Leave salary in the UAE is generally linked to an employee’s annual leave entitlement under UAE Labour Law. Private sector employees are entitled to paid annual leave, and employers must calculate leave salary correctly to avoid payroll errors and compliance issues.
Understanding how leave salary is calculated is important for both employers and employees. This guide explains the leave salary formula in the UAE, the role of basic salary and allowances, annual leave entitlement, and the most common mistakes to avoid in payroll processing.
Leave Salary Formula in UAE:
Leave Salary = (Monthly Salary ÷ 30) × Number of Leave Days
Important: In practice, annual leave is treated as paid leave under UAE Labour Law. However, payroll treatment may differ depending on whether you are calculating annual leave salary during service, payment for worked leave days, or cash in lieu of unused leave on termination.
To calculate leave salary in the UAE, it is important to understand the salary basis being used, the employee’s leave balance, and whether the employee worked during any part of the leave period. Below is a simplified example showing how leave salary may be calculated for annual leave.
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1. Basic Salary: This is the fixed monthly salary stated in the employment contract. In Ms. Z’s case, it is AED 10,000.
2. Housing Allowance: This is a regular allowance paid by the employer to support accommodation expenses. Ms. Z receives AED 2,000 as a housing allowance.
3. Annual Leave Entitlement: In the UAE private sector, employees are generally entitled to 30 days of annual leave for each full year of service.
4. Monthly Salary Basis: For annual leave salary, employers usually consider the employee’s regular monthly wage structure in line with the employment terms and payroll policy.
In Ms. Z’s case:
Monthly Salary = Basic Salary + Housing Allowance = 10,000 + 2,000 = 12,000 AED
5. Daily Leave Salary: The daily leave salary is calculated by dividing the monthly salary basis by 30:
Daily Leave Salary = Monthly Salary / 30 = 12,000 / 30 = 400 AED/day
This is the amount used for each day of annual leave in this example.
6. Days Worked During Annual Leave: If the employee works during part of the annual leave and the leave is not carried forward, the employee may be entitled to the leave salary plus compensation for the days worked, subject to UAE Labour Law and payroll policy. In this example, Ms. Z worked 10 days during her leave period.
7. Additional Compensation for Worked Leave Days: This is calculated based on the number of days worked during leave:
Additional Compensation = Days Worked During Annual Leave × Daily Leave Salary = 10 × 400 = 4,000 AED
8. Total Compensation During Annual Leave: The total compensation includes the leave salary plus the additional amount for the days worked during annual leave:
Total Compensation = Leave Salary + Additional Compensation
Total Compensation = 12,000 + 4,000 = 16,000 AED
| Component | Amount (AED) |
| Basic Salary | 10,000 |
| Housing Allowance | 2,000 |
| Annual Leave Entitlement | 30 days |
| Monthly Salary Basis | 12,000 |
| Days Worked During Annual Leave | 10 days |
| Daily Leave Salary | 400 |
| Additional Compensation for Worked Days | 4,000 |
| Total Compensation During Annual Leave | 16,000 |
This breakdown shows how leave salary may be calculated when an employee receives paid annual leave and is also compensated for days worked during that leave period.
Also read: Salary Deduction in UAE
Under UAE Labour Law, employees in the private sector are entitled to annual leave with full wage. If an employee is required to work during all or part of the annual leave and that leave is not carried forward to the next year, the employer must pay the worker the wage for the leave period plus compensation for the days worked, calculated according to the applicable legal rules.
The following annual leave entitlement generally applies for each year of service rendered by an employee:
Leave salary calculations in the UAE are important for both employers and employees because several legal and payroll factors affect the final amount.
There are different types of leave in the UAE depending on the employee’s situation and legal entitlement, as stated below:
| Type of Leave | Description |
| Sabbatical Leave | Leave for national service for eligible UAE nationals. |
| Study Leave | Leave for exams at accredited institutions after meeting the service condition, up to 10 working days annually. |
| Compassionate Leave | 3 to 5 days of leave in the event of the death of close relatives, depending on the relationship. |
| Hajj Leave | 30 days unpaid leave for Hajj, generally once during employment, subject to conditions. |
| Maternity Leave | 60 days maternity leave; full pay for 45 days and half pay for 15 days, with possible additional leave in specific cases. |
| Breastfeeding Breaks | Additional daily breaks for breastfeeding for a limited period after childbirth. |
| Parental Leave | 5 working days of paid parental leave for either parent, subject to the legal timeframe. |
The UAE labour framework permits eligible UAE national workers to take sabbatical leave to perform national service, subject to the applicable legal and administrative requirements.
Employees may take study leave for exams at accredited educational institutions if they satisfy the legal service condition. The maximum duration is generally 10 working days per year.
Compassionate leave is granted in the event of the death of close relatives. The number of days depends on the relationship to the deceased and the applicable legal provision.
The law grants unpaid leave for Hajj once during employment, subject to the applicable legal rules and employer policy.
Maternity leave in the UAE private sector is 60 days, including 45 days with full pay and 15 days with half pay. Additional leave may apply in certain medical situations according to the law.
Female employees are entitled to breastfeeding breaks for a limited period after childbirth in accordance with UAE Labour Law.
Parental leave in the UAE private sector is generally 5 working days with full pay, subject to the legal conditions and timeframe.
Employees are also entitled to official public holidays with full pay as announced by the UAE authorities.
Also read: Overtime Calculation in UAE
Public holidays that occur during annual leave are included in the calculation of annual leave according to UAE Labour Law.
During annual leave, the employee is entitled to paid leave in accordance with the applicable legal wage rules and the employment arrangement.
The employer may determine the annual leave date and may divide leave into two periods if necessary. If the employee is required to work during all or part of the annual leave and the leave is not carried forward, the employer must compensate the employee according to the law.
The employer should not require the employee to work during annual leave in a manner that conflicts with the legal rules governing leave and compensation.
The employee is generally entitled to receive the wage for the annual leave period in accordance with UAE Labour Law and the employer’s payroll process.
Yes. If employment ends before the employee uses the annual leave balance, the employee is entitled to payment in lieu of unused annual leave according to the applicable salary basis and legal rules.
Annual leave earnings should be processed according to UAE Labour Law and the employer’s payroll cycle so that the employee receives the entitlement correctly and on time.
After completing the required service period following probation, the employee is generally entitled to sick leave as follows:
However, the employee may lose entitlement to sick leave pay if the illness resulted from misconduct as defined by law.
An employee may resign while on sick leave subject to the employment contract, applicable notice requirements, and the legal circumstances of the case.
An employer cannot terminate an employee during the sick leave period before the employee has exhausted the legally prescribed sick leave entitlement. If the employee uses all sick leave and is still unable to return to work, the employer may terminate the employment in accordance with the law.
If the employee does not return to work after the permitted leave period and legal notice requirements are met, the employer may proceed according to the applicable employment rules.