What should you know about the leave salary calculation in the UAE?

leave salary calculation in the UAE

Paying leave salary to employees is one of the legal obligations that all companies in the UAE must comply with. But it is essential to learn everything about leave salary calculation in the UAE in order to avoid costly mistakes. Besides, calculating it correctly will help you maintain a good relationship with your employees and avoid misunderstandings regarding leave salary.

In this article, you will learn everything you need to know about leave salary in the UAE and its process. You are going to learn how to calculate leave salary and avoid errors during the process that might cause delays. Furthermore, we will also briefly explain the types of leave in the UAE and the rules related to these elements. Let us observe:

1. What is leave salary calculation in the UAE?

2. What are the rules and regulations related to annual leave salary in the UAE?

3. How should you carry out your leave salary calculation in the UAE?

4. Learn how to calculate leave salary in case of resignation

5. How many types of leave does the UAE Labour Law include?

6. Why should you choose PEO Middle East as your partner to manage your leave salary calculation in the UAE?

1. What is leave salary calculation in the UAE?

Leave refers to the official permission that employers can grant to their employees to miss work for a few days. In the UAE, leave salary is an element that falls under Federal Law No. 33 of 2021. According to this law, employers must carry out the respective calculation of leave salary before processing it and paying employees.

Furthermore, it is worth mentioning that leave salary can be paid or unpaid, depending on the situation of the employee. For example, it is a paid leave if the employee receives a payment based on a correct leave salary calculation. But if the employee misses work for no clear reason, the employer will not be required to pay the employee’s leave.

On PEO Middle East, we offer you complete solutions to handle the payroll of your business and its full HR department in the United Arab Emirates. However, you can also request our services in:

2. What are the rules and regulations related to annual leave salary in the UAE?

Before proceeding with the annual leave calculation in the UAE, it is essential to learn about the leave salary rules. For instance, these are some of the most important rules regarding leave salary in this country:

  • All employees must take or use their leaves in the year of entitlement. As for the dates of leave, the employer may set them in agreement with their employee, according to work requirements. Moreover, the employer must notify their employee of the leave date at least one month in advance.
  • Employees may carry over their annual leave balance to the year, with the consent of their employer and in accordance with the company’s rules. In that case, employees must receive the respective payment for the days they worked during their annual leave. This annual leave salary calculation in the UAE must be done according to the basic salary.
  • Employers may not prevent employees from using their accrued annual leave for more than 2 years. When their employment terminates, employers must calculate all accrued leaves on basic salary only.
  • The UAE leave salary rules state that the calculation of the duration of annual leave must include official holidays. But these holidays have to be specified by law/agreement.

3. How should you carry out your leave salary calculation in the UAE?

Now that you know how leave salary works, the next question is “how is leave salary calculated in the UAE?” There is more than one leave salary formula that employers must use when calculating this element. In other words, the formula to calculate it will vary depending on the case, type of contract, and other details.

One important element that will influence when using an annual leave salary calculator in the UAE is the type of contract. It will also depend on whether the employee resigns or not. Furthermore, there are also several types of leave that employers must take into consideration when calculating their employees’ leave salary.

But first, make sure to consider these conditions when using an annual leave calculator in the UAE:

  • Employees who have worked for a year can get a 30-day paid annual leave.
  • If an employee has worked for 6 months, they can get 2 days of paid leave every month.
  • For part-time employees, it is suggested to calculate leave salary based on working hours.

4. Learn how to calculate leave salary in case of resignation

There is also a way to calculate leave salary on resignation in the UAE, which will depend on two situations. Those situations rely on the type of contract the employee has, and it can be limited or unlimited. Keep in mind that, in any case, the employee will receive gratuity pay after terminating their contract, regardless of its type.

Below, you will learn more about the leave salary calculation in the UAE in case of resignation, including its formulas.

4.1. Leave salary calculation in the UAE for an unlimited contract

To complete the leave salary calculation in the UAE for an unlimited contract, the employer must follow these rules:

  • If the employee has worked for less than one year in the company, they will not receive gratuity pay.
  • But if the employee has worked between 1 and 5 years, they must receive a basic salary equivalent to 21 days.
  • Employees who have worked for 5 years or more will receive a basic salary equivalent to 30 days.

Learning how to calculate annual leave in the UAE also includes these guidelines:

  • Employees who resign after working for 1-3 years will have 1/3 of a 21-day basic salary.
  • If they resign after working for 3-5 years, they will have 2/3 of a 21-day basic salary.
  • But if they resign after working for 5 years or more, they will get a full 21-day basic salary.

4.2. Leave salary calculation in the UAE for a limited contract

The leave salary calculation in the UAE for a limited contract includes these rules:

  • Employees who have worked for less than one year will not receive gratuity pay.
  • If they have worked between 1 and 5 years, they get 21 days of salary for each year worked.
  • Employees who worked for 5 or more years receive 30 days of salary for each year worked.

Employers can accurately calculate annual leave in the UAE by following these rules.

5. How many types of leave does the UAE Labour Law include?

Apart from learning how to calculate leave salary in the UAE, you should also learn about the types of leave. In the UAE, you will find eight types of leave that must be considered for the calculation of leave salary.

When using a UAE leave salary calculator, make sure to include the following types of leave:

  • Sick leave.
  • Maternity leave.
  • Parental leave.
  • Study leave.
  • Compassionate leave.
  • Disability leave.
  • Compensatory leave.
  • Hajj leave.

Most of these types are paid leave, but remember that some others are unpaid, such as the Hajj leave. Using a UAE leave salary calculator online will help you get accurate results when calculating these types of leave.

5.1. Sick leave

All employees can take sick leave after they have worked for at least 3 months after their probationary period. Sick leave consists of missing work for 90 days per year due to sickness or health-related issues. But when it comes to the amount of money that employees can get for those days, there are rules to follow:

  • During the first 15 days, employees must receive full pay.
  • For the next 30 days, employees will only receive half pay.
  • During the remaining 45 days, there will be no pay.

To learn how leave salary is calculated in the UAE, and most precisely, sick leave, you must follow these steps:

  • Firstly, you have to divide your employee’s salary by 30 so you can convert it to daily wage.
  • Secondly, you need to multiply the employee’s daily wage by the number of days of the leave. This will lead you to the total leave compensation.

5.2. Maternity leave

Previously, maternity leave had a duration of 45 days. But now, according to the Federal Law No. 33 of 2021, maternity leave has increased to 60 days. During the first 45 days, the employee will receive full pay. But for the remaining 15, the employee will receive only half pay.

The new law also includes an entitlement to maternity leave for employees with stillborn babies and pregnancy-related illnesses. Therefore, all these elements must be included when using a leave salary calculator in the UAE.

5.3. Parental leave

While maternity leave only applies to mothers, parental leave applies to both mothers and fathers. Both parents are eligible to receive a 5-day paid leave in the 6 months following childbirth. Nonetheless, it is worth mentioning that the mother can receive parental leave as an addition to their maternity leave.

5.4. Study leave

If an employee has more than 2 years of service in a company, they can have a 10-day study leave. Depending on the company’s policies, the employee may or may not receive any payment for this type of leave.

5.5. Compassionate leave

If an employee’s spouse passes away, the employee will have a 5-day paid leave. In case an employee’s parent, child, sibling, grandparent, or grandchild passes away, the employee will have a 3-day paid leave.

5.6. Disability leave

If an employee is the mother of a baby with disabilities, she will receive a paid leave entitlement in addition to maternity leave. That entitlement is an additional 30-day paid leave and a 30-day unpaid leave.

5.7. Compensatory leave

In this case, employers must make sure to add the proper compensation to employees when using a leave salary calculator. Compensatory leave compensates employees if their employers require them to work during public holidays.

To calculate this, the employer must take into account additional time off and a bonus equal to 50% of the remuneration. Or it can also be a bonus equal to 150% of remuneration, depending on the situation.

5.8. Hajj leave

Employees interested in Hajj are allowed to take a 30-day leave, but they will not receive any payment for it. Besides, keep in mind that they can only take this type of leave once during their entire period of service.

6. Why should you choose PEO Middle East as your partner to manage your leave salary calculation in the UAE?

Having a professional partner like PEO Middle East is the most convenient way to make your payroll functions more efficient. Besides, it will also ensure the correct results when calculating UAE leave salary to avoid misunderstandings and issues with employees. Our payroll specialists will provide you with the best payroll services to improve other aspects of your payroll processes.

On the other hand, on PEO Middle East, we also offer a variety of services that help you improve other vital functions. These are some of our services:

If you operate a company outside the UAE, we can still help you manage your payroll. Our team offers the best payroll solutions in many countries across the Middle East, like Saudi Arabia, Qatar, etc. Regardless of your company’s location, we will provide you with the best services.

Would you like to learn more about the leave salary calculation in the UAE? With PEO Middle East as your partner, you can be sure that your payroll management will improve significantly. In case you desire to contact our payroll specialists, make sure to send us an email at [email protected]. This way, you can make your inquiries and get more information about our services.

But in case you are a professional searching for job opportunities in the UAE, The Talent Point is the solution. By using this platform, you will be able to explore a variety of job offers and vacancies in UAE companies. Make sure to visit thetalentpoint.com and send your inquiries to [email protected] if you need further help.

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