Human capital management is one of the most sensitive organisational functions covered by many legal frameworks. From recruitment and payroll to employee benefits, overtime, and termination, nearly every stage of the employee lifecycle demands strict compliance. This is no different from managing leave entitlement pay or leave salary.
Leave is a fundamental aspect of workplace rights. It ensures that employees are fairly compensated when they take time off for personal matters.
With human resources now demanding more work-life balance, a company’s leave policy plays a crucial role in determining whether a potential talent wants to join a firm.
Understanding leave salary is essential for both employers and employees in the UAE, as it’s governed by specific regulations outlined in the local labour law.
Whether for annual, sick, or other unforeseen events, accurately calculating the leave salary ensures compliance and fosters transparency in the workplace.
This article will provide a comprehensive guide to understanding leave salary in the UAE, who is entitled to it, the regulations covering it, and how to calculate it accurately.
What is Leave Salary in the UAE
Leave is an approved period during which an employee is permitted to skip work. This can be paid or unpaid.
Leave salary in the UAE refers to the compensation an employee receives during their time off or approved absences. The primary purpose of leave salary is to ensure an employee is paid during their absence at work and is generally calculated based on their basic salary and other applicable allowances.
In general, leave salary is a type of paid time off (PTO). However, PTO is a more broad term that covers all forms of paid leave, whereas leave salary in the UAE focuses more on ensuring employees are compensated during their time away from work according to employment contracts and local labour laws.
Good to Know
While both leaves and holidays offer off time from work, they are not the same. Holiday typically refers to public or company-designated days off, like national holidays (e.g., New Year’s Day), where the entire organization is off. Leave refers to time off that an employee requests for personal reasons, such as vacation, medical reasons, or family matters, and is often subject to company policies and approval.
Types of Leaves in the UAE
There are two types of leaves in the UAE: paid and unpaid. Here is a breakdown of them for a better understanding of what is leave salary and how it is calculated.
Paid Leave Types
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Study Leave
Employees are entitled to 10 working days of study leave each year (if the eligibility criteria are met).
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Compassionate Leave
Paid leave is granted for the demise of a family member. It is generally 3 days for a grandparent or sibling and 5 days for a child or spouse.
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Maternity Leave
Article 30 of the UAE Labour Law provides sixty days off for female workers as maternity leave, full pay initial 45 days, and half pay for 15 days.
If complications arise, 45 days of additional unpaid leave are allowed. In the event of any health issues or disability with the baby, 30 days of paid leave are allowed, with an option for a 30-day extension without pay.
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Parental Leave
5 days of fully paid leave for both mothers and fathers, applicable within the first six months of the child’s birth.
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Breastfeeding Breaks
Women are entitled to extra paid breaks (1 to 2 hours daily) for breastfeeding until six months after childbirth.
Unpaid Leave Types
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Sabbatical Leave
Leave for national service is unpaid unless otherwise stipulated by the employer.
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Leave for Umrah and Hajj
Employees can take up to 30 days of unpaid leave for Hajj once during their employment period- but it is unpaid.
Official Paid Holidays For Employees in the UAE
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Islamic New Year
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Gregorian New Year
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Eid al-Fitr, two days after the end of Ramadan
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Three days of Eid and Waqfa for Al Adha
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The Prophet Mohammed’s birthday one day
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Isra and Al Mi’raj
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National Day
Legal Framework: UAE Regulations on Leaves (2024)
Law for Leave Salary in the UAE
According to Article 29 of Federal Law No. 33/2021, employees in the UAE are entitled to one annual leave to travel to their home country or to see their loved ones. This leave entitlement allows employees to take a break from their work-life, attend to their personal life, refresh, and be back to work more productively.
Duration
Employees in the UAE are entitled to 30 days of paid annual leave for a complete year of service. On the other hand, employees who have completed six months of service are entitled to two days each month. If the employees are subject to termination before they have used up all of their annual balance leave, they are entitled to leave for a portion of their last year of service.
Notice
The employers must give employees enough time to plan their leave or time off, at least a month in advance.
Flexibility
The employee can carry over unused leave days into the next year if the employer agrees.
Monetary Award
The laws concerning annual leave entitle employees to a monetary benefit for vacation days accrued over a period of two years, subject to free will.
Treatment of Part-time Employees
The law also permits annual leave for part-time employees. The length of this leave depends on company policies and the duration of service.
Eligibility for Leave Salary
Understanding how to calculate leave salary in the UAE should start with assessing an employee’s eligibility for it. According to Article 29 of Federal Decree-Law No 33 of 2021, the annual leave allocation goes according to the duration of the worker’s tenure in the organization.
Here are the conditions for leave salary eligibility and how they differ based on the period of service.
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Employees who have worked for one year in an organisation should receive a one-month leave salary. However, this does not apply to free zone companies.
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Employees who have worked for over six months but under a year must receive a two-day leave salary every month until they reach a year of employment.
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Part-time workers can obtain yearly leave according to their working hours, as indicated in their employment agreement.
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If an employee is claiming annual leave salary at contract termination after a year of employment, the leave salary formula in UAE should be based on the basic salary, with no allowances.
Provisions For Unused Leave And Deductions
In the event that an employee does not use their leave, they can obtain cash in lieu (A payout equivalent to the value of the unused leave days). In this case how to calculate leave salary in the UAE will differ by taking into account the monthly basic salary (and allowances, if applicable).
Both the employer and employee can choose to benefit from compensation instead of taking the leave. At the same time, the employee can also choose to carry forward the leaves to the next year instead of cashing out.
However, the number of leaves that can be carried forward is subject to UAE labour laws. The leave salary formula must also be adjusted to account for these carried-over days.
When employees take leaves without pay (LWOP), their leave salary is affected by overall salary calculations. So when formulating how to calculate leave salary, it is essential to deduct and take into account the leaves without pay.
How to Calculate Leave Salary in The UAE
Calculating leave salary requires precision and accuracy as it is directly regulated by labour laws. Generally, leave salaries are calculated based on the employee’s salary and the duration of annual leave entitlement. The formula should also take into account other factors that might affect the calculation, such as benefits, allowances, or any other components that affect an employee’s total salary.
Basic Leave Salary Formula
Leave Salary = (Basic Salary ÷ 30) x Number of Leave Days
Advanced Leave Salary Formula
Leave Salary=(Basic Salary+Monthly Allowances ÷ 30)× Number of Leave Days +(Daily Salary×Number of Days Worked During Leave)
The advanced leave salary formula adds all components that will influence the final calculation of leave salary, such as allowances and compensation that account for the number of days worked during the leave.
Below is a detailed example of how to calculate leave salary in the UAE when processing payroll.
Explanation
The monthly salary of 12,000 AED is a sum of a base salary of 10,000 AED and a housing allowance of 2,000 AED.
To calculate the daily salary, divide the monthly salary by 30 days:
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Daily Salary= 12,000 AED ÷ 30 = 400 AED
During the leave period, the employee worked for 10 days. The additional compensation for these days is calculated by multiplying the daily salary by the number of days worked:
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Additional Compensation (for days worked during leave) = 400 AED ÷ day×10 days = 4,000 AED
The total leave salary is the sum of the regular annual leave salary and the additional allowance for the days worked during the leave. Thus, in this case:
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Total Leave Salary=12,000 AED+4,000 AED=16,000 AED
The employee is entitled to a regular monthly salary of 12,000 AED for their 30 days of annual leave. However, they worked for 10 days during this leave period. As a result, they received extra compensation of 4,000 AED (400 AED/day x 10 days).
Therefore, their total compensation during the annual leave period is the sum of the regular leave salary (12,000 AED) and the additional amount for working those 10 days (4,000 AED), giving a total of 16,000 AED.
Maternity Leave Salary Calculation
The calculation of maternity leave salary is different from this standard format. The salary is based on the full monthly wage (basic salary + allowances) for the first 45 days and half of the monthly wage for the remaining 15 days.
Here is how to calculate it:
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Fully Paid Period (First 45 days):
Maternity Leave Salary (Fully Paid)=(Monthly Salary÷ 30)×45
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Half-Paid Period (Next 15 days):
Maternity Leave Salary (Half Paid)=(Monthly Salary÷30×0.5)×15
FAQs
Can workers be terminated during leave?
No, according to the UAE labour law, an employer cannot terminate an employee during the leave period.
What are the fully paid leave rights?
Here is a list of fully paid leave rights set as per the UAE labour law,
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Annual Leave: 30 calendar days after completing one year of service)
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Sick Leave: First 15 days of sick leave are fully paid after completing 3 months of service.
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Maternity Leave: First 45 days are fully paid (for female employees).
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Parental Leave: 5 working days (within the first 6 months of the child’s birth).
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Compassionate Leave: 5 days for the death of a spouse and 3 days for the death of a parent, child, sibling, grandparent, or grandchild.
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Study Leave: 10 working days (for employees enrolled in approved educational institutions, after completing 2 years with the company).
How to calculate holiday pay in UAE?
Holiday Pay=Monthly Salary ÷ 30 ×Number of Public Holiday Days
How is annual leave paid?
The leave salary must be paid before the start of the annual leave.
Is annual leave calculated on basic salary?
No. The annual leave salary should be calculated based on the employee’s full monthly wage, which is a sum of both the sum of basic salary and any other fixed allowances like housing or transportation. In other words, this means that the employee will receive his or her monthly salary, as they normally would if they were working, and not just the basic salary.
