Knowing what you’re owed when it comes to your precious time off from work is an important part of a job in any country. If you’re new to the United Arab Emirates (UAE), knowing the leave days that you’re allowed is also crucial, as it affects the way that the leave salary is paid out. You don’t want to lose money from your budget when still getting used to living in a high-cost city like Dubai.
We’re committed to providing immigrants with the necessary information to transition to life in a new country. In this Remitly guide, we’ll detail everything you need to know as a newcomer about leave in the UAE and how it affects payouts at your new job.
Understanding leave salary calculation in UAE
In the UAE, leave is defined as the number of days that an employee is allowed to take off every year. Leave salary is the equivalent pay for those days.
These benefits are available to both full-time and part-time workers, although conditions may apply. The number of leave days you have may vary based on how long you’ve worked at a job, but the method for calculating leave salary remains the same.
Overview of UAE Labour Law pertaining to leave salary
The Ministry of Human Resources and Emiratisation (MoHRE) is the body in charge of handling all labour matters in the UAE. Part of its responsibility is adjudicating cases related to labour laws, following guidelines like Federal Decree-Law No. 33 of 2021.
This legislation states that all employees in the UAE are entitled to paid leave. It lays out how contracts should be written, what counts as overtime, and how leave is to be allotted and paid. The law also discusses what workers should be paid for different types of leave.
Why understanding leave salary calculation is important
Understanding how to calculate the leave salary your employer owes can help in a few ways.
- Accurate payouts: When a worker takes time off, the leave salary must be paid before the leave begins. This means you are owed a paycheck before you go on vacation. That money could be key to funding your time off, so make sure it’s computed correctly.
- When leaving a company: If you quit your job before using up your allotted annual leave, you’re entitled to receive payment for the entire period, including unused days.
- Carrying over leave: If you don’t use all your leave days in a given year, you can carry some of it forward into the next year. But what if you don’t want to take that extra vacation? You can ask to have it paid out in cash.
Key components of leave salary calculation
There are many different moving parts involved in computing leave salary in the UAE, but keeping an eye on a few parts will help you navigate the process with ease.
Basic salary and additional allowances
“Basic wage” or “basic salary” is the amount of money that you are paid specifically for your work. This amount does not change at all and will be stipulated in your contract.
The “wage” or “full salary” is your basic wage as well as any additional perks from your employer. These could be anything from housing allowances to sales commissions or other profit-sharing schemes.
The difference here is crucial when it comes to paying out unused leave. Employees who want to receive cash payment for unclaimed leave days—rather than carrying it over to the next year—must calculate the leave salary based on the flat wage amount. If you have left your job, you will be paid for any unused leave, but it will be calculated based on your basic salary.
Calculation of leave days
A leave day counts as a full eight-hour day of work, which is the legal maximum. If you are a full-time employee, the amount of leave time you receive will vary depending on how long you’ve been with the company.
On the other hand, part-time workers calculate annual leave based on the amount of work done compared to full-time workers; simply divide the number of hours you have worked by eight. The resulting figure will tell you how many full days you have worked. Then, divide this figure by your total working days in the year and multiply by 100. This will give the percentage of a full-time worker’s annual leave that a part-time employee can claim.
However, note that UAE labour law stipulates that part-time workers must get at least five leave days per annum.
Understanding leave entitlement and provisions
For full-time workers, employers must give the following number of leave days and leave salary:
- Workers with more than one year of full-time service receive 30 days of paid leave per year.
- Workers with more than 6 months of service but less than one year get two days of paid time off per month
UAE labour law specifies that these are minimum amounts, so make sure to check your work contract to get the most accurate information.
If you are carrying over leave from one year to the next, you cannot carry forward or receive a cash payout for more than half of your allotted days. Employers may also request that workers take leave at certain times. This depends on factors such as staffing needs or seasonal work availability. However, you are still entitled to receive a leave salary for those days.
Step-by-step guide to calculating leave salary
Now that we know what leave is and how it interacts with leave salary, we’ll break down how to calculate your annual leave salary. It’s fairly straightforward, but there may be a few determining factors to keep in mind.
Formula for leave salary calculation in the UAE
The formula for computing your leave salary is pretty straightforward. All we need to do is calculate the relevant full or basic daily wage. Then, multiply that by the number of leave days taken to get the leave salary owed. Simply put:
Full or Basic Wage / 30 = Daily Wage
Daily Wage x Number of Leave Days = Leave Salary
Examples of annual leave salary calculation
Example #1: Imagine a worker who wants to take leave for 18 days next month. This worker earns a base salary of 4,500 AED per month, plus an additional 1,500 AED in housing allowance.
Calculate daily full wage
Since they are still employed, we use their full salary to calculate daily wage.
(4,500 + 1,500) / 30 = 200 AED per day
Calculate leave salary for the leave period
Now that we have the daily full wage, we multiply that by 18 (the number of leave days they are taking) to get the amount of leave salary owed.
200 x 18 = 3,600 AED
Before starting leave, this worker should receive the full 3,600 AED in leave salary from the employer.
Example #2: A worker is entering their third year at a business. They only used 22 of their 30 leave days last year. They have decided that they don’t want to carry the rest forward and will take the cash payout instead. They make 5,000 AED in basic salary and live in a house worth 2,000 AED, which is rented by the company.
Calculate daily full wage
Since this worker has been with the company for three years, their payout will be based on their full salary. We need to calculate the daily wage first.
(5,000 + 2,000) / 30 = 233.33 AED per day
Calculate the payout for the unused leave days
Now, we’ll take the daily full wage and multiply it by the number of unused leave days, which is 8.
233.33 x 8 = 1,866.64 AED
This worker is owed 1,866.64 AED for unused leave days from the previous year.
Example #3: This employee is leaving their company but only used 7 days of their leave. They were making a basic wage of 3,000 AED and an extra 1,500 AED for housing.
Calculate daily basic wage
Since this employee is leaving the company, we only look at the basic wage to calculate the payout for the remaining leave days.
3000 / 30 = 100 AED per day
Compute the payout for unused leave days
Then, we’ll multiply the daily basic wage by the number of unused leave days, which was 23 in this case.
100 x 23 = 2,300 AED
On departing the company, this former employee should be paid out with 2,300 AED in leave salary.
Types of leave and their impact on salary
We’ve talked a lot about time off in general, mostly in reference to annual leave. However, workers in the UAE can take several other kinds of leave. These different categories can impact how much pay you will receive.
Annual leave
As we’ve seen, full-time workers are granted 30 days of annual leave after the first year with the company. Those who have completed six months of service receive two days per month. Part-time employees can receive a minimum of five days of annual leave based on the number of hours they have worked.
All of this is categorised as annual leave, which is always paid out in full while the employee still works for the company.
Sick leave
On the contrary, workers on sick leave can be paid less than the full amount, depending on how long it lasts.
Following a probation period of not more than six months, you can receive up to 90 days of sick leave per year. The first 15 days must be fully paid, and the next 30 days can then be paid at half the normal rate. The remaining 45 days will not be paid.
Maternity leave
Maternity leave follows a similar scheme, in that new mothers receive 60 days of leave in total. The first 45 days must be paid in full, but the next 15 days can be paid at half rate.
Female employees can receive an additional 45 days of unpaid leave if they or their child falls ill during pregnancy or childbirth. However, maternity leave doesn’t preclude other kinds of leave. This means that mothers on maternity leave can switch to sick leave or bereavement leave before going back as needed.
Unpaid leave and its implications
As a worker in the UAE, you always have the option of agreeing to unpaid leave. This kind of leave has no limit. However, remember that you aren’t accruing time with the company or in the retirement scheme while on unpaid leave.
Ensuring compliance and best practices
Here are a few tips to help newcomers stay up-to-date with the expectations and obligations regarding leave and leave salary in the UAE.
- Align with MoHRE requirements: This is the most important source of information for tracking leave salary requirements. So, stay current with the latest communications from MoHRE to ensure compliance.
- Employment contract considerations: By law, employment contracts must explain the specific number of leave days allotted to employees. Whether your company sticks with the required minimums or provides workers extra time should be clearly stated in the contract.
- Resources and tools for accurate calculation: Use an online calculator to compute your payout quickly and easily.
Find your footing in the UAE
As you adjust to working life in the UAE, you may be interested in knowing more about other labour laws and the country’s salary payment system! All this information will help you navigate the country’s labour market like a local.
FAQs
What is leave salary?
In the UAE, leave is defined as the number of days that an employee is allowed to take off every year. Leave salary is the equivalent pay for those days.
How is leave salary calculated in UAE?
Leave salary for full-time employees can be calculated using this simple formula:
(Full Salary / 30) x Number of Leave Days = Leave Salary
If you are leaving the company and receiving a cash payout for your unused leave days, you must use your basic salary rather than your full salary to calculate the amount.
What are the general rules for calculating holiday pay?
According to Federal Decree-Law 33/2021, holiday pay is not included in leave salary calculations. If you are asked to work on a public holiday, you will be compensated with a supplementary day off. If this cannot be arranged, you will receive an extra 50% overtime pay for the hours worked, as well as reimbursement for the missed holiday.
When should I receive my leave salary?
According to UAE labour laws, you must receive your leave salary must be paid before your time off starts.