Employee benefits in the United Arab Emirates are designed to ensure fair treatment, work–life balance, and financial security for workers across all industries. Among these benefits, leave salary in UAE stands out as one of the most important rights that employees should fully understand. Whether you are an expat, a new employee, or an employer looking to comply with labor laws, having clear knowledge about how leave salary works can help you avoid confusion and ensure you receive or provide the correct entitlements.
In this guest post, we break down everything you need to know about leave salary in UAE, including eligibility, calculation methods, rules during notice periods, and important legal updates aligned with the UAE Labour Law (Federal Decree-Law No. 33 of 2021).
What Is Leave Salary in UAE?
Leave salary refers to the paid compensation an employee receives during their annual leave. Under the UAE Labour Law, all employees who complete at least one year of service are entitled to annual paid leave. The purpose of this benefit is to ensure a balance between professional duties and personal well-being while maintaining an employee’s income during vacation periods.
In simpler terms, leave salary in UAE ensures that workers do not face a financial burden when taking their legally granted holidays.
Annual Leave Entitlement Under UAE Law
Understanding how much leave you are entitled to is the first step in calculating your leave salary.
1. Less Than 1 Year of Service
Employees who have completed six months but not yet one full year of employment are entitled to two days of paid leave per month.
2. One Year or More of Service
After completing one full year with a company, employees become eligible for 30 calendar days of annual leave every year.
These entitlements apply to both full-time and part-time employees, depending on their contractual agreements.
How to Calculate Leave Salary in UAE
The UAE Labour Law clearly states how leave salary should be calculated, but many employees still struggle to understand the formula.
Basic Rule for Calculation
The leave salary is calculated based on the employee’s basic salary plus housing allowance, if applicable. Other allowances—such as transportation, utilities, or bonuses—are typically not included unless mentioned in the employment contract.
Formula for Monthly Calculation
Here is the commonly used formula for leave salary in UAE:
Daily Leave Salary = Monthly Basic Salary ÷ 30
Total Leave Salary = Daily Salary × Number of Leave Days
Example
If your monthly basic salary is AED 6,000:
Daily Salary = 6,000 ÷ 30 = AED 200
Leave Salary for 30 days = 200 × 30 = AED 6,000
If your salary includes fixed housing allowance, it must be added before dividing.
Payment of Leave Salary: When Should It Be Paid?
According to UAE law, employees are entitled to receive their leave salary before the leave begins. This ensures they have financial support during their vacation period rather than waiting until they return.
Some companies prefer to pay leave salary together with the monthly payroll, but this must be mutually agreed upon, and the employee must not be deprived of their right to timely compensation.
Can Employees Work During Annual Leave?
The UAE Labour Law prohibits employees from working for another employer during their annual leave. Violating this rule may result in disciplinary action and the employee may even lose their leave salary.
An employee can, however, voluntarily agree with their current employer to postpone leave or encash unused leave.
Leave Encashment Rules in UAE
Employee resignations, terminations, and end-of-service situations often raise questions about leave encashment. Here’s what the law states:
If an employee has unused annual leave days at the time of resignation or termination, they are entitled to cash compensation.
The encashment is calculated using the basic salary at the time of settlement.
For example, if a worker resigns with 10 unused leave days and has a monthly basic salary of AED 4,500:
Daily Salary: 4,500 ÷ 30 = AED 150
Encashment Amount: 150 × 10 = AED 1,500
This rule ensures fair compensation for unused leave and protects employee rights on departure.
Leave Salary in UAE During Notice Period
One of the most frequently asked questions is whether employees can take annual leave during the notice period. The answer is yes, but only with employer approval.
Key points to remember:
Leave taken during the notice period does not reduce the employee’s financial entitlements.
If the employer asks the employee to work during the notice period, unused leave must be encashed.
Employers cannot force employees to take leave during the notice period unless mutually agreed.
Public Holidays and Leave Salary
A common misunderstanding is whether public holidays are included in annual leave. UAE law clarifies that:
If a public holiday falls during an employee’s annual leave, it does not count as part of the leave days.
Employees are entitled to separate compensation for official holidays.
This rule ensures employees do not lose annual leave days due to national holidays.
Advance Leave and Salary Deductions
Some employees request leave before completing six months of service. In such cases, employers may allow advance leave at their discretion. However, if the employee resigns shortly after, employers may deduct the unearned days from the final settlement.
This ensures that leave salary in UAE remains fair and aligned with actual service duration.
Common Issues Faced by Employees
Despite clear laws, employees often encounter challenges regarding their leave salary. Common issues include:
Underpayment due to incorrect salary calculation
Delayed payment of leave salary
Deduction of allowances not mentioned in the contract
Encashment disputes at resignation or termination
Misunderstanding how public holidays affect annual leave
Denial of leave despite legal eligibility
In most cases, such problems arise from contractual misunderstandings or lack of awareness. Understanding your rights helps prevent such issues and ensures smoother employer-employee relationships.
Conclusion:
Whether you are an employee planning your next vacation or an employer aiming to comply with UAE labour laws, clear knowledge of leave salary in UAE is essential. It ensures fair compensation, prevents disputes, and promotes a healthy work environment. With proper awareness of entitlements, calculation methods, and settlement rules, both employees and employers can maintain a transparent and legally compliant working relationship.
