The Complete Guide to Leave Salary Calculation in the UAE – 2025 (Update)

Akshayn

June 11 2025

Key Takeaways

Entitlement After 6 Months: Employees who have completed 6 months but less than 1 year of service are entitled to 2 days of paid leave per month; after 1 year, they receive 30 calendar days of annual leave.
Leave Salary Based on Basic Pay: The leave salary is calculated using the basic salary only, unless the contract specifies including allowances like housing or transport.
Standard Leave Salary Formula:
Use the formula:
(Basic Monthly Salary ÷ 30) × Number of Leave Days.
Payment Timing: Employers must pay the leave salary before the leave begins. For unused leave at the end of employment, payment should be made at termination.
Proration for Partial Years and Part-Time Work: Leave entitlements are pro-rated for employees leaving mid-year and for part-time staff, based on months worked or hours relative to full-time ≥
Carry-Over & Expiry Rules: Employees may carry forward unused leave by agreement, but employers cannot force expiry for more than two years. Excess leave should be paid out if unused upon termination.
Public, Sick & Special Leaves: Official holidays and sick leave taken during annual leave are included in leave days. Special leaves like maternity, parental, bereavement, and Hajj follow separate statutory rules (e.g., 60 days maternity, 5 days parental, 5/3 days bereavement).
Working During Leave or Holidays: If an employee works during their annual leave or public holiday, they must receive their regular leave pay plus additional compensatory or overtime pay as per law.

Leave salary calculation in the UAE is one of those HR topics that looks simple on paper but gets tricky fast.
Questions pile up:
Is leave pay just basic salary?
Do allowances count?
What about part-timers or new joiners?

With the Federal Decree-Law No. 33 in full effect, the rules have evolved and staying compliant is more important than ever.

In this complete guide, you’ll get:

A breakdown of UAE leave salary rules
A clear formula to calculate it
Common pitfalls to avoid
Actionable tips to stay compliant with minimal effort

Payroll errors cost companies an average of $291 per employee annually. Let’s demystify leave salary once and for all.

Why Leave Salary Calculation Can Be Confusing

At first glance, calculating leave salary may seem straightforward. But when you start dealing with real-world scenarios, new hires, resignations, part-time staff, unpaid leave it becomes surprisingly complex.

Lack of Clarity in Contracts and Payroll Systems
Many employment contracts fail to clearly differentiate between:

Basic Salary – The fixed amount without benefits
Gross Salary – Includes all regular earnings before deductions
Total Compensation – May include variable bonuses, commissions, or discretionary allowances

When HR or payroll professionals work off unclear data, errors are inevitable. Add manual leave tracking to the mix, and you’re asking for inconsistencies.

Different Leave Types with Different Rules

Not all leave is created equal:

Annual Leave requires full pay (basic + fixed allowances)
Unpaid Leave affects accrual and salary calculations
Sick Leave may overlap with annual leave policies
Maternity/Paternity Leave may follow separate calculation norms

Each type has different entitlements and calculations under UAE law, and mixing them up can lead to payroll violations.

Inconsistent or Delayed Data Entry

When leave records aren’t updated in real time, mistakes build up. For example:

Leave taken isn’t deducted properly from balances
Carryover isn’t tracked or capped
Encashments are miscalculated due to outdated data

Manual Processes Increase Risk

Spreadsheets or outdated HRMS systems leave room for:

Calculation errors
Duplicate entries
Accrual mismanagement

The result? Discrepancies between what the employee expects and what they’re paid—leading to mistrust or disputes.

Area of Confusion	What Typically Goes Wrong	Compliance Risk
Salary Definition	Contract doesn’t clarify basic vs. gross salary	High
Allowance Treatment	Fixed vs. variable allowances misclassified	Medium
Prorated Leave	Part-year service not correctly prorated	Medium
Data Updates	Delayed or missed updates to accruals and balances	High
Leave Type Classification	Sick/unpaid/maternity incorrectly processed as annual leave	High
Manual vs. Automated	Errors in Excel-based calculations	Very High

Takeaway: Even well-intentioned HR teams get tripped up without a clear system, structured policies, and automation.

UAE Labour Laws and Leave Entitlements

Understanding leave salary starts with understanding the broader landscape of UAE labour law. The main legal foundation comes from the Federal Decree-Law No. 33 of 2021, which governs employment relations and employee rights across all private sector companies in the UAE.

Key Leave Types under UAE Labour Law:

Type of Leave	Entitlement	Remarks
Annual Leave	30 days after 1 year; 2 days/month after 6 months	Must be paid in full before leave starts
Sick Leave	90 days/year (15 days full, 30 half, 45 unpaid)	Medical certificate required
Maternity Leave	60 days (45 days full, 15 half)	Can be extended unpaid for 45 more days if needed
Paternity Leave	5 days (within first 6 months of birth)	Paid leave
Hajj/Umrah Leave	Up to 30 days unpaid	One-time only, for pilgrimage
Bereavement Leave	3–5 days depending on relationship	Paid leave
Study Leave	10 days/year for employees in accredited institutions	Requires 2+ years with employer and proof of exams

All leaves must be reflected accurately in payroll systems and HRMS platforms to ensure compliance with MoHRE audits.

Legal Requirements for Leave Salary Payment

Leave salary must be paid before the employee proceeds on leave.
Employees are entitled to carry forward unused leave (as per company policy or employment contract).
If an employee resigns or is terminated, unused annual leave must be encashed and paid along with final settlement.
Part-time employees are also covered under labour law but receive pro-rated entitlements.

How Leave Salary Is Calculated Under UAE Law

Here’s how HR or payroll managers do it right:

Confirm leave entitlement (based on tenure and contract)
Calculate monthly salary (Basic + Fixed Allowances)
Find daily rate (Divide by 30)
Multiply by the number of entitled leave days
Adjust for exceptions (unpaid leave, excess carryover, partial usage)
Confirm payment timing (must be done before leave starts)

💡 Pro Tip: Use Paydaysuite to automate payroll, avoiding manual slip-ups.

Legal Basis and Salary Components

Under Article 29 of Federal Decree-Law No. 33 of 2021, the entitlement is:

30 calendar days of paid leave after 1 year
2 days per month after completing 6 months but before completing 1 year
Pro-rata leave for part-time workers based on hours worked

Under Article 29 of Federal Decree-Law No. 33 of 2021, the entitlement is:

30 calendar days of paid leave after 1 year
2 days per month after completing 6 months but before completing 1 year
Pro-rata leave for part-time workers based on hours worked

Key Formula:

Leave Salary = (Basic Salary + Fixed Allowances ÷ 30) × Number of Leave Days

⚠️ In termination cases: Use only basic salary.

Let’s explore how factors like employment status, type of leave, and payment structure affect leave salary through different scenarios.

Scenario	Salary Used	Leave Days Entitled	Remarks
Full-time employee with 1+ year tenure	Basic + Fixed Allowances	30 days	Standard annual leave calculation
Full-time employee with <1 year	Basic + Fixed Allowances	2 days per month	Applies from 6 months onward
Termination before 1 year	Basic only	Prorated	Only basic salary used on exit
Part-time employee	Pro-rata (as per contract)	Prorated	Based on hours worked vs. full-time equivalent
Leave encashment	Basic + Fixed Allowances	Unused balance	At year-end or on resignation
Employee takes unpaid leave	Adjusted monthly salary	Reduced accrual	Must deduct unpaid period from total accrual
Leave overlaps with weekends/holidays	Still 30 calendar days	30 calendar days	Not based on working days
Employee returns early from leave	Actual days taken	Recalculate	Pay for days taken + normal pay for worked days
Employee takes partial leave	Daily rate	Actual days	Calculate per day and multiply
Employee on commission-based pay	Exclude variable components	30 days	Use fixed components only unless stated in contract

Scenario 1: Full-Time Employee with 1+ Year of Service

Example: Ahmed works full-time with a basic salary of AED 8,000 and a housing allowance of AED 2,000. He takes his entitled 30 days of annual leave.

Monthly Salary = 8,000 + 2,000 = AED 10,000
Daily Salary = 10,000 ÷ 30 = AED 333.33
Leave Salary = 333.33 × 30 = AED 10,000 of AED 8,000 and a housing allowance of AED 2,000. He takes 30 days of annual leave.
Monthly Salary = 8,000 + 2,000 = AED 10,000
Daily Salary = 10,000 ÷ 30 = AED 333.33
Leave Salary = 333.33 × 30 = AED 10,000

Scenario 2: Full-Time Employee with 7 Months of Service

Example: Fatima joined the company 7 months ago. Her basic is AED 7,000, and her fixed allowance is AED 1,500. She’s eligible for 14 days of leave.

Monthly Salary = 8,500
Daily Salary = 8,500 ÷ 30 = AED 283.33
Leave Salary = 283.33 × 14 = AED 3,966.67 7 months ago. Her basic is AED 7,000, and fixed allowance is AED 1,500. She is eligible for 14 days (2 days × 7 months).
Monthly Salary = 8,500
Daily Salary = 8,500 ÷ 30 = AED 283.33
Leave Salary = 283.33 × 14 = AED 3,966.67

Scenario 3: Termination After 9 Months

Example: Youssef is leaving the company after 9 months. His basic salary is AED 6,000. Allowances are not included for termination calculations.

Eligible Leave = 2 days × 9 = 18 days
Daily Salary = 6,000 ÷ 30 = AED 200
Leave Salary = 200 × 18 = AED 3,600 after 9 months. Basic = AED 6,000. No allowance considered.
Eligible Leave = 2 days × 9 = 18 days
Daily Salary = 6,000 ÷ 30 = AED 200
Leave Salary = 200 × 18 = AED 3,600

Scenario 4: Part-Time Employee

Example: Noor works part-time, clocking 20 hours/week in a company where full-time is 40 hours/week. Her basic salary is AED 4,000 and fixed allowance is AED 1,000.

Entitlement = 30 days × (20 ÷ 40) = 15 days
Monthly Salary = AED 5,000
Daily Salary = 5,000 ÷ 30 = AED 166.67
Leave Salary = 166.67 × 15 = AED 2,500 20 hours/week in a 40-hour week company. Basic = AED 4,000, allowance = AED 1,000.
Entitlement = 30 days × (20 ÷ 40) = 15 days
Monthly Salary = AED 5,000
Daily Salary = 5,000 ÷ 30 = AED 166.67
Leave Salary = 166.67 × 15 = AED 2,500

Scenario 5: Leave Encashment (Year-End)

Example: Bilal hasn’t taken 10 days of leave this year. His basic salary is AED 9,000 and allowance is AED 1,000.

Monthly Salary = 10,000
Daily Salary = 10,000 ÷ 30 = AED 333.33
Encashment = 333.33 × 10 = AED 3,333.33 taken 10 days of leave. Basic = AED 9,000, allowance = AED 1,000.
Monthly Salary = 10,000
Daily Salary = 10,000 ÷ 30 = AED 333.33
Encashment = 333.33 × 10 = AED 3,333.33

Scenario 6: Employee Takes 15 Days Unpaid Leave

Example: Aisha earns AED 12,000/month. She takes 15 unpaid days in May.

Monthly Salary Reduced = 12,000 ÷ 30 × 15 = AED 6,000 deducted
Final Salary for May = AED 6,000
Accrual = Only half-month accrual (1 day) AED 12,000/month. She takes 15 unpaid days in May.
Monthly Salary Reduced = 12,000 ÷ 30 × 15 = AED 6,000 deducted
Final Salary for May = AED 6,000
Accrual = Only half-month accrual (1 day)

Scenario 7: Leave Overlaps with Weekend

Example: Khalid takes leave from Dec 1–30, which includes 8 weekend days.

Still counted as 30 calendar days
No reduction for weekends unless specified in contract leave from Dec 1–30, which includes 8 weekend days.
Still counted as 30 calendar days
No reduction for weekends unless specified in contract

Scenario 8: Return from Leave Early

Example: Layla takes 10 days of approved leave but returns on day 7.

Leave Salary Paid = 10 days initially
Adjustment = 3 days paid as regular salary
Net Adjustment = Regular payroll cycle resumes from day 8 10 days of approved leave but returns on day 7.
Leave Salary Paid = 10 days initially
Adjustment = 3 days paid as regular salary
Net Adjustment = Regular payroll cycle resumes from day 8

Scenario 9: Partial Leave Days

Example: Rami takes 5 leave days. His monthly salary is AED 15,000.

Daily Rate = 15,000 ÷ 30 = AED 500
Leave Salary = 500 × 5 = AED 2,500 5 leave days. Monthly salary = AED 15,000.
Daily Rate = 15,000 ÷ 30 = AED 500
Leave Salary = 500 × 5 = AED 2,500

Scenario 10: Commission-Based Pay

Example: Huda has a basic salary of AED 7,000 and receives variable monthly commissions.

Use only fixed components: AED 7,000
Daily = 7,000 ÷ 30 = AED 233.33
Leave Salary for 30 days = 233.33 × 30 = AED 7,000 a basic of AED 7,000, and commission varies monthly.
Use only fixed components: AED 7,000
Daily = 7,000 ÷ 30 = AED 233.33
Leave Salary for 30 days = 233.33 × 30 = AED 7,000

Why does this matter beyond just payroll?

Delays = discontent. Employees expect timely, accurate leave pay.
Errors = fines. MoHRE audits can uncover underpayments or faulty calculations.
Untracked leave = liabilities. Unused or unaccounted leaves may build up into massive year-end payouts.

Even one miscalculation can lead to employee disputes or damage your brand’s credibility.

Leave Salary Comparison Framework

Component	Full Leave (Post 12 Mo)	Termination-Based Leave	Part-Time Employees
Eligibility	30 days/year	Pro-rata by service	Pro-rata by hours
Calculation Basis	Basic + Allowances	Basic only	As per contract
Payment Timing	Before leave starts	At exit	Regular cycle
MoHRE Audit Risk	Low (if automated)	Medium (if manual)	High (if unclear)

Common Misconceptions + Expert Tips

Misconceptions

Leave salary is always basic pay only ✅ False
Part-timers don’t get leave salary ✅ False
You can pay after leave ends ✅ False

Expert Tips

Align leave years (e.g. Jan–Dec) for smoother tracking
Use a first-come-first-serve policy for high-demand months
Automate leave encashments and approvals to reduce friction

Payroll simplicity = employee satisfaction = higher retention.

Strategic Insights: Trends HR Leaders Need to Watch

Modern HR is leaning towards:

Gig and hybrid workforce entitlements with flexible pro-rata leave policies
Real-time visibility into leave balances for employees and managers
Fully automated approvals, encashments, and payroll syncs
Seamless integration of leave tracking with payroll systems

What CFOs and CHROs Care About

C-suite leaders don’t want just compliance they want strategy:

Forecasting leave liabilities and managing cash flow
Audit readiness at any time
Boosting efficiency through automation
Minimizing disputes by reducing human error in leave tracking

Platforms like Paydaysuite offer automated rule engines, audit trails, and real-time salary calculators to help you stay ahead.

FAQs

What is leave salary in UAE?

It’s the amount paid to employees when they go on their entitled annual leave, based on their basic salary and applicable allowances.

How is leave salary calculated in UAE?

Use the formula: (Basic + Fixed Allowances) ÷ 30 × Leave Days.

Is leave salary based on basic or gross salary?

For active leave: basic + fixed allowances. For terminations: only basic salary.

Can employers delay leave salary payment?

No. UAE law mandates that payment must be made before leave begins.

Do part-time employees get leave salary?

Yes, but on a pro-rata basis depending on their contracted hours.

What happens to unused leave when an employee resigns?

They must be compensated for unused leave based on their basic salary.

Can employees work during their leave?

Yes, if they get a permit and the secondary employer is authorized.

Are sick days included in annual leave?

Usually yes, unless the employment contract specifies otherwise.

Making Leave Salary Effortless

Leave salary isn’t just a checkbox it’s about honoring time off and following labor law with confidence. With evolving labor structures, hybrid work, and real-time employee expectations, manual methods no longer cut it. Platforms like Paydaysuite simplify leave tracking, automate calculations, and keep you audit-ready without the spreadsheet headaches.

Need help modernizing your payroll and leave processes? Explore Paydaysuite.