What Is Leave Salary in the UAE?
Leave salary is the amount paid by the employer to the employee during the period of absence. As per the UAE Labour Law, leave salary is not optional. The calculation method is explicitly defined by law for each category of payment, and leave calculation in UAE must follow these rules without exception.
The two main rules every employer must understand:
● When an employee is on leave, they are entitled to receive their full basic salary plus allowances for the duration of the leave
● When calculating encashment upon resignation or termination, the calculation reverts to basic salary only
● The leave salary is due before the employee begins annual leave, not upon expiry of the leave
These two rules are the most common leave calculation mistakes in the UAE.
How Annual Leave Is Calculated in UAE
How annual leave is calculated in UAE depends entirely on the employee's length of service with the employer. As per Article 29 of Federal Decree-Law No. 33 of 2021, the leave entitlement is as follows:
● Less than 6 months: no leave entitlement
● 6 months up to 1 year: 2 days per month worked
● Over 1 year: 30 days per year (full calendar days)
● Part-time employees: pro-rata based on actual working hours per contract
Key rules around leave entitlement:
● Entitlement commences from the first day of employment, but the right to take leave is only acquired after completing six months of service
● Public holidays falling during the leave period are counted as part of the leave unless otherwise provided in the employment contract
● The employer must notify the employee of scheduled leave dates at least one month in advance
● The employee may request to start leave with at least 10 days notice
● Leave balance accrued over 2 years cannot be withheld by the employer
● Leave entitlement upon termination is calculated on a pro-rata basis for the fraction of the year worked
How to Calculate Leave Days in UAE
Having established what the leave entitlement is, the next step is to calculate the monetary value. Understanding how to calculate leave days in UAE correctly requires applying the right formula to the right salary components. The standard formula is:
Leave salary = (Basic salary + allowances) divided by 30, multiplied by number of leave days
Example 1: Full 30-day annual leave
Total monthly compensation: AED 12,000 (AED 8,000 basic salary, AED 3,000 housing allowance, AED 1,000 transport allowance)
Leave salary = (12,000 / 30) x 30 = AED 12,000
Example 2: 15-day annual leave
Same employee takes 15 days of annual leave:
Leave salary = (12,000 / 30) x 15 = AED 6,000
The remaining 15 days of the month are compensated at the usual rate, so the total month payment remains AED 12,000.
Example 3: Employee with 8 months of service
An employee with AED 10,000 monthly compensation and 8 months of service is entitled to 2 days per month, giving 16 accrued leave days:
Leave salary = (10,000 / 30) x 16 = AED 5,333
Annual Leave Calculating in UAE Including Holidays
One of the most common errors in annual leave calculating in UAE including holidays is the incorrect treatment of public holidays during leave periods.
The default rule under Federal Decree-Law No. 33 of 2021 is clear: if a public holiday falls during the leave period, it is counted as part of the leave, not added as an extra day on top of it.
For example, if an employee takes 10 days from the 1st to the 10th of December, and UAE National Day (2 December) falls within that period, the employee has still used 10 leave days in total. The National Day is included in the 10, and the employee returns on the 11th.
This applies to all employees unless the contract explicitly states otherwise. When creating employment contracts, it is good practice to clarify exactly how public holidays interact with annual leave and whether they will be excluded. For companies that wish to exclude public holidays from the leave count, this must be stated explicitly in the employment contract for each employee.
Sick Leave Calculation in UAE
Sick leave calculation in UAE is governed by a completely separate set of rules from annual leave, outlined in Article 31 of Federal Decree-Law No. 33 of 2021. The entitlement after completing the probationary period is:
● Days 1 to 15: full pay (basic salary plus all allowances)
● Days 16 to 45: half pay
● Days 46 to 90: no payment
● Beyond 90 days: employer may terminate the contract
Sick leave calculation in UAE basic salary is one of the most searched questions because many employees assume sick leave is paid the same way as annual leave throughout. It is not. The half-pay calculation for days 16 to 45 uses the basic salary only. Allowances are excluded from this tier entirely.
Example: Sick leave payment calculation
Basic salary: AED 8,000. Allowances: AED 4,000. Total monthly: AED 12,000.
● Days 1 to 15: AED 12,000 (full compensation including allowances)
● Days 16 to 45: AED 8,000 (basic salary only, at half pay for the period)
Important sick leave rules:
● An employee is not entitled to sick leave during the probationary period
● The employer can require a medical certificate from an MOHRE-approved medical provider
● Sick leave days falling within an annual leave period are counted as part of the annual leave unless the contract specifies otherwise
● An employee on sick leave cannot be terminated within the first 90 days of that sick leave
Sick Leave Calculation After Resignation in UAE
Sick leave calculation after resignation in UAE follows specific rules that differ from sick leave during active employment.
● Unused sick leave days are not encashable the way annual leave days are at the end of service
● An employee who falls sick after submitting their resignation but before the last working day is entitled to sick pay for the notice period under the normal sick leave rules
● An employer cannot terminate the employment contract on grounds of sickness within the first 90 days after the notice period has begun
Final settlement calculations after resignation focus entirely on encashing unused annual leave days. Sick leave carries no encashment entitlement.
Maternity Leave Calculation in UAE
Maternity leave calculation in UAE is governed by Article 30 of Federal Decree-Law No. 33 of 2021. The entitlement is:
● 45 days of fully paid maternity leave (basic salary plus all monthly allowances)
● 15 additional days at half pay
● 60 days total paid maternity leave
Maternity leave calculation example:
Total monthly compensation: AED 15,000 (AED 10,000 basic salary, AED 5,000 allowances)
● Payment for first 45 days: (15,000 / 30) x 45 = AED 22,500
● Payment for days 46 to 60: (15,000 / 30) x 15 x 50% = AED 3,750
● Total maternity leave payment: AED 26,250
Other maternity provisions:
● An additional 45-day unpaid leave can be taken immediately after the paid maternity leave period
● If the newborn requires special care, the mother is entitled to an additional 30 days of fully paid leave
● An employer cannot terminate a pregnant employee or an employee currently on maternity leave
● The mother may choose between 45 days of fully paid leave or 60 days at half pay
Annual Leave Calculation in UAE Excel
Annual leave calculation in UAE Excel templates must be configured to determine the following for each employee:
● Start date of employment (to establish service length and entitlement tier)
● Breakdown of total monthly compensation into basic salary and individual allowance components
● Number of leave days taken in the current leave year
● Public holidays falling within each leave period and how the contract treats them
● Contract type: limited or unlimited (this affects the encashment formula on exit)
● Number of remaining leave days to be encashed on exit
For encashment on exit, the correct formula is:
Leave salary = Basic salary divided by 30, multiplied by remaining leave days
This is the most common Excel error in leave calculation. Many payroll officers use total compensation instead of basic salary for this formula, which overpays the employee and creates a compliance issue.
The limitation of Excel for annual leave calculation in UAE is that it is a static document. It does not update automatically when leave is taken, cannot flag when an employee is approaching the 2-year accumulation limit, and does not integrate with payroll to ensure correct salary processing. An AI-powered HRMS like Voyon Folks automates every element of this calculation with UAE-specific rule sets built into the platform. Visit voyonfolks.com to learn more.
Advantages of Automating Leave Calculation in UAE
Eliminates calculation errors at source
Automation applies the correct formula to each leave scenario every time. Manual calculation across multiple employees, leave types, and service lengths inevitably generates errors that become payroll disputes.
Compliance with Federal Decree-Law No. 33 of 2021
Leave calculation software updates its rule engine when UAE Labour Law changes, ensuring entitlements, encashment formulas, and sick leave tiers remain current without requiring HR to manually review and update every template.
Saves time on leave administration
For a 200-person company, manual leave calculation and reconciliation consumes 8 to 12 hours of HR time per month. Automated software reduces this to a review and approval function.
Real-time leave balance visibility
Employees see their accurate leave balance at any time without raising a query with HR, reducing routine HR query volume significantly.
Disadvantages of Manual Leave Calculation
High error rate at scale
The more employees and leave types involved, the higher the probability of calculation errors. Errors in final settlement calculations are particularly damaging as they typically trigger MOHRE complaints.
No automatic regulatory update
When UAE Labour Law changes, manual spreadsheets require someone to identify the change and update every template. This is rarely done proactively.
Inconsistencies between departments
When more than one person handles leave calculation, the same scenario is often calculated differently, creating inequitable treatment and audit risk.
No payroll integration
Manual leave encashment figures must be re-entered into the payroll system separately, introducing a second opportunity for error at every payroll cycle.
Conclusion
All leave calculations are governed by law. From entitlement to allowances, from leave salary to sick leave tiers, everything is determined by Federal Decree-Law No. 33 of 2021 with no room for approximation or subjective interpretation.
Organisations that take a casual approach to leave calculation in UAE run the risk of employee disputes, MOHRE complaints, and final settlement errors. The combination of clear policy documentation and automated calculation tools is the only sustainable approach as headcount grows. A spreadsheet works for 20 employees. A company of 200 needs a proper automated solution.
Using an AI-powered HRMS like Voyon Folks helps organisations manage leave calculation in accordance with UAE Labour Law while minimising manual intervention and eliminating the errors that manual processes inevitably produce. Visit
