You’ve booked your flight home, your leave has been approved, and now you’re staring at your payslip trying to figure out if the number is right. This is one of the most common payroll questions in the UAE, and it’s also one of the most misunderstood. Employees assume leave salary works the same as a regular monthly paycheck. It doesn’t.
UAE Labour Law sets out a specific formula for leave salary, and depending on whether you’re taking leave during your job or getting paid out after leaving one, the calculation actually changes. Get this wrong, and you either underpay your employees or leave money on the table yourself. Let’s break down exactly how it works, based on the law itself, not guesswork.
UAE Leave Salary Calculator
Calculate your annual leave pay or unused leave encashment based on UAE Labour Law, Federal Decree-Law No. 33 of 2021, Article 29.
Basic salary only. This is the base used for the daily wage calculation.
Days of annual leave you’re taking, or unused days remaining.
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Talk to an HR ConsultantWhat Is Leave Salary Under UAE Law?
Leave salary is the payment an employee receives for the days they take off as annual leave. It's governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, which came into force on February 2, 2022, and replaced the older Federal Law No. 8 of 1980.
Specifically, Article 29 of this law lays out the rules for annual leave entitlement, and Cabinet Resolution No. 1 of 2022 (the Executive Regulations) fills in the operational details, including how carry-forward and cash encashment work.
Here's the part most people miss: leave salary isn't a bonus or a favor from your employer. It's a legal entitlement. As long as you meet the service requirement, your employer is required to pay you for that time off, in full, before or during your leave period.
Disclaimer: This article explains the general framework under UAE federal labour law. Specific free zones like DIFC and ADGM follow different regulations, and individual contracts can offer more generous terms. For a situation specific to your case, it's worth speaking with an HR consultant or legal advisor.
How Much Annual Leave Are You Actually Entitled To?
Your leave entitlement depends entirely on how long you've been with your employer. Here's how Article 29 breaks it down:
| Service Period | Annual Leave Entitlement |
|---|---|
| Less than 6 months | No statutory entitlement |
| 6 months to less than 1 year | 2 calendar days per month |
| 1 year or more | 30 calendar days per year |
Notice the word "calendar," not "working." Under the federal system that most mainland UAE companies fall under, weekends and public holidays that happen to fall within your leave period count toward your 30 days. This trips up a lot of employees who expect their leave to stretch further than it actually does.
If you're working in a free zone like DIFC or ADGM, the rules are different. Those jurisdictions typically grant 20 working days of leave, calculated on working days only, which excludes weekends. So the same "30 days" and "20 days" numbers can mean very different things depending on where your labour card is registered.
The Leave Salary Formula
Now for the part everyone actually wants: how the number gets calculated.
The standard formula under UAE Labour Law is:
Daily Wage = Basic Salary ÷ 30
Leave Salary = Daily Wage × Number of Leave Days
That's it. No complicated multipliers, no hidden variables. But there's one detail that catches almost everyone off guard, and it's important enough to get its own section.
What Counts as "Salary" in This Formula?
This is where leave salary calculation splits into two different tracks, and mixing them up is one of the most common payroll mistakes in the UAE.
While you're still employed and taking annual leave: your leave salary can be based on your full wage, meaning basic salary plus fixed contractual allowances like housing or transport, if your employment contract or company policy allows for it.
When you're leaving the company (resignation or termination) and getting paid for unused leave: the calculation is strictly based on basic salary only. Allowances don't count here, even if they were part of your regular monthly pay.
This distinction matters a lot in practice. An employee with a high allowance-to-basic ratio might get a generous leave payment during active employment, but a noticeably smaller encashment amount when they leave the company. It's not a mistake by the employer, it's how the law is written.
A Worked Example, With Real Numbers
Let's put this into practice. Say your basic salary is AED 9,000 a month, and you're taking your full 30-day annual leave entitlement.
Daily wage: 9,000 ÷ 30 = AED 300
Leave salary: 300 × 30 = AED 9,000
Simple enough, since 30 days lines up neatly with a full month's basic pay.
Now let's say you're resigning after completing 18 months of service, and you have 12 unused leave days remaining. Your basic salary is still AED 9,000.
Daily wage (basic only): 9,000 ÷ 30 = AED 300
Encashment: 300 × 12 = AED 3,600
This AED 3,600 becomes part of your final settlement, along with any other dues owed to you, like end-of-service gratuity.
Quick Fact: If your leave falls in a partial year of service, say you resign after 8 months, your entitlement is calculated proportionally. At 2 days per month between 6 and 12 months of service, someone who worked 8 months would have accrued roughly 4 days of leave, not the full 30.
Leave Salary vs Leave Encashment: Two Different Situations
It's worth being precise about the terminology here, because "leave salary" and "leave encashment" often get used interchangeably, but they apply to different moments in your employment.
Leave salary is what you're paid while you're still employed and physically taking your leave. Your employer is required to pay this before you go on leave, and it should reflect your full or agreed wage as per your contract.
Leave encashment is the cash payout for leave days you never used, typically settled when your employment ends, whether through resignation, termination, or the natural expiry of a fixed-term contract. This is calculated using basic salary only, and it must be included in your final settlement.
Under UAE Labour Law, your employer is required to pay your final settlement, including any leave encashment, within 14 days of your last working day. If they miss that window without a valid reason, that's a compliance issue MOHRE takes seriously, and it's one of the more frequent complaints filed by departing employees.
If you're heading toward the end of a contract and want to understand what else factors into your final payout, our guide on the UAE notice period covers how resignation timelines interact with your settlement.
Can You Carry Forward Unused Leave?
Life happens, and sometimes you don't use all your leave in a given year. UAE law does allow for this, but with limits.
Under Article 19 of Cabinet Resolution No. 1 of 2022, read alongside Article 29(8) and (9) of the main law, an employee may carry forward up to half of their annual leave entitlement into the following year. Alternatively, you can agree with your employer to receive cash compensation for that unused portion instead, calculated based on your salary at the time the leave was due.
Here's a rule that protects employees specifically: an employer cannot prevent you from using your accrued leave for more than two consecutive years, unless you've voluntarily agreed to carry it forward or take a cash payout instead. In other words, your employer can't just quietly sit on your leave balance indefinitely without your consent.
That said, there's also a time limit working against employees who wait too long. Under Article 54(9) of the Labour Law, as amended by Federal Decree-Law No. 9 of 2024, any claim related to rights accrued under the law, including unused leave, generally can't be pursued more than two years after your employment ends. So if you've left a job and think you're owed unpaid leave, it's worth acting on it sooner rather than later.
If your company doesn't have a clear written policy on leave carry-forward, that's usually where disputes start. A properly documented employee handbook can prevent a lot of this confusion before it turns into a MOHRE complaint.
Common Payroll Mistakes Companies Make
A few mistakes show up again and again in leave salary disputes, and most of them are avoidable with a bit of clarity upfront.
The first is applying the wrong salary base, using basic-only for active leave when the contract promises full wage, or vice versa during encashment. The second is miscounting the service period, particularly for employees who fall in that awkward 6-to-12-month window where entitlement accrues monthly rather than all at once. The third is simply missing the 14-day final settlement deadline after an employee's last working day.
None of these are complicated fixes on paper. They usually come down to payroll teams not having a clear, documented process, especially in smaller companies that don't have dedicated HR staff managing compliance day to day.
If your organization is scaling and this kind of payroll accuracy is becoming harder to manage manually, working with an HRMS consulting partner can help you set up systems that calculate this correctly every time, instead of relying on someone doing the math by hand each pay cycle.
FAQs
Q1: Is leave salary calculated on basic salary or gross salary? It depends on the situation. While you're actively employed and taking annual leave, your contract may allow for full wage (basic plus fixed allowances). But if you're being paid out for unused leave upon resignation or termination, the calculation is strictly based on basic salary only.
Q2: How many annual leave days am I entitled to in the UAE? Under Article 29 of Federal Decree-Law No. 33 of 2021, you're entitled to 30 calendar days of paid leave after completing one year of service. If you've worked between 6 months and 1 year, you accrue 2 days per month. There's no statutory entitlement before 6 months of service.
Q3: Can my employer refuse to pay me for unused leave when I resign? No. Unused annual leave must be compensated as part of your final settlement, which is legally required within 14 days of your last working day. An employer withholding this without valid justification is in breach of UAE Labour Law.
Q4: Do weekends count as part of my annual leave? Under the federal system, yes. Annual leave is calculated in calendar days, so weekends and public holidays that fall within your leave period count toward your total entitlement. Free zones like DIFC and ADGM follow a different system based on working days.
A Final Thought
Leave salary calculation isn't complicated once you know the formula, but the details around it, basic versus full wage, carry-forward limits, and settlement deadlines, are exactly where most confusion and disputes come from. Whether you're an employee trying to double-check your payslip or an employer trying to stay compliant, the safest approach is always to work from the actual law rather than assumptions.
If you're an employer looking to tighten up your leave policies and avoid payroll disputes before they happen, or a job seeker trying to understand what you're owed before signing your next offer, reach out to Accel HR's team — we help both sides of the table get this right.