Leave Payout on Termination in South Africa (2026/2027)
When employment ends in South Africa — whether through resignation, dismissal, or retrenchment — the employer must pay the employee for any unused annual leave. This is a legal requirement under the Basic Conditions of Employment Act (BCEA).
The standard calculation uses the daily rate method: monthly salary × 12 ÷ 260 working days per year. This daily rate is then multiplied by the number of unused leave days to determine the payout amount. For example, an employee earning R25,000 per month with 15 unused leave days would receive R25,000 × 12 ÷ 260 × 15 = R17,307.69.
If an employee leaves partway through a leave cycle, they are also entitled to pro-rata leave for the incomplete cycle. Annual leave accrues at approximately 1.25 days per month (15 days ÷ 12 months). For example, if an employee has worked 6 months of a new cycle, they would have accrued 7.5 days of pro-rata leave.
Leave payout is taxed as normal income, not as a lump sum benefit. It is added to the employee's earnings for that pay period and PAYE is calculated accordingly. This is different from severance pay, which is taxed under the more favourable lump sum tax tables.
Frequently Asked Questions
How is leave payout calculated in South Africa?
Leave payout is calculated as: daily rate × unused leave days. The daily rate is monthly salary × 12 ÷ 260 working days per year. For example, at R25,000/month with 15 unused days: R25,000 × 12 ÷ 260 × 15 = R17,307.69.
Is leave payout taxed?
Yes, leave payout on termination is taxed as normal income at your marginal PAYE rate. It is added to your earnings for that pay period. Unlike severance pay, leave payout does not qualify for the more favourable lump sum tax tables.
How many leave days do I accrue per month?
Under the BCEA, employees accrue approximately 1.25 days of annual leave per month (15 days per year ÷ 12 months). This means after 6 months of a new leave cycle, you would have accrued 7.5 days of pro-rata leave.
Can my employer refuse to pay unused leave?
No. The BCEA requires employers to pay out all unused annual leave on termination of employment, regardless of the reason for termination. This applies whether the employee resigns, is dismissed, or is retrenched.
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