Leave salary calculation in the UAE: Process & challenges

leave salary calculation in the UAE

To maintain a good relationship with your workforce, it is essential to learn how to properly carry out their leave salary calculation in the UAE. In this country, the Labour Law states that employees are entitled to paid time off, but this matter often confuses employers.

In this article, you will learn how to calculate annual leave in the UAE. Moreover, you will gain more understanding of the other types of leaves and how to manage them. If you fail to correctly calculate this important payment, you can end up facing complaints and even litigation. For this reason, if you do not want to put your business at risk, it is essential for you to learn the following points:

  1. What is leave in the UAE?
  2. How is the leave salary calculation done in the UAE?
  3. What are the other types of leave in the UAE Labour Law?
  4. How can you manage your workforce data best?
  5. Why choose PEO Middle East as your best option for payroll management?

1. What is leave in the UAE?

Before starting with the process of leave salary calculation in the UAE, it is essential to understand what the law says about leaves.

In simple words, a leave is whenever an employee receives official permission to miss work for a specific number of days. In this regard, there are two types of leaves:

  • Paid: the employee receives his or her payment for the duration of the leave
  • Unpaid: the employee is not entitled to receive any payment for missing work

The Federal Law No. 33 of 2021 is the current legislation about leaves in the UAE. It took effect on February 2022 and the previous law was the Federal Law No. 8 of 1980. In this law, everything about leaves is stated.

Additionally, it explains all the leaves to which employees are entitled.

1.1 Why are leaves necessary?

Although from the employer’s viewpoint, a leave may seem unnecessary or unproductive, the truth is that granting leaves to employees can be better for the organization.

Here is what leaves can do for employees and overall business productivity:

  • Promotes good mental health and wellbeing
  • Improves employees’ work-life balance
  • Reduces employee stress
  • It helps to decrease unscheduled days off
  • Stimulates more productivity among your workforce
  • It causes employees and employers to adhere to labour laws
  • Helps to build good employee-employer relationships
  • Maintains your business risk-free and avoids litigation

Employers need to know how to use a leave salary calculator in the UAE to ensure that their workforce continues being productive and receives fair payment.

2. How is the leave salary calculation done in the UAE?

Having understood the importance of leave in the UAE, the next crucial step is to know how leave salary is calculated in the UAE.

As an employer, you may wonder how to carry out an error-free calculation of leave salary since this is highly important to ensure employee satisfaction. It is critical to start with the most important one, the annual leave.

2.1 How is leave salary calculated in the UAE?

The annual leave is the most anticipated by employees, as they get the chance to travel or spend time with their families. Although the annual leave salary calculation in the UAE may be challenging, it is fundamental to understand its basics.

First, employees who have worked for a year in your organization are eligible for a 30-day paid annual leave.

But, if the employee has worked for your organization for six months, he or she is entitled to two days of paid leave per month.

In the case of part-time employees, the labour contract should specify the basis for the annual leave calculation. This is because the Labour Law does not state the days like with full-time workers. However, in this case, it is best to carry out calculations according to working hours.

2.2 What are the rules regarding annual leave salary?

The UAE Labour Law for leave salary specifies how to calculate it, while it also outlines some rules you must follow:

  1. The employee should receive the payment immediately before leave starts
  2. The annual leave payment should be before the leave begins
  3. The leave salary calculation in UAE is done on full salary. It includes basic salary, allowance, and any other. Generally speaking, it is based on the last salary the employee received.

Furthermore, there are additional rules regarding administrative matters:

  1. The employee has the right to decide the date on which the leave starts. However, he or she has to give a 10-day notice.
  2. The employer can decide if the annual leave should be divided or the date moved based on the demands of work.
  3. In case the employer decides the date of start of the annual leave, it should give a month’s notice to the employee
  4. Employers cannot prevent employees to use their annual leave
  5. Employers cannot terminate contracts during annual leave

2.3 Leave salary calculation in UAE in case of resignation

In case of resignation, employees are entitled to gratuity pay. This is a type of benefit stated in the Labour Law, but it is different based on the type of contract:

  • Leave salary calculation in the UAE for an unlimited contract: this type of gratuity pay is more complicated. If the company has ended the working relationship, the employee with less than a year does not receive gratuity pay. Employees with 1-5 years working for the corporation receive 21 days of basic salary. And, workers with more than 5 years will get 30 days of basic salary. If the employee has resigned and has worked for 1-3 years in the corporation gets 1/3 of 21 days of basic salary. Between 3-5 years, the employee gets 2/3 of 21 days of basic salary, and more than 5 years in the company grants full 21 days of basic salary.
  • Leave salary calculation in UAE for limited contract: Employees that have been working for less than a year do not receive gratuity pay. Employees with 1-5 working years in the organization receive 21 days of salary for each year worked as gratuity pay. Workers with more than 5 years in the corporation receive 30 days of pay each year.

3. What are the other types of leave in the UAE Labour Law?

Annual leave is not the only one to which employees are entitled in the UAE. In this regard, the leave salary calculation in the UAE involves knowing how to determine all the other types of leaves.

3.1 Sick leave

Employees are entitled to sick leave as per the UAE Labour Law for leave salary when they have been working for three months after the probationary period.

Therefore, employees are entitled to 90 days per year of sick leave. It is up to the employee to take the leave at once or divided it across the year.

The first 15 days are calculated at full pay, the following 30 days are calculated at half pay, and subsequent days have no pay.

The leave salary calculator for sick leave follows these steps:

  1. Divide the employee’s salary by 30 to convert it to daily wage
  2. Multiply the daily wage by the number of days
  3. The result will be the sick leave compensation

3.2 Maternity leave

The most recent Labour Law has made important modifications to maternity leave since it increased it from 45 days to 60 days.

The worker will receive full pay for the first 45 days and half pay for the following 15 days. However, the most notable modification is that employees are entitled to maternity leave for stillborn babies and pregnancy-related illnesses.

If, as an employer, you follow these guidelines, your image will improve, particularly during these times when there are more female workers that do not want to leave their work.

3.3 Parental leave

Both female and male workers are entitled to parental leave. The employee can request a 5-day paid leave as long as it is six months after the birth.

3.4 Compassionate leave

This 5-day leave is for employees who have lost a spouse, and employees who have lost a parent, child, grandchild, grandparent, or sibling get a 3-day leave.

3.5 Disability leave

Mothers receive an additional 30 days of paid leave and 30 days of unpaid leave if they have a baby with a disability.

3.6 Study leave

Those employees that have been working for the corporation for more than 2 years are entitled to 10-day study leave. But, the UAE Labour Law does not state if those days are paid or unpaid. In this case, the company’s policies will determine this matter.

3.7 Hajj leave

Employees can take a 30-days unpaid leave to participate in Hajj. But, the employee can only request this type of leave once during their entire period of service.

3.8 Compensatory leave

Employees that are requested to work during a public holiday should receive compensation. The employer has to calculate it as a compensatory leave, which is an additional time off plus a bonus of 50%, or it can add a bonus of 150% remuneration.

Although understanding every type of leave is crucial for ensuring an error-free financial record, there is another aspect you have to consider, which is knowing how to handle employee data.

4. How can you manage your workforce data best?

To carry out the paid and unpaid leave calculation in the UAE you need to have full visibility of your employees’ data.

This means that you need to monitor accurately each request from your employees about leaves. For example, your HR department should be able to know who is on leave, who is going on leave, and the entitlements of each one.

When you process your employee data manually, this can be complex. Moreover, if you do not have a platform to check daily attendance effectively, you can end up in a mess.

In this regard, it is essential to view and manage your employee data effectively to ensure excellent payments. Furthermore, this can even relieve the workload of your payroll specialists.

There are several payroll software programs and platforms that can help you manage your workforce data. But if this is too overwhelming for you, or if you lack the needed resources, it is best to delegate this task.

By having experts processing and managing your employees’ payroll, you can have peace of mind and ensure optimal leave compensation calculations, as well as other payments.

5. Why choose PEO Middle East as your best option for payroll management?

Ensuring an error-free leave salary calculation in the UAE will help you prevent challenges and issues with your workforce. Since this is a crucial matter, you have to rely on specialists that can provide a high-quality service.

At PEO Middle East, we use our technology and tools to make sure that your business performs properly when it comes to payment calculations. In this way, you will have the best experts providing you with assistance and working side-by-side with you.

Moreover, we can offer you our payroll solutions in several locations across the Middle East, so you can become part of the many businesses that belong to our history of success:

Do you need support with leave salary calculation and more aspects of your payroll? On PEO Middle East, we can provide a tailored service to relieve your burden. Feel free to send your questions or contact us at [email protected]. Our representatives will gladly help you.

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