Not knowing how to calculate leave salary in the UAE is not an option to employees and employers. UAE Labour Law provides annual leaves as a legal right and employees are entitled to receive the right salary payment during vacation or leaving a job.

This guide can be used to understand how leave salary is computed in the UAE, the legal regulations, formulas, examples, and the errors to be avoided.

What Is Leave Salary in the UAE?

Leave salary is the amount of money an employee gets during his/her leave of the year. UAE Labour Law states that the employees have a right to annual leave paid after completing a specified amount of employment.

The leave salary should be paid by the employer according to the wage of the employee when the employee takes a vacation or leaves the company.

Normal salary normally comprises:

• Basic salary

• Housing allowance (including in salary package)

Most of the time, however, overtime, bonuses and commissions are not computed in the calculation of the leave salary.

UAE Labour Law for Annual Leave

Annual leave allowances are well established in accordance with the UAE Labour Law (Federal Decree Law No. 33 of 2021).

Employment Duration	Annual Leave Entitlement
Less than 6 months	Not eligible
6 months – 1 year	2 days per month
More than 1 year	30 days per year

Every year, employees that have worked over one year will enjoy 30 days of paid annual leave.

The employers are required to remit leave salary prior to the start of the leave by the employee.

How Leave Salary Is Calculated in UAE

Salary will be calculated on full wage of the employee included in basic salary and allowances and this is called leave salary.

Standard Leave Salary Formula

Leave Salary = (Monthly Salary ÷ 30) × Number of Leave Days

This formula is used to calculate the daily wage of the employee then multiplied by the days of leave.

Example of Leave Salary Calculation

Let’s consider a practical example.

Detail	Amount
Basic Salary	AED 5,000
Housing Allowance	AED 2,000
Total Salary	AED 7,000
Leave Days	30

Step 1: Calculate Daily Wage

Daily Wage = 7000 ÷ 30
Daily Wage = AED 233.33

Step 2: Calculate Leave Salary

Leave Salary = 233.33 × 30
Leave Salary = AED 7,000

So the employee receives AED 7,000 as leave salary.

Leave Salary Calculation for Partial Leave

Employees are not always utilizing the 30 days of leave.

Example:

Monthly Salary	Leave Days	Leave Salary
AED 6,000	10 days	AED 2,000

Formula:

6000 ÷ 30 = 200 per day
200 × 10 = AED 2,000

Leave Salary When Resigning

When the employee leaves without using his or her annual leave, the employee is entitled to cash compensation of the days of leave.

This compensated payment is referred to as leave encashment.

Leave Encashment Formula

Unused Leave Pay = (Monthly Salary ÷ 30) × Unused Leave Days

Example:

Salary	Unused Leave	Payment
AED 8,000	15 days	AED 4,000

Important Rules for Leave Salary in UAE

There are various legal regulations regarding payment of leave salary:

1. Payment Must Be Made Before Leave

Employers need to remunerate the salary on leave prior to the commencement of the vacation by an employee.

2. Leave Cannot Be Replaced with Cash (Except at Termination)

Employers ought to give their employees the chance to use their leave rather than compensating it.

3. Carry Forward of Leave

Organizations can enable their workers to use carry over leave into the following year.

4. Public Holidays During Leave

The number of public holidays during annual leave is not considered as in a leave day.

Explore UAE Gratuity Calculator

Factors That Affect Leave Salary Calculation

The last leave salary could be varied according to various factors.

Factor	Impact
Basic Salary	Main component of calculation
Allowances	Housing or fixed allowances may be included
Leave Days Taken	More leave days increase payment
Contract Type	Limited vs unlimited contracts may affect policy

Common Mistakes in Leave Salary Calculation

The working of leave salary is not understood by many employees.

Using Only Basic Salary

Others hold a view that basic pay is all that is used. Full wage inclusive of allowances is regarded in most situations.

Incorrect Daily Wage Calculation

The monthly salary should always be divided by every month and not by the working days.

Ignoring Unused Leave Payments

The employees who drop out of the company tend to forget about the right to leave encashment.

Leave Salary vs End-of-Service Gratuity

These two payments are misconstrued.

Benefit	Purpose
Leave Salary	Payment during annual leave
Gratuity	End-of-service benefit

Short-term compensation is leave salary and long-term service reward is gratuity.

Tips for Employees

In order to be paid the right leave salary:

• Check your employment contract

• Verify elements of salary that are to be calculated.

• Track your unused leave days

• Ask HR to provide salary breakdown.

Conclusion

When you know the right formula and labour law regulations, the calculation of leave salary in the UAE is not a hard task. Employees who serve one year will have the right of 30 days to receive paid annual leaves and the employers have the responsibility to provide the same as stipulated by the laws of the UAE.

Understand the benefits of knowing how to leave salary works will assist employees enjoy their rights and will help them to budget their finances in a better way.

FAQs

What is the calculation of leave salary in UAE?

The calculation of leave salary is by using the following formula:

Salary per Month/ 30 x Leaves.

Is the leave salary based on basic salary?

Typically it is based on the entire wage (basic salary plus allowances), based on company policy.

At what time is leave salary to be paid?

The leave salary is to be paid by the employer prior to the employee taking his annual leave.

Is it possible to pay employees unused leave?

Yes. In case an employee is leaving a company he or she has to be paid the unused days of leave.