leave-salary-calculation-in-uae
Leave salary calculation is one of the aspects of the UAE labor laws that can be confusing for many employers and employees. You may be wondering if your leave pay will be calculated on the basic salary only or whether you are entitled to your full salary. Employers, on the other hand, would want to know other determinants that may influence leave salary. Explaining such factors is important in providing transparency and understanding between the two parties.
This guide answers all your questions relating to leave salary in the UAE. Be it as an employee who wants to learn about entitlements or as an employer looking to understand compliance obligations, this article will give insights and useful practical tips on this subject.
Leave salary in the UAE is the full monthly pay that an employee is guaranteed to continue receiving even when they go for approved annual leave by employer after completion of 1 year of service. This means that although you are not working during the leave period, you will continue receiving your normal salary, including basic salary and allowance only if that stated in the employment contract or in your company payroll policy.
Key points about leave salary in the UAE:
As stated under Article 29 of Federal Decree-Law No. 33 of 2021, annual leave is to be granted in accordance with the service duration of the employee with the entity. The annual leaves that are paid are distinguished on the grounds of the employee’s period of service, as follows:
An employee whose service is terminated before using up their full annual leave balance is entitled to leave pay for the portion of the last year of service.
Leave salary calculation under the UAE regime requires an understanding of the various provisions that are set out in the UAE Labour Law, specifically Federal Decree-Law No. 33 of 2021. The steps for calculating leave salary in the UAE are presented below:
Daily Wage = Basic Salary ÷ 30
Leave Salary = Daily Leave Wage × Number of Leave Days taken by employee
Example
Assume John is an employee of X Company
Now, Minimum Statutory Calculation ( Basic Salary Component Only )
If Employee Contract includes allowances in leave salary calculation
In case of termination of an employee’s services with his current employer, they are entitled to claim a cash allowance for annual leave days that they have not availed of during their service period as per Article 29(9) of the Employment law. With regard to this type of cash allowance, the calculation shall be based on the basic salary.
Part-time employees are entitled to annual leave, but the period will depend on the employer and working duration of the employee.
Note: Specific details may vary based on individual employment contracts, company policies, and collective bargaining agreements where applicable. Therefore, the employer and employee must refer to their respective contracts of employment or the law concerning their particular case to get the correct calculations and entitlements.
Leave salary calculations are more critical in the United Arab Emirates for both employees and employers because of the number of factors involved in them.
The UAE provides its employees with more than just annual leave under some special conditions:
The Ministry of Human Resources and Emiratisation (MoHRE) is the authority responsible for enforcing the UAE Labour Law and ensuring employer compliance with regulations related to annual leave and leave salary calculation in the UAE.
MoHRE provides official guidance, resolves labour disputes, and allows employees to file complaints if their leave entitlements or payments are not handled correctly. Employers are required to maintain accurate payroll and leave records in line with MoHRE regulations.
Employees are expected to use their annual leave during the year in which it is accrued. Employers may determine the timing of annual leave based on operational needs, but this should be done in agreement with the employee.
Unused annual leave may be carried forward to the following year with employer approval, subject to company policy. Employers cannot prevent employees from using their accrued leave for more than two consecutive years unless the employee agrees otherwise.
If an employee works during an approved annual leave period, they are entitled to receive their regular salary for those working days, and the leave balance should be restored unless otherwise agreed.
Public holidays and sick leave that fall within an employee’s approved annual leave period are generally counted as part of the annual leave, unless the employment contract or company policy provides otherwise.
Employees should review their employment contracts and internal policies to understand how public holidays or sick leave are treated when they occur during annual leave.
The UAE Labour Law requires annual leave to be granted with full pay but does not explicitly define all salary components included in leave salary. As a minimum, leave salary is calculated based on the employee’s basic salary.
Fixed allowances may be included in leave salary calculations only if clearly stated in the employment contract or internal payroll policy. Variable payments such as bonuses or commissions are generally excluded unless contractually agreed.
Annual leave and leave salary calculation in the UAE are governed by Federal Decree-Law No. 33 of 2021 and enforced by MoHRE. Employees are entitled to paid annual leave based on their length of service, and employers must ensure correct calculation and timely payment of leave salary.
Because employment contracts and company policies can affect how leave salary is calculated, both employers and employees should seek clarity to ensure compliance and avoid disputes.
Looking for accurate, compliant payroll processing and leave calculations? Farahat & Co. offers a fully comprehensive payroll service in UAE that ensures full compliance with the UAE labor laws. Our experience in financial management will help you avoid any penalties and disputes associated with employee leave entitlements. Contact us for a consultation.