How to Handle Leave Salary Calculation in the UAE

Understanding leave salary calculation in the UAE is crucial to maintaining a good relationship with your employees.

An important part of a healthy employer-employee relationship is rewarding employees’ hard work with paid time off. In the specific context of leave, this means allocating employees with a set number of vacation days (and payment, where it applies) that they are entitled to by law. 

Employees in the UAE private sector are legally entitled to paid annual leave. But when it comes to calculating leave salary—especially for partial years, part-time staff, or payouts at resignation—many employers get it wrong.

This guide explains exactly how leave salary is calculated, based on the UAE Labour Law (Federal Decree-Law No. 33 of 2021), updated for 2024 and 2025.

What Is Leave Salary?

Leave salary is the amount an employee receives during their paid annual leave. It’s typically calculated based on the employee’s basic salary and accrued leave balance.

Employees must receive their full leave pay before they go on leave, unless otherwise agreed.

Annual Leave Entitlements in the UAE

Under UAE Labour Law:

• Employees are entitled to 30 calendar days of paid leave per year after completing 1 full year of service.

• Employees who’ve worked 6 months to 1 year are entitled to 2 paid leave days per month.

• Part-time workers are entitled to prorated leave based on actual working hours defined in their contract.

Leave Entitlement by Tenure (Full-Time Employees)

What About Part-Time Employees?

Under UAE Labour Law, part-time employees are also entitled to paid annual leave, but the entitlement is calculated proportionally based on their actual working hours compared to a full-time employee in the same role.

For example:
If a full-time employee works 48 hours/week and a part-time employee works 24 hours/week, the part-time employee is entitled to 50% of the full leave entitlement (i.e. 15 days instead of 30 per year).

Leave for part-time workers is calculated based on the contracted hours per month and must be clearly outlined in their employment contract.

Payroll Note: Leave salary for part-time workers is still based on their basic wage, prorated to reflect their working hours.

How to Calculate Leave Salary

Formula:
(Basic Monthly Salary ÷ 30) × Number of Leave Days

Example:
AED 3,000 basic salary → AED 100 per day
If 18 days accrued: 100 × 18 = AED 1,800 leave salary

Important: Allowances (housing, transport, etc.) are not included in leave salary calculations unless contractually specified.

When Is Leave Salary Paid?

• Before the start of leave, as per labour law

• At resignation, for unused accrued leave

Example:

An employee resigns after 9 months and hasn’t taken any leave.
Leave entitlement = 18 days
Leave salary = 18 × daily basic wage

What If an Employee Doesn’t Take Their Leave?

If an employee does not use their entitled annual leave, the balance rolls over to the next year or is paid out at the end of employment. However, employers are encouraged to ensure leave is used within two years, per MOHRE best practice, to avoid excessive accruals.

Additional Rules to Know About Annual Leave in the UAE

In addition to calculating leave salary correctly, there are administrative rules around when and how annual leave is taken:

• Leave pay must be processed before the leave begins. Employees must be paid their leave salary in advance.

• Employees are entitled to full salary for the period worked leading up to their leave.

Salary Definition:

By default, leave salary is calculated using basic salary only.
However, if your contract or company policy defines “full salary” to include housing or transport allowances, then those must be honoured during leave.

Leave Scheduling Rules

• The employer has the right to set or adjust the leave dates based on business needs, with at least 1 month’s notice.

• The employee may also request specific leave dates, but must give at least 10 working days’ notice.

• Employers may choose to split annual leave (e.g., 15 days now, 15 later), provided it’s communicated and agreed.

Carrying Forward and Accrual Rules

• Leave may be carried over for up to two years, but employers must not prevent employees from using their accrued leave beyond that period.

• Any unused leave at the end of employment must be paid out in cash, based on basic salary only.

Other Situations to Be Aware Of

• Public holidays that fall during annual leave are counted as part of the 30 days — no replacement days are given.

• Sick days during annual leave do not pause the leave unless supported by a medical certificate and employer approval.

• If the employee does not return on time after annual leave, those days are unpaid unless otherwise agreed.

• If the employee is required to work during scheduled annual leave, they must be paid separately for those working days.

Other Types of Leave and Salary Entitlements in the UAE

In addition to annual leave, UAE Labour Law provides for several other types of employee leave—some fully paid, some partially paid, and some unpaid.

Here’s what employers need to know when processing payroll:

Sick Leave

• 15 days full pay

• Next 30 days at half pay

• Next 45 days unpaid
  Entitlement begins after probation is complete.

Payroll calculation:
Use basic salary.
Example: AED 3,000 monthly basic = AED 100/day
First 15 days = 100% pay, next 30 = 50% pay

Maternity Leave

• 60 days total: 45 full pay, 15 half pay

• Additional unpaid leave for illness or complications

• Additional 30 paid + 30 unpaid days if child has a disability

Parental Leave

• 5 working days paid leave

• Must be taken within 6 months of child’s birth

• Available to both mothers and fathers
  Separate from maternity leave.

Disability Leave (Post-Maternity)

• Mothers of children with disabilities may take:

  • 30 additional days paid leave

  • 30 days unpaid leave

Compassionate (Bereavement) Leave

• 5 days paid: spouse’s death

• 3 days paid: death of parent, child, grandparent, sibling or grandchild

Study Leave

• 10 paid days per year for exams

• Must be enrolled in a UAE educational institution

• Available after 2 years of service

Compensatory Leave

• If an employee works on a public holiday or weekly day off, they’re entitled to:

  • One substitute day off

  • OR 150% of daily basic wage as overtime pay

Hajj Leave

• Up to 30 days of unpaid leave may be granted

• One-time entitlement during employment

• Not mandatory, but typically granted

Why It Matters

Incorrect leave salary calculations can lead to:

• Disputes and legal claims

• Penalties under UAE Labour Law

• Loss of employee trust

How NOW Money Supports Employers

NOW Money offers a fully compliant payroll solution for UAE businesses. From automated leave tracking to WPS-compliant salary payments, we make managing payroll easier, faster, and more accurate.

Need help simplifying payroll and staying compliant with UAE labour law? Explore NOW Money’s digital payroll solution

Understanding the full scope of leave types and their salary impact is essential for accurate payroll and compliance with leave salary calculation in the UAE.

FAQs About Leave Salary in the UAE

Q: Do allowances count toward leave salary?
A: No, only the basic salary is used unless otherwise stated in the contract.

Q: Is annual leave calculated by calendar or working days?
A: It’s based on calendar days, including weekends.

Q: What happens to unused leave at the end of employment?
A: It must be paid out in cash, based on basic salary.

Q: What about part-time employees?
A: Leave is prorated based on working hours. For example, if an employee works 50% of full-time hours, they get 15 leave days per year instead of 30.

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Legal Disclaimer

This article reflects UAE Labour Law as of April 2025, including Federal Decree-Law No. 33 of 2021 and recent amendments.

It is for informational purposes only and does not constitute legal advice.
For specific situations, consult MOHRE or a legal professional.