Leave Salary Calculation UAE: Leave salary is a vital part of employee compensation in the UAE and a critical responsibility for employers. As of 2025, the UAE Labour Law continues to mandate annual leave entitlements and paid leave policies. Understanding accurate leave salary calculation UAE guidelines is essential for every HR manager and business owner.
This article outlines the current rules, formulas, and best practices for managing leave payments according to UAE law.
Leave Salary Calculation UAE—Updated HR Guide for 2025
What Is Leave Salary in UAE?
Leave Salary Calculation UAE: Leave salary refers to the amount paid to employees during their annual leave or for unused leave days when their contract ends. This is a legal obligation under the UAE Labour Law (Federal Decree Law No. 33 of 2021 and its updates in 2022–2025).
Employees who complete 12 months of service are entitled to 30 calendar days of paid annual leave. Leave salary must reflect the employee’s basic salary plus average allowances (if applicable).
Eligibility Criteria for Annual Leave
| Length of Service | Entitlement |
|---|---|
| Less than 6 months | No paid leave, only unpaid leave |
| 6 months – 1 year | 2 days per month |
| More than 1 year | 30 calendar days annually |
Employers must ensure leave balances are tracked, and salary is paid before or at the beginning of the leave period.
Components of Leave Salary
The leave salary calculation UAE generally includes:
Basic Salary (fixed component)
House Allowance (if specified)
Other fixed monthly allowances (transport, food, etc.)
Excludes:
Bonuses
Overtime
Commission (unless contractually fixed)
The UAE law mandates payment of “wage”, which can mean more than just the basic salary depending on the contract.
How to Calculate Leave Salary in UAE (Formula)
To calculate leave salary, use this standard formula:
Leave Salary = (Monthly Salary ÷ 30) × Number of Leave Days
If the employee has allowances included in their contract:
Leave Salary = ((Basic Salary + Allowances) ÷ 30) × Leave Days
Example Calculation (With Allowances):
Monthly Salary Breakdown:
Basic Salary = AED 3,000
Housing Allowance = AED 1,000
Transport Allowance = AED 500
Total = AED 4,500
Leave Entitlement = 30 days
Leave Salary = (4,500 ÷ 30) × 30 = AED 4,500
If only 15 days of leave are used:
Leave Salary = (4,500 ÷ 30) × 15 = AED 2,250
When Should Leave Salary Be Paid?
According to UAE law, employers must pay leave salary:
Before the employee begins their leave, or
Within the regular payroll cycle if mutually agreed
Late payment can result in labour complaints or penalties.
What About Leave Encashment?
Leave encashment applies when:
The employee resigns or is terminated
The employee does not use all their annual leave
Encashment Calculation Formula:
If an employee has 20 unused leave days and monthly salary is AED 4,000:
Encashment = 20 × (4,000 ÷ 30) = AED 2,666.67
Legal Updates for 2025
Leave Salary Calculation UAE: As of January 2025, there are no major changes to the leave salary structure, but HR compliance audits are increasing.
Employers must:
Maintain digital records of leave balances
Issue payslips reflecting leave deductions or payments
Have written leave policies in employee handbooks
The MOHRE (Ministry of Human Resources & Emiratisation) requires companies to show transparency in their leave salary calculation in UAE.
Employer Best Practices
Document All Leave Requests
Use a digital HRMS system for approval, tracking, and payroll sync.Clarify Allowances in Contracts
Only fixed allowances should be included in leave salary unless otherwise specified.Pay on Time
Leave salary delays can trigger disputes with MOHRE.Audit Monthly
Run monthly audits on leave balance and salary calculations to avoid surprises.Consult Your PRO or HR Partner
When in doubt, seek help from experts like MahadHRC.ae.
FAQs on Leave Salary in UAE
Q1. Is annual leave calculated based on calendar or working days?
🅰️ It’s calculated based on calendar days, unless the contract specifies otherwise.
Q2. Do Friday/Saturday count in leave?
🅰️ Yes, weekends are counted as part of leave.
Q3. Is unused leave carried forward?
🅰️ By law, leave must be used within 2 years. However, some employers allow encashment or carry-forward policies.
Final Thoughts
Leave Salary Calculation UAE: Whether you are an HR professional or a small business owner in the UAE, understanding leave salary calculation UAE policies is essential in 2025. With proper systems in place and a clear understanding of the law, you can stay compliant and avoid penalties.
Let MahadHRC.ae assist your business with compliant HR practices, payroll, and leave management across Abu Dhabi, Dubai, and the UAE.