Leave Salary Calculation in UAE: Under UAE Labour Law, every employee who completes 12 months of service is entitled to paid annual leave. This is calculated based on their basic salary and allowances. When an employee takes leave or resigns, the employer must ensure proper leave salary calculation in UAE to avoid legal issues and fines.
Whether you’re an HR manager, PRO, or business owner, understanding how to do this correctly is essential in 2025.
Leave Salary Calculation in UAE – Step-by-Step for Employers 2025 Guide
What the UAE Labour Law Says (2022 Amendment)
Leave Salary Calculation in UAE: According to Federal Decree-Law No. 33 of 2021, which came into effect in 2022 and remains valid in 2025:
Employees are entitled to 30 calendar days of annual leave after completing one year.
Those with less than a year of service get leave proportional to their completed months.
Leave salary must be paid before the employee goes on vacation, or upon final settlement if resigning.
Step-by-Step Leave Salary Calculation in UAE (2025)
Step 1: Determine Eligible Leave Days
| Service Duration | Leave Entitlement |
|---|---|
| Less than 6 months | No paid leave |
| 6–12 months | Pro-rated leave |
| 12+ months | 30 calendar days |
Step 2: Calculate Daily Salary
Formula:
Daily Salary = (Monthly Basic Salary + Allowances) ÷ 30
This daily rate is used to calculate leave compensation.
Step 3: Multiply by Leave Days Taken or Accrued
Formula:
Leave Salary = Daily Salary × Number of Leave Days
Step 4: Include Pending Leave (if Resigning or Terminated)
If the employee didn’t take their full leave, calculate cash compensation for unused leave days at the time of resignation or termination.
Example Leave Salary Calculation in UAE (2025)
Let’s say an employee has:
Basic Salary: AED 3,000
Allowances (housing + transport): AED 2,000
Total Salary: AED 5,000
Leave Days Accrued: 30
Step-by-Step:
Daily Salary = 5,000 ÷ 30 = AED 166.67
Leave Salary = 166.67 × 30 = AED 5,000
In this case, the employee is paid a full month’s salary as leave salary.
Employer Obligations for Leave Salary
As per UAE law, employers must:
Pay leave salary in advance before employee goes on vacation
Maintain accurate leave records for every staff member
Pay cash for unused leave at end of service
Ensure leave pay is included in final settlement letter
Failure to comply can result in:
Labour complaints
Legal fines
Reputation damage on MOHRE records
When to Pay Leave Salary
| Situation | Action |
|---|---|
| Before vacation | Pay full leave salary in advance |
| Resignation | Pay for unused leave along with EOSB |
| Termination | Include leave salary in final dues |
| No leave taken | Must carry forward or pay as cash (max 2 years) |
💡 Note: Annual leave can be carried forward or encashed, but not lost unless expired under specific conditions.
Common Mistakes in Leave Salary Calculation
| Mistake | Impact |
|---|---|
| Using basic salary only (no allowances) | Underpayment – violates UAE law |
| Ignoring unpaid leave periods | Overpayment risk |
| Miscalculating pro-rata for <1 year staff | Legal non-compliance |
| Not keeping leave balance records | Penalties during inspection |
Mahad HRC advises using a structured leave tracking system or ERP to avoid errors.
How Mahad HRC Helps with Leave Salary Calculation in UAE
We provide full HR support to UAE businesses, including:
Monthly leave accrual reports
Automated leave balance tracking
Final settlement calculation templates
Payroll + WPS compliant leave payments
Documented leave approval workflows
Support with MOHRE inspections and disputes
Whether you manage 5 or 500 employees, our team ensures you remain 100% compliant.
What to Include in a Leave Salary Slip
When issuing leave pay, your pay slip should include:
Gross salary
Daily rate breakdown
Leave days taken
Total leave amount paid
Date of leave start and end
Stamp and signature of HR department
This builds transparency and protects both employer and employee in the long term.
Tools and Templates from Mahad HRC
Need help with formatting?
We offer:
Leave Salary Calculation Excel Template
Arabic + English Leave Salary Certificate Format
Final Settlement Calculator with Leave Balance
PDF Leave Approval Forms (Custom Branded)
Just contact our team and we’ll send you the resources.
Final Thoughts
“Leave salary is not a bonus it’s a legal entitlement. Calculating it wrong can cost you more than just money.”
Mastering leave salary calculation in UAE isn’t just good HR practice it’s a legal requirement in 2025. Let Mahad HRC UAE support your business with payroll accuracy, HR compliance, and peace of mind.