday premium payments are not part of it. Gratuities, transport allowances, and payments in kind are excluded as well. What remains is the ordinary wage, which is the figure you use.

This is why simply dividing a total payslip figure by a number of days produces the wrong answer. If the employee receives a travel allowance of 1,500 rand a month and a housing subsidy, those are not part of the ordinary rate, and using the total will overstate leave pay.

Working Out a Daily Rate From a Monthly Salary

South African payroll practice uses a standard conversion when a contract does not specify a daily rate. The method is to convert the monthly salary into an annual figure, then divide by fifty-two weeks to get a weekly figure, and then divide by the ordinary weekly hours.

For an employee on a 45-hour week earning 20,000 rand a month, the calculation runs as follows. Multiply 20,000 rand by twelve to get 240,000 rand a year. Divide by 52 to get approximately 4,615 rand 38 cents a week. Divide by 45 ordinary hours to reach an hourly ordinary rate of about 102 rand 56 cents.

To move from an hourly rate to a daily rate, multiply by the ordinary hours in the working day. On a nine-hour day that gives roughly 922 rand 99 cents. On an eight-hour day it gives about 820 rand 51 cents.

A shortcut that produces the same result is to divide the monthly salary by 195, which is the standard number of ordinary hours in a month for a 45-hour week, and is calculated as 45 multiplied by 52 and divided by 12.

When the Ordinary Week Is Not 45 Hours

Not every contract sets a 45-hour week. Forty hours is common in office environments, and the ordinary daily hours may be eight rather than nine. If the contract or a collective agreement sets 40 hours, then 40 is the divisor, and the resulting hourly rate is higher.

The correct monthly hours for a 40-hour week come to 173.33, not 195. Using the wrong divisor is the single most common cause of underpaid leave in South African payroll, and the error compounds across every leave day taken in a year.

Calculating Leave Pay on Termination

When employment ends — by resignation, dismissal, retrenchment, or expiry of a fixed-term contract — the employer must pay for accrued but untaken annual leave. Accrual is usually worked out proportionally. For every month of completed service in the current cycle, the employee accrues one twelfth of the annual entitlement.

Take an employee on 15 working days of annual leave a year who leaves after seven completed months. Seven twelfths of 15 working days is 8.75 days. If they took three days of leave already, then 5.75 days remain to be paid.

The payment is 5.75 multiplied by the daily ordinary rate. Using the earlier daily figure of 922 rand 99 cents, that comes to about 5,307 rand 19 cents.

Rounding is a decision point worth noting. Practice varies between rounding up to the next full day, rounding to the nearest half day, and paying the exact fraction. Whichever the employer applies must be applied consistently, and rounding down systematically is the version most likely to end up in a dispute.

Leave Accrued Over Multiple Cycles

Annual leave generally has to be taken within six months of the end of the cycle in which it accrued, unless the employer agrees to a longer carry-over. Where an employer has allowed leave to accumulate for years, the accrued balance at termination can be substantial. There is no statutory cap on the amount carried into a final settlement, so a long-serving employee with a liberal carry-over policy can be owed several months of pay. If an employer refuses to pay out what is owed after the leave records are settled, a formal letter of demand is usually the next step before the CCMA or the labour court.

Leave Pay When You Resign

Resignation does not remove the entitlement to accrued leave. The employee resigns, the employment relationship ends on the agreed last day, and the accrued leave is paid out in the final settlement.

Where things become interesting is the interaction between notice and leave. An employee who resigns with five unused days and who is also required to work a month’s notice has two separate entitlements. They can take the leave during the notice period, which effectively shortens the number of days they are physically at work, or they can work the full notice and be paid for the leave at the end. Both are legitimate if the employer agrees to the timing.

An employer cannot simply refuse to pay accrued leave because the employee resigned, and cannot use it to offset a notice period the employee failed to work without an agreement recorded in writing.

Annual Leave and Public Holidays

A public holiday that falls inside a period of annual leave does not count as a day of annual leave, provided the employee would ordinarily have worked on that day. The leave extends by a day, or the day is added back to the balance.

This is where a lot of short payments originate. An employee books two weeks of leave, a public holiday falls in the middle, and the payroll system deducts the full ten days anyway. Doing the arithmetic properly means the employee retains one day of leave they are entitled to.

Payment Instead of Leave: When It Is Allowed

South African law takes a firm line on cashing out leave. An employer may not pay an employee instead of granting annual leave during the employment relationship. Leave is a health and safety provision as much as a benefit, and the legislature does not want it converted into money while the employee keeps working.

The one exception is termination. When employment ends, accrued leave becomes a payment obligation, because there is no longer any employment relationship in which to take the time off.

What employers can do is reach a written agreement that leave be taken at a specific time, or grant additional paid time off over and above the statutory minimum. What they cannot lawfully do is offer an employee a lump sum in December in exchange for giving up their statutory leave days.

Leave, Overtime and Commission

Three categories of pay sit near leave and regularly cause confusion.

Overtime is excluded from the ordinary rate, so leave pay is not inflated by overtime earnings. An employee who worked heavy overtime in the months before going on leave is paid for that leave at the ordinary rate, not at an average including overtime.

Commission is more complicated. Where commission forms a regular and predictable part of the employee’s earnings, excluding it entirely can leave the employee materially worse off during leave. In practice, many employers pay commission on deals that conclude during the leave period, which sidesteps the problem.

Benefits in kind, such as a company vehicle or a housing subsidy, are not part of the ordinary rate for leave pay, but they usually continue during a period of paid leave because the employment relationship continues.

A Worked Example

An employee earns 24,000 rand a month, works a 45-hour week on a nine-hour day, receives a travel allowance of 2,000 rand, and resigns on 30 September after eight completed months in the current leave cycle. They took four days of leave in April.

The ordinary rate excludes the travel allowance, so the figure to work from is 24,000 rand a month. Dividing by 195 gives an ordinary hourly rate of approximately 123 rand 08 cents. Multiplying by nine gives a daily rate of approximately 1,107 rand 69 cents.

Full-year entitlement is 15 working days. Eight twelfths of 15 is 10 working days accrued. Four days were taken, leaving six days owing. Six days at 1,107 rand 69 cents is approximately 6,646 rand 15 cents.

That amount is paid in the final settlement along with notice pay and any other amounts owing. It is separate from the question of whether the employee worked their notice period.

Common Errors in Leave Pay Calculations

Using 160 hours instead of 195 as the monthly divisor is the most frequent mistake, and it produces a rate roughly 18 per cent too high. Using the total payslip figure including allowances and overtime is second. Failing to add back a public holiday that fell during leave is third.

Two further errors are worth naming. The first is paying leave at the rate in force at the start of the leave cycle rather than the rate in force when the leave is taken or the employment ends. The second is allowing leave balances to be tracked in hours while the payment is calculated in days, so that the two never reconcile.

Getting Leave Pay Right

The method is short. Establish the ordinary rate of pay and exclude everything that is not ordinary. Convert a monthly salary to an hourly figure using the correct monthly hours for the contracted week, then convert to a daily figure using the ordinary hours in the day. Accrue leave proportionally by completed months. Pay out whatever remains when employment ends.

Do those four steps consistently and leave pay stops being a source of disputes. It becomes what it should be: a straightforward calculation that both employee and employer can follow on a single sheet of paper.