Human capital management is one of the most critical organisational functions governed by many legal frameworks. Nearly every stage of the employee lifecycle demands strict compliance–from recruitment, employee benefits, payroll, overtime, and to termination. This is no different from managing a leave salary.
As more professionals learn the value of work-life balance, a company’s leave policy plays a crucial role in determining whether a potential applicant wants to join an organisation. Leave salary has become a fundamental aspect of workplace rights as it ensures that employees are fairly compensated when they take time off work for personal matters.
Understanding the fundamentals of a leave salary is essential for both employers and employees in the UAE. Whether for annual, vacation, 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 the types, components, and formulas of a leave salary in the UAE. We’ll also discuss who is entitled to it and the laws it follows.
What is Leave Salary in the UAE
Leave is an approved period during which an employee is permitted not to work. It can either be paid or unpaid.
Leave salary in the UAE refers to the compensation an employee receives for approved absences. The primary purpose of leave salary is to ensure an employee is paid during the approved time off from work. It is generally calculated based on their basic salary and other applicable allowances according to employment contracts and local labour laws.
In general, leave salary is a type of paid time off (PTO). However, PTO is a broader term that covers all forms of paid leave, including holidays.
Difference Between Leaves and Holidays
While both leaves and holidays offer off time from work, they are not the same. Holidays typically refers to public or company-designated days off.
For instance, New Year’s Day is a national holiday where the entire organization is off from work to spend time with their respective families. On the other hand, leave refers to time off that an employee requests for personal reasons, such as for vacation, medical or family matters, and is often subject to company policies and approval.
Types of Leaves in the UAE
Leaves in the UAE are mainly classified under paid and unpaid days off. Below is a breakdown of each type of leave and how they are calculated.
Paid Leaves
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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 loss of a family member. Generally, a 3-day compassionate leave applies for the passing of 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 grants female workers a 60-day maternity leave, where they will receive their full pay for the initial 45 days and half pay for the remaining 15 days.
If the mother experiences complications, 45 days of additional unpaid leave are allowed. In the event that the baby suffers any health issues or disability, they may be allowed to take 30 more days of paid leave, plus the 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. Parental leave is in addition to maternity leave for mothers in the UAE. This provision aims to support both parents in bonding with and caring for their newborn.
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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
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Sabbatical Leave
Leave for national service is unpaid unless otherwise stipulated by the employer.
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Umrah and Hajj Leave
Employees can take up to 30 days of unpaid leave for Hajj once during their employment period.
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 (2025)
Under Article 29 of Federal Law No. 33 of 2021, employees in the UAE are entitled to one annual leave to visit their home country or spend time with loved ones. This leave allows employees to take a break from professional life, attend to personal matters, recharge, and return to work with increased productivity.
Duration
Employees in the UAE are entitled to 30 days of paid annual leave for a full year of service. On the other hand, employees who have completed six months of service are eligible to take two days off each month. If an employee is terminated before using all of their allotted annual leave, they are entitled to compensation for the unused leave, calculated based on the portion of the year they have worked.
Notice
In the UAE, employers are required to give employees enough time to plan their annual leave, typically at least a month in advance. This rule applies specifically to annual leave, not resignations.
When an employee resigns, they must serve a notice period, usually 30 days. If the employee has unused annual leave, they may use it to reduce the length of the notice period, but this is subject to the employer’s approval. For example, if an employee has 5 days of unused leave, they can apply those 5 days to the 30-day notice period, allowing them to leave earlier, provided the employer agrees.
Flexibility
Some employers give employees the flexibility to carry over unused leaves into the next year upon request.
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.
Eligibility of Part-time Employees
Part-time employees in the UAE also qualify to take an annual leave. However, its length may depend on company policies and the duration of service.
Qualifications for Leave Salary
According to Article 29 of Federal Decree-Law No 33 of 2021, the annual leave allocation is calculated based on the duration of the employee’s tenure in the organization.
Here are the conditions to qualify for leave salary in UAE:
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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 employees can obtain yearly leave according to their working hours, as specified in their contract.
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If an employee has completed a year of service and is claiming an annual leave salary upon contract termination, the calculation in UAE will only include the basic salary, with no allowances.
Provisions for Unused Leave and Deductions
If an employee has unused leaves, they can receive a cash payout equivalent to the value of the unused days, known as leave encashment. The process or terminology may vary by country or company policy.
Informally, terms like “provisions” or “cash for unused holidays” are widely accepted, but leave encashment is the official process recognized by companies or statutory laws. This allows employees to convert unused leaves into cash at any time during their employment.
Laws Regulating Leave Encashment in the UAE
“Leave encashment” is applicable for leave calculation in the UAE and is governed by Federal Decree-Law No. 33 of 2021). It regulates how unused annual leave should be handled by employers. Note that the law does not mandate encashment of unused leave or enforce a “use it or lose it” rule during ongoing employment unless agreed upon in the employment contract.
Leave encashment is often part of the company’s internal benefits policy, which could be advantageous for both employees and employers. Employees are given the option to convert the unused leaves into cash, or carry them forward to the following year. Moreover, the leave encashment can also be applied as additional compensation to their final pay upon resignation or termination. As for employers, they can offer leave encashment as an incentive to reduce absences, allowing them to continue with business operations as normal and maintain productivity.
Employers cannot restrict or prevent employees from using their accrued annual leave for more than two years. However, the number of leaves that can be carried forward is subject to UAE labour laws. In the event unused leaves expire (generally after a 2 year period), employees must be compensated in cash.It’s important to review your employment contract and consult with your HR department to understand how these provisions apply to your specific situation.
When Can You Get Leave Encashment
Leave encashment can be obtained at any time as per company policies or at specific junctures. They are:
During Employment
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Some organizations allow employees to encash unused leaves at the end of a financial or calendar year.
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It might also be offered as an incentive to limit leave usage and increase productivity.
Upon Resignation or Termination:
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If an employee leaves a job, any accrued but unused leave is often compensated in the final settlement.
Upon Retirement:
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Many companies and government organisations explicitly provide leave encashment upon retirement as part of the employee’s end-of-service benefits.
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.
Per Article 29 (1) of the UAE Labour Law, when an employee takes a 30-day annual leave after completing 12 months of employment, they are entitled to receive their full monthly salary, comprising both the basic salary and allowances and any other components that affect an employee’s total salary.
When taking these into account, the basic leave salary formula is:
Leave Salary = [(Basic Salary + Allowances) ÷ 30] × Number of Leave Days + (Daily Salary × Number of Days Worked During 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 per day × 10 days = 4,000 AED
* The additional allowance is the leave encashment or the provision for unused leave provided to the employee.
The total leave salary is the sum of the regular annual leave salary and the additional allowance for the days worked during the leave.
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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 per 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), which totals to 16,000 AED.
Calculation for Leave Without Pay
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 unpaid absences.
Leave without pay is a temporary absence from work which is requested by an employee and approved by the employer. It does not cover the following:
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Suspension
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Furlough
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An absence for which leave has not been approved
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Non-pay status for overtime work
Here is an example of how to calculate leave salary by assuming the employee took 2 days of leave without pay. This means that the employee has taken an extra two holidays in addition to the 30 days paid leave.
Leave Salary Without Pay Formula
Leave Salary Without Pay = [(Basic Salary + Allowances) ÷ 30] x (Number of Leave Days – LWOP)
11,200 = [(10,000 + 2000) ÷ 30] × (30-2)
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
The employee has taken two LWOP (Leave Without Pay), which will be deducted from their annual leave entitlement of 30 days and multiplied to their daily salary.
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Leave Without Pay
400 AED x (30 – 2) = 11,200
The daily salary of an employee for a 30-day leave period is AED 400. As the employee has taken 2 LWOP, his leave entitlement has been reduced to 28 days. This makes the total compensation during the annual leave period AED 11,200 (400 x 28).
Always refer to your company’s specific policies on LWOP and allowances. Some companies may have specific rules regarding the reduction of allowances against the LWOP.
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) = [Basic Salary + Allowances] ÷ 30 x 45
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Half-Paid Period (Next 15 days):
Maternity Leave Salary (Half Paid) = [Basic Salary + Allowances] ÷ 0.5 x 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 leaves employees are entitled to?
Under UAE Labour Law, employees are entitled to various fully paid leaves, including 30 calendar days of annual leave after completing one year of service, 15 fully paid sick leave days after completing three months of service, 45 fully paid maternity leave days for female employees, 5 working days of parental leave within the first six months of a child’s birth, 5 days of compassionate leave for the death of a spouse, 3 days for the death of a parent, child, sibling, grandparent, or grandchild, and 10 working days of study leave for employees enrolled in approved educational institutions after completing two years of service.
How to calculate holiday pay in UAE?
The calculation for holiday pay in UAE is similar to leave salary. Simply refer to this formula: (Monthly Salary ÷ 30) × Number of Public Holidays (in month)
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. 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.
What is the purchased leave rate of pay?
It refers to the adjusted daily or hourly pay an employee receives after taking additional leave days beyond their standard paid leave entitlement. It is an alternative to taking a leave without pay where employees take extra time off by agreeing to a temporary reduction in their salary. The cost of these purchased or extra leave days is either deducted from their pay in installments over a few months or in one upfront deduction.
How is the annual leave salary calculated?
To calculate for your leave salary, get the sum of your basic salary and allowances, then divide it by 30. From there, multiply the quotient to the number of leave days. Simply refer to this formula: [(basic salary + allowances) ÷ 30] x Number of Leaves.
How to request for leaves?
To request a leave, it is important to follow these steps. (1) Keep the request letter brief and concise, incorporating a leave application form if your organization provides one. (2) Maintain a formal and respectful tone throughout the communication, clearly indicating the exact dates you are requesting leave and outlining the purpose. (3) Ensure you are familiar with your company’s annual leave policy to avoid misunderstandings. (4) Specify who will handle your tasks during your absence to ensure continuity of work. Submitting the request early allows your team sufficient time to plan tasks around your leave.
Is leave salary and gratuity the same?
Leave salary is the payment your employer gives for your leave, whereas gratuity means end-of-service benefits or payment paid to the employee upon resignation or termination.
Can I get leave salary after resignation?
Yes. As per the UAE labour law, an employee is entitled to encashment of annual leaves that are not taken upon employee termination or resignation.
