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What is annual leave pay and who is entitled to it?
Annual leave pay is the average wage paid to an employee for the days they are on annual leave. This entitlement is regulated by the Labour Code of the Republic of Azerbaijan and applies to all employees working under employment contracts. During leave, an employee retains their job and position, as well as average earnings that are no lower than their most recent salary (Article 111.1).
Employees become entitled to leave in their first year of employment six months after signing an employment contract (Article 131.1). Basic paid leave may not be shorter than 21 calendar days, while it is 30 calendar days for employees listed in Article 114.3 of the Code.
You can use the annual leave calculator to calculate your leave pay using your own figures. The calculator is based on the rules in force from January 16, 2026.
How annual leave pay is calculated
The calculation involves the following steps, in order (Article 140):
- Set the reference period: The 12 calendar months before the month in which leave begins are used (140.1). If an employee has worked for less than 12 months, the full calendar months actually worked are used (140.2).
- Calculate earnings: Add together the wages accrued to the employee during those 12 months.
- Find average monthly earnings: Divide the total by 12.
- Calculate the daily amount: Divide average monthly earnings by the average annual number of calendar days in a month — 30.4 (140.3).
- Calculate leave pay: Multiply the daily amount by the number of calendar days of leave (140.3).
The formula is: total wages for 12 months ÷ 12 ÷ 30.4 × number of leave days.
Public holidays that are non-working days, the nationwide day of mourning and voting days that fall during annual leave are not counted as leave days and are not paid, but the leave period is extended by the number of those days (Article 114.6). Saturdays and Sundays are counted as leave days.
If an employee spent one of the months included in the calculation on unpaid leave taken through no fault of their own, partially paid social leave or downtime through no fault of their own, that month is replaced with the nearest fully worked calendar month (140.1).
Payments included and excluded from the calculation
The list of payments included in the total is set out in a list approved by Cabinet of Ministers Resolution No. 137 of August 25, 1999. Under the list:
| Included | Not included |
|---|---|
| Tariff (position) salary for time actually worked | One-off bonuses; payments for anniversaries, holidays and birthdays |
| Bonuses paid under the remuneration system | Payments made as financial assistance |
| Regular allowances (for difficult and harmful working conditions, night work, length of service, academic degrees and other reasons) | Business trip payments |
| Payments for overtime and work on rest days and public holidays | Compensation for unused leave |
| Average earnings retained for a previous leave period | Payments under civil-law contracts |
| Benefits for temporary incapacity for work, pregnancy and childbirth | The value of free meals, transport, work clothing and similar items |
Therefore, pay for previous leave and sickness benefits are not deducted from the total; they are included in it.
Payment deadlines and tax obligations
An employer must pay annual leave pay at least three days before the leave begins (Article 140.5). An employment or collective agreement may set a different deadline, but payment must be made no later than the date on which the next salary payment — an advance or the remaining balance — is due. If the money is paid after the leave begins, the employee may request that the leave start date be counted from the date the money is actually paid (140.6).
The same deductions that apply to monthly wages are also withheld from annual leave pay: income tax, mandatory state social insurance contributions, unemployment insurance contributions and compulsory medical insurance contributions. According to the State Tax Service, the portion of leave pay attributable to each month is added to that month’s wages and taxed together with them. You can check the deductions using the salary calculator.
Unclear cases and recommendations
If an employee has been in an employment relationship for less than 12 calendar months before taking leave, average monthly earnings are calculated using the full calendar months actually worked (Article 140.2).
From January 16, 2026, average earnings retained during annual leave must not be lower than the employee’s most recent salary (Article 111.1). The Code does not specify how this comparison should be made. In its explanation, the Ministry of Labor and Social Protection of the Population says the comparison is made for each month: leave pay must not be lower than the salary the employee would have received for the working days in that month that fall during their leave. This is an interpretation; the Code itself does not set out this rule. In disputed cases, employees are advised to contact the Ministry or the State Labor Inspectorate Service.
Checklist
- Have the wages for the last 12 months been added together?
- Have one-off bonuses and financial assistance been excluded from the total? Have pay for previous leave and sickness benefits been included?
- Have public holidays and days of mourning been excluded from the leave days, with the leave extended by the same number of days?
- Is payment being made at least three days before the leave begins?
- Have tax and social insurance deductions been taken into account?
Preparing for the calculation and required documents
To ensure annual leave pay is calculated correctly, the following information should be provided to the accounting department:
- The start and end dates of the leave, based on the application or order.
- Official information on wages accrued over the last 12 months.
- The number of leave days to which the employee is entitled: basic leave; additional days based on length of service (5–10 years — 2, 10–15 years — 4, more than 15 years — 6 calendar days, Article 116.1) and working conditions (at least 6 calendar days, Article 115.1); and additional days for women with children (two children under 14 — 2 days; three or more children, or a child with a disability — 5 calendar days, Article 117.1). Additional days based on working conditions and length of service are added to basic leave (Article 136.2).
Potential problems and grounds for refusal
The main difficulties that can arise in the calculation concern employees with less than 12 months of service and the treatment of bonuses. Bonuses provided for under the remuneration system are included in the total, while one-off bonuses are excluded (Cabinet of Ministers Resolution No. 137). If an employee finds a discrepancy in the calculation, they should ask the employer for an explanation.
Practical example
An employee earned a monthly salary of 1,000 manats over the last 12 months and is taking 21 calendar days of leave:
| Step | Calculation | Result |
|---|---|---|
| Wages for 12 months | 1,000 × 12 | 12,000 manats |
| Average monthly earnings | 12,000 ÷ 12 | 1,000 manats |
| Daily amount | 1,000 ÷ 30.4 | 32.89 manats |
| Annual leave pay (before taxes) | 32.89 × 21 | 690.79 manats |
If this amount is lower than the salary the employee would receive for the working days in that month that fall during their leave, the Ministry’s explanation says that salary amount should be paid. For example, if an employee earning 1,000 manats a month takes eight days of leave from February 6 to 13, 2026, the formula gives 263.16 manats. However, because six of February’s 20 working days fall during the leave, the payment would be 1,000 ÷ 20 × 6 = 300 manats.
Checklist
- Has the leave order been formally issued?
- Have one-off payments been excluded from the total wages for the last 12 months?
- Will payment be made at least three days before the leave begins?
- Have tax and social insurance deductions been calculated correctly?
How to check official information
Rules on annual leave pay can be checked in Articles 111, 114–117, 131, 136 and 140 of the Labour Code. The list of payments included in the calculation is set out in Cabinet of Ministers Resolution No. 137. For matters that remain unclear, refer to the official explanations of the Ministry of Labor and Social Protection of the Population.
Checked: October 14, 2026.
Sources
- Labour Code of the Republic of Azerbaijan — e-qanun.az
- Law No. 332-VIIQD of December 30, 2025 (amendments concerning leave) — e-qanun.az
- Cabinet of Ministers Resolution No. 137 of August 25, 1999 — e-qanun.az
- State Tax Service — questions and answers
- Ministry of Labor and Social Protection of the Population
