Leave salary calculation in UAE can be confusing for companies and employees. However, employees can be more curious regarding the payment structure during these times. They may want to know about if their payment will be according to their full or basic salary, if there will be factors influencing their payments, and the overall leave salary formula.
In this article, we will be giving you the complete run-down regarding leave salary calculation formula in UAE. Know all about the leave salary formula and receive tips to get the best out of the leave salary.
What is leave salary?
The leave salary is the complete payment employees receive when they decide to take a leave. This payment goes to the employees when they are not working during a certain period.
What are the fully-paid leaves rights?
According to the Article 29 of Federal Decree-Law N° 33 of 2021, the annual leave allocation goes according the duration of the worker’s tenure in the organization. Leave salary goes according to the length of the worker’s service:
- One-month leave. Employees who have been working for at least 1 complete year receive a one-month leave salary.
- Two-day leave. Individuals working for over six months but under a year, they must receive a two-day leave salary every month.
- Part-time leave. Part-time workers can obtain yearly leave according to their working hours as it appears in their employment agreement.
How to calculate leave salary in UAE?
The leave salary formula is completely transparent and it goes according to the worker’s salary and duration of their annual leave benefit. To provide the correct payment, employers must follow certain rules:
- The employer has to pay the worker the complete salary for the work they do before their leave.
- It is mandatory to provide the employee their leave payment before the leave period.
- Annual leave salary formula hinge on the complete salary. Including the basic salary, housing allowance, and other allowances applicable in a usual working month.
Factors applicable and leave salary formula in the UAE
- 1st case: One-month yearly leave after a year of employment.
According to the labor law, when a worker takes a one-month annual leave after a year of employment, they have to obtain their complete monthly salary.
The leave salary calculation formula goes as follows:
Leave salary = (basic salary + allowances / 30) x number of days of leave
Example 1. A worker with AED 10,000 of basic salary and allowances receives a one-month leave, the leave salary calculation formula in Excel sheet goes as follows:
Leave Salary = (10,000 / 30) x 30 = AED 10,000
Example 2. When a worker’s complete rates amount to AED 10,000, including basic salary and allowances, and they decide to take a 24-day leave, the leave salary calculation formula goes as follows:
Leave Salary = (10,000 / 30) x 24 = AED 8,000
- 2nd case: Yearly leave at contract termination after a year of employment.
According to the Article 29 (9), if an employee is claiming annual leave salary at contract termination after a year of employment, the leave salary formula in UAE bases on the basic salary, with no allowances.
- 3rd case: Employment between 6 months to a year.
If a full-time worker has been working for more than six months, their right to annual leave salary is of 2-days of leave each month until they reach a year of employment.
- 4th case: Employment for less than six months.
Workers with less than six months of service do not receive leave salary.
What does the UAE labor law say about leave salary?
The UAE labor law specifies the rights of both parties according to leave salary formula and calculation. According to it, these are the most important rules:
- Employees can obtain their leave during the year. Employers can give suggestions regarding leave dates according to their needs, agreed upon with the employee, or rate among workers for a better workflow.
- Employers have to inform employees of their leave dates a month in advance.
- Employees have the right to choose the beginning of their leave and they have to provide a 10-day heads-up in advance to it.
- Workers can carry over their leaves to the following years with the employer’s approval.
- Employees will obtain their regular payments during their yearly leave.
- If holidays coincide with the employee’s annual leave, they will be a part of the leave.
- If the worker extends their leave beyond the yearly leave period, they will not receive extra payment for those extra days.
- Employers cannot stop employees from using their leave accrued for more than two years, unless the employee decides to receive an allowance or carry it forward.
- If a worker leaves before using their accrued leave days, they have to obtain payment for those days, no matter the duration of the leave.
- During the probation period, employers can let workers use some of their annual leave days. However, if they do not pass probation, they maintain the right for compensation for the remaining balance.
- There cannot be contract termination during the leave period.
What are the provisions regarding unused leaves and deductions in UAE?
If a worker does not use their leave, they can obtain cash in lieu. The leave salary calculation formula in UAE in this case takes into account the monthly basic salary. Both parties can choose to obtain compensation instead of taking the leave. Nevertheless, the worker may want to obtain extra leave the next year.
In this case, according to the labor law, employees can carry over some of the remaining leave to the following year. It is vital to consider the stipulations regarding leave carry forward and adjust the leave salary formula accordingly.
When an employee selects their leaves without pay (LWOP), it influences their leave salary and overall salary calculations. Deducting leaves without pay days from their complete leave right is essential when doing the leave salary calculation.
What are other types of leave in UAE?
Other types of leave in UAE include:
- Maternity leave. 60-day leave, 45 at full pay and 15 at half-pay.
- Parental leave. 5-day full pay leave within the first six months of birth.
- Hajj and Umrah leave. Up to a month, it is unpaid.
Tips about leave salary formula for employers
- Provide clarity on the particular holiday year. This can align with the proper calendar year or start from the worker’s operational date. Nevertheless, you have to simplify management operations by aligning the workforce to a uniform leave year. As a result, you will enhance efficiency and consistency with your leave management.
- Make sure that employees coordinate their annual leave with their line supervisors. Consequently, guaranteeing that holiday plans happen only after obtaining the manager’s authorization.
- Manage your leave tracking and enhance payroll with professional HR software. Simplify these procedures by partnering with professionals like Connect HR.
Frequently Asked Questions
How do you calculate leave salary?
If a worker has been operating for over a year, they will receive a leave salary that includes their basic payment + allowances. If they decide to terminate their contract and claim their leave, their leave salary formula in UAE will only use their basic salary.
How do you calculate leave?
The leave salary calculation formula in UAE is:
- Leave salary = (basic salary + allowances / 30) x number of days of leave
Can workers be terminated during leave?
No, this is not allowed by the UAE labor law.
When is the annual leave salary paid?
According to the law, employees have to receive their payment before the leave. This includes their complete salary with their compensation for the worked days.
Can employees operate in other areas during their leave?
Yes, workers can provide their services somewhere else during their yearly leave. They can find temporary or remote work alongside their main employment.
What happens if the worker does not report at the end of their leave?
The employee will be subject to penalties, such as forfeiting the right to obtain payment during their absence. If they are absent for over a full week after the end of their leave, the employer can end the contract.
Does the annual leave salary apply if the contract is over?
If the agreement is over, the leave salary formula calculation base on the main basic salary. Also, with a leave calculator UAE, any extra leave will be calculated only on the basic salary.
If you want more information about leave salary formula or leave salary calculator UAE support, contact us now!