Leave Salary Calculation in the UAE: A Complete Guide (2026)
Leave salary calculation in the UAE is one of the most misunderstood areas of employment law. Many employees confuse basic salary with total salary, while employers sometimes miscalculate unused leave during final settlement.
Under Federal Decree-Law No. 33 of 2021, annual leave and leave salary are clearly regulated, but applying the law correctly requires understanding eligibility rules, calculation formulas, and settlement procedures.
This guide explains the legal framework, provides practical calculation examples, and clarifies how unused leave is treated during resignation or termination.
For the official legal framework, you can refer to the UAE Government Portal.
What is Leave Salary in the UAE?
Leave salary in the UAE refers to the payment an employee receives during approved annual leave.
Who is eligible for leave salary in the UAE?
Under UAE Labour Law:
- Employees who complete 6 months of continuous service are entitled to leave.
- Employees who complete 1 full year are entitled to full annual leave benefits.
- Employees who resign after serving notice are eligible.
- Employees terminated for reasons other than misconduct remain eligible.
- Employees dismissed under Article 44 (serious misconduct) may lose certain benefits, as the provision permits termination without notice for serious violations.
Difference between leave salary and basic salary?
A common misconception is that leave salary is calculated based on total monthly salary.
- Basic Salary: The fixed monthly salary mentioned in your contract, excluding allowances such as:
- Housing
- Transportation
- Bonuses
- Leave Salary: The amount paid during annual leave. It is generally calculated using basic salary unless stated otherwise in the employment contract.
For example, if your total monthly salary is AED 15,000 but your basic salary is AED 8,700, leave salary calculations will typically be based on AED 8,700.
Practical Note:
In payroll practice, disputes frequently arise due to confusion between basic salary and total compensation. Employers should clearly define and document salary components to avoid miscalculations in leave and final settlements.
What Does UAE Labour Law Say About Annual Leave?
The United Arab Emirates updated its labour laws to create a more flexible and secure work environment. Federal Decree-Law No. 33 of 2021, effective February 2, 2022, replaced Federal Law No. 8 of 1980.
Annual leave entitlements are governed under Article 29 of Federal Decree-Law No. 33 of 2021, which specifies eligibility, duration, and payment requirements.
Leave Entitlement After 6 Months
Employees who complete more than 6 months but less than one year of service are entitled to 2 days per month of annual leave.
Leave Entitlement After 1 Year
Employees who complete one full year of service are entitled to 30 calendar days of paid annual leave per year.
Leave Rules for Part-Time Employees
Part-time employees are entitled to annual leave on a pro rata basis, meaning their leave is calculated proportionally according to their working hours compared to full-time employees.
Example:
If a full-time employee receives 30 days of annual leave, a part-time employee working half the hours would receive 15 days.
How to Calculate Leave Salary in the UAE
Leave salary is calculated using the employee’s basic monthly salary and the number of accrued leave days.
Under the UAE Labour Law, monthly salary calculations are standardized using a 30-day month for wage computation purposes. This is why the daily wage is calculated by dividing the basic salary by 30.
Step 1: Calculate the Daily Wage
Daily Wage = Basic Monthly Salary ÷ 30
Example: If the basic salary is AED 6,000:
- 6,000 ÷ 30 = AED 200 per day
Step 2: Multiply by Leave Days
Leave Salary = Daily Wage × Number of Leave Days
If the employee is entitled to 30 days of annual leave:
- 200 × 30 = AED 6,000
This means a full 30-day annual leave generally results in payment equivalent to one month of basic salary.
Example: Resignation After 8 Months
Employees who complete more than 6 months but less than one year of service are entitled to 2 days of leave per month.
If an employee resigns after 8 months with a basic salary of AED 6,000:
- Leave entitlement = 2 days × 8 months = 16 days
- Daily wage = 6,000 ÷ 30 = AED 200
- Unused leave payout = 200 × 16 = AED 3,200
The amount of AED 3,200 must be included in the employee’s final settlement as payment for unused leave.
Table: Leave Salary Calculation Example
| Step | Description | Calculation | Result (AED) |
| 1 | Basic Monthly Salary | — | 6,000 |
| 2 | Daily wage | 6,000 ÷ 30 | 200 |
| 3 | Leave Entitlement | 30 days | — |
| 4 | Total Leave Salary Payable | 200 × 30 | 6,000 |
Leave Salary Calculation for Unused Leave
Payment for Accrued but Unused Leave
If an employee has accrued annual leave that has not been taken, the unused balance must be compensated either:
- As payment during employment (if agreed), or
- As part of the final settlement upon resignation or termination
Under the UAE Labour Law, accrued leave cannot be forfeited unless there is a lawful justification. In the absence of such justification, unused leave must be paid in cash.
The calculation method remains the same:
- Unused Leave Pay = Daily Wage × Unused Leave Days
Since UAE wage calculations are based on a standardized 30-day month:
- Daily Wage = Basic Salary ÷ 30
Example: Unused Leave Settlement
Assume:
- Basic Salary: AED 6,000
- Daily Wage: 6,000 ÷ 30 = AED 200
- Unused Leave: 10 days
Table: Settlement Calculation
| Component | Calculation | Amount (AED) |
| Daily Wage | 6,000 ÷ 30 | 200 |
| Unused Leave Days | — | 10 |
| Total Leave Encashment | 200 × 10 | 2,000 |
Total Payable for Unused Leave: AED 2,000
This amount must be included in the employee’s final settlement upon termination.
Leave Salary Calculation for Different Employment Types
Full-Time Employees
Employees who complete one year of continuous service are entitled to 30 calendar days of annual leave. Leave salary for full-time employees is calculated using the standard formula explained above:
- Daily Wage = Basic Salary ÷ 30
Leave Salary = Daily Wage × Leave Days
Part-Time Employees
Part-time employees are entitled to annual leave on a pro rata basis, calculated according to their agreed working hours in comparison to full-time employees.
The leave salary calculation method remains the same, but entitlement is proportionate to actual working hours.
Limited vs Unlimited Contracts
Since the 2022 labour law reform, private sector employment contracts in the UAE are primarily fixed-term (limited) contracts.
Importantly, the method of calculating leave salary applies uniformly regardless of contract type. The formula for determining daily wage and leave pay does not change.
However, settlement procedures may vary depending on whether:
- The contract expires upon completion of its term, or
- The contract is terminated early
In all cases, accrued leave must be calculated and settled in accordance with statutory provisions.
When Is Leave Salary Paid in the UAE?
Leave salary is paid either with the regular monthly payroll cycle (as per company policy) or before the employee begins their annual leave. Compensation for unused leave must be part of the final settlement in the event of resignation or termination.
Practical Consideration: Employers should ensure leave salary is processed before the employee proceeds on leave to avoid wage protection system (WPS) compliance issues and potential payroll discrepancies.
Various Types of Paid Leave in the UAE
While this guide focuses primarily on annual leave salary, the UAE Labour Law also provides for additional statutory leave categories, summarized below.
Annual Leave – 30 Days After 1 Year
- 30 calendar days after completing 1 year of service
- 2 days per month if service is between 6 months and 1 year
- Salary must be paid before leave begins
- Unused leave may be carried forward or paid out (subject to agreement)
Sick Leave—Up to 90 Days (With Conditions)
Maximum 90 days per year (after probation):
- First 15 days – Full pay
- Next 30 days – Half pay
- Remaining 45 days – Unpaid
- Medical certificate required
Maternity Leave – 60 Days
- 60 days total:
- 45 days – Full pay
- 15 days – Half pay
- Additional unpaid leave may be granted for medical reasons
- Job protection applies during leave (with limited exceptions)
Paternity Leave – 5 Working Days
- 5 working days – Fully paid
- Must be used within 6 months of the child’s birth
Bereavement Leave
- 5 days – Death of spouse
- 3 days – Death of parent, child, sibling, or grandparent
Study Leave – 10 Working Days
- 10 working days per year – Paid
- Employee must have completed at least 2 years of service
- Granted for examination purposes
National Service Leave – 11 Months to Several Years
- Applies to UAE citizens performing mandatory national service
- Employment remains protected during service
- Employee has the right to return after completion
Public Holidays – 13 to 15 Days Per Year
Approximately 13–15 paid public holidays per year, as officially declared by the UAE Government.
Common public holidays include:
- New Year’s Day
- Eid Al Fitr
- Eid Al Adha
- Islamic New Year
- Prophet Muhammad’s (PBUH) Birthday
- UAE National Day
If an employee is required to work on a public holiday, they are entitled to:
- Another day off, or
- Additional compensation, as per the law
Leave Salary vs End of Service Benefits
End-of-service gratuity is regulated under Articles 51–53 of Federal Decree-Law No. 33 of 2021, which outline eligibility criteria and calculation methodology. Although both involve employee compensation, they serve different legal purposes and are calculated using different criteria.
Leave Salary:
Leave salary is compensation paid to an employee during approved annual leave or for accrued but unused leave days:
Key characteristics:
- Paid during employment (not only at termination)
- Calculated based on the employee’s basic salary (unless contractually stated otherwise)
- Determined according to the number of accrued leave days
- Not linked to total years of service
- May form part of the final settlement if leave remains unused
Leave salary ensures income continuity while the employee is temporarily absent from work.
End-of-Service:
End-of-service gratuity is a statutory terminal benefit payable upon lawful termination of employment, provided eligibility conditions are met:
Key characteristics:
- Paid only at the end of employment
- Calculated exclusively on the employee’s basic salary
- Directly linked to the total length of service
- Designed as long-term service compensation
Unlike leave salary, gratuity reflects the employee’s accumulated years of service rather than unused leave entitlement.
Gratuity Formula:
Under UAE Labour Law:
- 21 days’ basic salary for each year of service (first 5 years)
- 30 days’ basic salary for each additional year after 5 years
Gratuity is calculated proportionally for partial years of service.
Ensuring Compliance with UAE Labour Law
Compliance with the UAE Labour Law is a shared responsibility between employers and employees. Proper administration of leave entitlements and end-of-service benefits is essential to prevent disputes and ensure lawful compensation.
Employer Obligations
Employers are legally responsible for the accurate administration of employee leave and statutory benefits. This includes:
- Granting annual leave in accordance with legal entitlement
- Maintaining accurate leave and payroll records
- Paying leave salary before the commencement of annual leave
- Settling payment for accrued but unused leave upon termination
- Calculating and disbursing end-of-service gratuity in accordance with the statutory formula
Failure to comply with these obligations may expose the employer to financial penalties and labour disputes.
Employee Responsibilities
Employees are equally expected to understand their contractual and statutory entitlements. In particular, employees should:
- Review their employment contract and salary structure
- Distinguish between basic salary and allowances
- Monitor accrued leave balances
- Verify final settlement calculations, including leave encashment and gratuity
A clear understanding of these components reduces the likelihood of miscalculation or dispute at the end of employment.
Importance of Compliance
Accurate application of leave and gratuity provisions:
- Ensures fair compensation
- Protects statutory rights
- Promotes transparency in employment relationships
- Reduces the risk of formal labour claims
Non-compliance by either party may result in regulatory penalties or formal dispute proceedings.
Leave Salary Calculator – Estimate Your Payment
A leave salary calculator provides an estimate of the amount payable during annual leave or upon settlement of unused leave. The calculation is based on the employee’s basic monthly salary and the number of accrued leave days.
(End-of-service gratuity must be calculated separately using the statutory gratuity formula.)
Example Scenario:
Assume:
- Basic Monthly Salary: AED 8,000
- Leave Entitlement: 30 days (after completing one year of service)
Step 1: Calculate Daily Wage
- Daily Wage = Basic Salary ÷ 30
- 8,000 ÷ 30 = AED 266.67
Step 2: Calculate Leave Salary
- Leave Salary = Daily Wage × Leave Days
- 266.67 × 30 = AED 8,000 (approx.)
Estimated Leave Salary: AED 8,000
This example demonstrates that a full 30-day annual leave generally results in payment equivalent to one month of basic salary.
Final Thoughts
Accurate leave salary calculation is essential for lawful compliance and fair compensation. Whether processing payroll or reviewing a final settlement, applying the correct formula based on basic salary ensures transparency and reduces the risk of dispute.
Both employers and employees should verify leave balances, salary structure, and settlement components to ensure calculations align with the UAE Labour Law. Proper understanding of these principles promotes clarity, compliance, and professional employment practices.
