KEY FACT: Under UAE Labour Law, employees generally receive 30 days of annual leave for each year of extended service, while employees with more than six months but less than one year of service are entitled to two days per month. Annual leave is paid at the applicable wage, while unused leave paid when employment ends is calculated according to the basic wage.

Leave Salary in UAE at a Glance

• Employees with more than one year of service generally receive 30 days of annual leave per year.
• Employees with more than six months but less than one year of service receive two days per month.
• Annual leave is paid leave.
• Part-time employees have annual leave calculated according to their actual working hours.
• Employees leaving employment can receive cash compensation for their legally due unused annual leave.
• End-of-service unused leave compensation is calculated according to the basic wage.

What is Leave Salary in UAE?

Leave salary is the remuneration an employee is entitled to receive for a period of approved annual leave.

The UAE Labour Law provides employees with annual leave with full wage. The law also provides for payment relating to accrued annual leave when employment ends before the employee has used the balance.

It is important to distinguish:

Leave taken during employment
→ Employee receives the applicable leave wage.

Unused leave when employment ends
→ Cash compensation for the legally due balance is calculated according to the basic wage.

UAE Annual Leave Entitlement

30 Days After One Year

An employee is entitled to at least 30 days of annual leave for each year of extended service.

2 Days Per Month Between 6-12 Months

Where an employee has completed more than six months but less than one year of service, the entitlement is two days for each month of service.

Annual Leave During Probation

An employee does not automatically receive the full annual leave entitlement simply because they are on probation. However, the employer may agree to grant annual leave during probation. If the employee does not pass probation, the law preserves the right to compensation for the remaining annual leave balance.

Part-Time Employee Leave

Part-time employees receive annual leave based on their actual working hours. The Implementing Regulation provides a calculation based on annual working hours compared with a full-time arrangement.

How is Leave Salary Calculated in UAE?

The calculation depends on whether the employee is taking annual leave or receiving cash compensation for unused leave after employment ends.

For annual leave taken during employment, the employee is entitled to the applicable wage for the leave period. The UAE Government’s employment FAQ explains annual leave salary as the employee’s basic wage plus applicable allowances received during the normal working month.

For unused annual leave paid when employment ends, the Implementing Regulation specifically provides for calculation according to the basic wage.

Leave Salary Formula

The second formula applies to the cash compensation for legally due unused annual leave when employment ends.

Basic Salary vs Full Wage

This is one of the most important distinctions.

The UAE Government states that annual leave salary includes the basic wage plus other allowances received in the normal working month.

Are Allowances Included?

For annual leave taken during employment, applicable allowances that form part of the employee’s normal monthly wage can be included.

However, when employment ends and the employee receives cash compensation for legally due unused annual leave, the calculation is based on the basic wage, rather than the employee’s full monthly remuneration.

Daily Wage Calculation

For a simple monthly-paid employee:

Daily leave wage = Applicable monthly wage ÷ 30

For example, if the applicable monthly leave wage is AED 9,000:

AED 9,000 ÷ 30 = AED 300 per day

Confirm the appropriate basis based on whether the payment relates to leave taken during employment or unused leave settled at termination.

Leave Salary Calculation Examples

10-Day Example

Assume an employee receives AED 9,000 as the applicable monthly leave wage.

AED 9,000 ÷ 30 × 10 = AED 3,000

The employee would receive AED 3,000 for 10 days of annual leave under this illustrative calculation.

15-Day Example

If the applicable monthly leave wage is AED 12,000:

AED 12,000 ÷ 30 × 15 = AED 6,000

30-Day Example

If the applicable monthly leave wage is AED 15,000:

AED 15,000 ÷ 30 × 30 = AED 15,000

These examples are illustrative. The employee’s contractual wage structure should be reviewed when calculating actual leave pay.

Part-Time Example

Part-time annual leave is not simply calculated by applying the full-time 30-day entitlement. The Implementing Regulation bases the entitlement on actual working hours and provides a specific formula for converting those hours into annual leave entitlement.

When Should Leave Salary Be Paid?

The UAE Government states that annual leave wages should be paid before the employee takes the annual leave, together with the applicable wage for the leave days.

Employers should therefore ensure that payroll processing is completed in accordance with the applicable employment terms and payment procedures.

Unused Annual Leave Salary

An employee who leaves employment before using legally due annual leave can be entitled to cash compensation for the unused balance.

The Labour Law also provides for leave compensation relating to the proportionate part of the final year worked.

Resignation

When an employee resigns, and the employment relationship ends after the applicable notice period, eligible unused annual leave can form part of the final settlement.

The cash compensation is calculated according to the basic wage.

Termination

The same principle applies when employment is terminated: the employee can be entitled to compensation for legally due unused annual leave.

The amount depends on the eligible leave balance and the employee’s basic wage.

Partial-Year Leave

If employment ends partway through a year, the employee may be entitled to leave for the proportion of the year worked.

The Labour Law expressly recognises entitlement to leave for parts of the final year where employment ends before the annual leave balance is used.

Can Annual Leave Be Carried Forward?

Yes, subject to the applicable rules.

The Labour Law allows employees, with employer approval and according to applicable workplace regulations, to carry forward annual leave or part of the balance to the following year. It also prevents employers from keeping an employee from benefiting from accrued annual leave for more than two years, subject to the employee’s choice to carry it forward or receive cash compensation under the applicable rules.

The Implementing Regulation further provides that an employee may carry forward up to half of annual leave to the following year, or agree with the employer to receive a cash allowance for it according to the wage received when the leave becomes due.

Can Employees Encash Annual Leave?

Employees may receive cash compensation for certain unused leave balances where permitted under the Labour Law and Implementing Regulation.

A key distinction applies:

• During employment: cash allowance for carried-forward leave can be agreed subject to applicable rules.
• At the end of employment: legally due unused annual leave is compensated according to the basic wage.

What Happens If an Employer Refuses Annual Leave?

Employers can set annual-leave dates based on work requirements and applicable rules, but they cannot indefinitely prevent employees from taking accrued statutory leave.

The Labour Law requires employees to take their leave during the entitlement year, subject to the applicable arrangements, and places limits on preventing employees from using accrued leave for more than two years.

Employees who believe their statutory leave rights are being improperly denied can use the relevant MOHRE labour-support and complaint channels.

Other Types of Leave in UAE

Annual leave is only one category of employee leave under UAE employment law.

Sick Leave

Employees may be entitled to sick leave subject to the conditions and limits prescribed by the Labour Law.

Maternity Leave

Female employees are entitled to maternity leave under the applicable statutory provisions.

Parental Leave

Employees can also receive parental leave under UAE Labour Law.

Bereavement Leave

Bereavement leave is available for qualifying family deaths according to the statutory conditions.

Study Leave

Eligible employees can receive study leave where the statutory conditions are met.

Hajj Leave

The Labour Law provides for specific leave arrangements for employees undertaking Hajj, subject to the applicable conditions.

Unpaid Leave

Employees may take unpaid leave where permitted and agreed under the applicable employment arrangements.

Public Holidays & Weekly Rest

Employees are also entitled to official public holidays with full pay, subject to the applicable rules.

Leave Salary vs Other Employee Benefits

Leave salary should not be confused with other employment payments.

Each payment can have a different statutory calculation basis.

Employer Compliance Checklist

Employers should:

UAE Leave Salary Calculator

A simple calculation can be used for planning:

Leave salary = Applicable monthly wage ÷ 30 × leave days

For termination:

Unused leave compensation = Basic wage ÷ 30 × eligible unused leave days

For example:

Basic salary: AED 6,000
Unused leave: 12 days

AED 6,000 ÷ 30 × 12 = AED 2,400

This is an illustrative calculation and should not replace a review of the employee’s actual contract, leave balance and applicable statutory requirements.

Common Leave Salary Mistakes

Common errors include:

• Using gross salary to calculate termination leave compensation when the statutory basis is basic wage.
• Treating annual leave and unused-leave compensation as identical.
• Ignoring partial-year entitlement.
• Failing to track carried-forward leave.
• Assuming probation automatically provides the full annual leave entitlement.
• Applying full-time leave rules to part-time employees.
• Forgetting to include applicable allowances when calculating ordinary leave salary.
• Failing to pay or document leave correctly.

FAQs

What are the different types of leave available to employees in the UAE?

Employees may be entitled to annual, sick, maternity, parental, bereavement, study, Hajj and unpaid leave.

What are the UAE leave rules for employees in private companies?

UAE Labour Law sets minimum leave entitlements for private-sector employees, subject to applicable conditions.

What is the difference between paid and unpaid leave in the UAE?

Paid leave provides wages during authorised absence; unpaid leave generally provides no salary, subject to applicable rules.

How many days of unpaid leave can an employee take in the UAE?

Unpaid leave depends on the applicable circumstances, employer approval and UAE Labour Law provisions.

How is leave salary calculated in the UAE?

Annual leave salary generally includes basic wage and applicable allowances, subject to the circumstances and payment method.

Is UAE leave salary based on basic salary or full salary?

It depends on the situation: annual leave pay and accrued leave compensation can use different wage calculations.

Which types of leave are paid in the UAE?

Annual leave and certain portions of sick, maternity, parental and compassionate leave are paid according to applicable rules.

How is unused annual leave paid after resignation or termination?

Employees generally receive compensation for accrued unused annual leave based on the applicable basic wage calculation.

What is the sick leave policy in the UAE?

Employees may receive up to 90 days of sick leave annually after probation, subject to statutory conditions and payment rates.

How many days of maternity leave are available in the UAE private sector?

Female employees are entitled to 60 days of maternity leave, subject to applicable UAE Labour Law conditions.

When does parental leave start in the UAE?

Parental leave can generally be taken within six months following the child’s birth, subject to applicable conditions.

What is the difference between personal leave and annual leave?

Annual leave is a statutory entitlement; personal leave depends on the specific reason and applicable leave category.

Conclusion

UAE leave salary rules distinguish between annual leave taken during employment and cash compensation for unused leave when employment ends. Employees generally receive 30 days of annual leave after a year of service, while those with more than six months but less than one year receive two days per month.

For ordinary annual leave, the applicable leave wage can include basic salary and relevant allowances. For unused statutory leave paid at the end of employment, the calculation is based on basic wage.

Employers should therefore maintain accurate leave records, apply the correct calculation basis, and process leave payments in accordance with UAE Labour Law and its Implementing Regulation. To learn more, connect with our team of experts at Arnifi!