Free tool · Labour Proclamation 1156/2019 · final pay
What Leave Pay is due on the way out?
When employment ends, untaken annual leave is paid out in cash, and notice the employer didn't give is paid as wages. Enter the wage, service and leave balance to see both — with the estimated tax and net amount.
Rates per Income Tax Proclamation 1395/2025 (effective July 2025) and Labour Proclamation 1156/2019 where noted. Estimates only — verify with the Ministry of Revenues or your advisor.
The regular monthly wage (usually basic salary).
Leave earned but not taken, paid out on termination (Art. 77(4)). See the entitlement table below.
Employer gave the full notice period
If it wasn't given, the wages for the notice period are owed (Art. 35).
How Leave Pay works in Ethiopia.
Annual leave can't normally be swapped for money (Art. 76(2)) — the one exception is when the contract ends. Then every day of leave earned but not taken is paid in cash at the worker's daily wage (Art. 77(4)).
If the employer ends the contract after probation without giving the notice the law requires, the wages for the notice period are owed as well. Both are part of final pay, alongside any severance.
Worked example: 30,000 ETB a month, 5 years' service, 10 days of untaken leave, terminated by the employer without notice. Leave pay = 10 × 1,000 = 10,000 ETB. Notice pay = 2 months = 60,000 ETB. Gross Leave Pay 70,000 ETB.
Annual leave entitlement by service
| Year of service | Working days of leave |
|---|---|
| 1st year | 16 |
| 2nd year | 16 |
| 3rd year | 16 |
| 4th year | 17 |
| 5th year | 17 |
| 6th year | 18 |
| 7th year | 18 |
| 8th year | 19 |
| 9th year | 19 |
| 10th year | 20 |
| 11th year | 20 |
Notice periods
After probation, an employer terminating the contract must give one month's notice for up to one year of service, two months for one to nine years, and three months beyond nine years — two months in a workforce reduction (Art. 35).
Paying out leave by hand every time someone leaves? See how NYLOS tracks leave balances and final pay inside payroll.
Frequently asked questions.
Is unused annual leave paid when employment ends in Ethiopia?
Yes. Leave can't normally be exchanged for money, but when the contract ends, all leave earned and not taken is paid in cash (Labour Proclamation 1156/2019, Art. 77(4)) — whatever the reason for leaving, including resignation or dismissal.
How many days of annual leave do workers get?
16 working days in the first year of service, plus one working day for every additional two years (Art. 77).
What is pay in lieu of notice?
If the employer ends the contract after probation without giving the required notice — 1, 2 or 3 months depending on service, or 2 months in a workforce reduction — the wages for that notice period are owed instead (Art. 35).
How is Leave Pay taxed?
Unused leave pay is taxed as extra income on top of the monthly salary, spread over 12 months: leave pay ÷ 12 is added to the salary, the extra tax this causes is worked out with the monthly income tax brackets, and that difference × 12 is the tax. Example: salary 8,000 ETB, leave pay 10,000 ETB → tax on 8,833.33 (1,358.33) − tax on 8,000 (1,150) = 208.33 × 12 = 2,500 ETB. Notice pay is taxed separately, by full months of the wage plus the part month on its own bracket. Confirm the treatment for your case with the Ministry of Revenues or your advisor.
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