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 decide on 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.
What is a Leave Salary in the UAE?
Leave salary in UAE is the entire monthly salary that an employee is guaranteed to continue receiving even when they go for annual leave. This means that although you are not working during the leave period, you will continue receiving normal salary, including basic salary and allowance.
Key points about leave salary in UAE:
- Leave Entitlement: Every employee is entitled to 30 days’ annual leave with pay on completing one year of continuous service.
- Calculation: Leave salary shall be computed as follows:
- Daily rate of salary: The total monthly salary, that is, basic plus allowances, by 30.
- Leave salary: Daily rate of salary by number of leave days.
- Components of Leave Salary: The leave salary shall include basic pay and allowances mentioned in the agreement.
- Legal Basis: The UAE Labour Law requires that leave salary be given.
Fully-Paid Leave Entitlement
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 an entity. The annual leaves that are paid are distinguished on the grounds of the employee’s period of service, as follows:
- 30 Days Leave: Employees whose service period is more than one year are entitled to fully paid leave for 30 days.
- 2-Day Leave: Employees with at least six months but less than one year of service shall be entitled to two days of fully paid leave per month.
- Part-Time Leave: Part-time employees are eligible for annual leave according to his/her working hours, according to the terms of employment of the employee.
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.
How to Calculate Leave Salary in the UAE
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:
Annual Leave Entitlement
- An employee is entitled to thirty days (30) fully paid annual leave upon completion of one year of service.
- For an employee having completed six months but less than one year in service, he shall be entitled to two days’ leave per month.
Leave Salary Components
- Base Salary: This is the basic element of leave salary.
- Additional Allowances: These involve house, transport systems, and other allowances depending on the contract of employment.
Calculation Method:
- Full Month Salary: For a complete year in service, the leave salary shall be at full monthly salary, including basic salary plus any allowance.
- Daily Salary: The daily salary can be calculated by dividing the monthly salary by 30 (the number of days in a month).
For example, assume an employee’s basic pay was AED 10,000 plus a house allowance of AED 2,000.
Total monthly salary would thus be AED 12,000.
The leave salary for the period of 30 days would be AED 12,000.
Encashment of Unused Leave:
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
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 under UAE Labour Law
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.
- Annual Leave under UAE Labor Law: Under Article 29 of Federal Law No. 33/2021, every employee working in the UAE is entitled to annual leave with full salary. This leave allows employees to rest, recharge, and return to work refreshed and more productive.
- Duration: Annual leave for a complete year of service is 30 days. Employees who have attained six months are entitled to two days each month. In the last year of their service, employees are entitled to leave for a portion in case they are fired before they can use up all their annual balance leaves.
- Notice Period: In the event that the contract of employment is terminated by either party while the employee is on leave, a notice period shall only commence upon the return of the employee from such leave, unless the parties otherwise agree in writing.
- Annual Leave Balance: The worker may, with the approval of his employer, carry forward his annual leave balance or days thereof to the following year.
- Cash Allowance: The employer may not prevent the worker from benefiting from his annual leave accrued for more than two years, unless the worker wishes to carry it forward or receive a cash allowance for it.
- Annual Leave for Part-Time Workers: The part-time worker shall be entitled to annual leave according to the actual working hours the worker spends working for the employer, and its period shall be defined in the employment contract.
Other Leave Types
The UAE provides its employees with more than just annual leave under some special conditions:
- Maternity Leave: Under Article 30 of Federal Decree-Law No. 33, the female worker shall be entitled to a maternity leave of (60) sixty days, according to the following:
- The first (45) forty-five days with full wage; and
- The following (15) fifteen days with half wage.
- Bereavement Leave: The worker shall be entitled to paid leave in the following cases:
- A bereavement leave of (5) five days, in case of death of the husband or wife and (3) three days in case of death of the mother, father, son, brother, sister, grandson, grandfather, or grandmother, starting from the date of death;
- A parental leave for a period of (5) five working days, for the worker (either the father or mother), who has a newly born child, in order to take care of his child, and the worker is entitled to such leave for a continuous or intermittent period, within (6) six months from the date of the child’s birth.
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.
Read More: Benefits of Outsourcing HR Services in UAE
