Leave salary calculation in UAE

Leave salary calculation in UAE

Leave salary calculation in UAE-As an employer of labor in the United Arb Emirates, paying your workers who are not indigenes of the UAE is difficult, especially when you don’t have enough information or knowledge about Employment Visa Outsourcing.

This article on Leave salary calculation in UAE explains everything you need to know about leave salary in the UAE.

Leave salary calculation in UAE

Leave salary is highly important for employees; therefore, employers need to make the calculations correctly. This will help them make an informed decision that will favor their business.

Most employees look forward to their annual leave because it’s a time that they can use to relax and regain strength. As an employee in the UAE, it is your right for your employer to pay your leave salary whether you go for the leave or not.

However, many companies face trouble because the laws governing annual leave in the UAE specify how employee leave salary should be calculated. So if you are an employer of labor in the UAE, and you fail to calculate your employees’ leave salary correctly using the approved UAE government formula, you may face the consequences.

Why Leave salary calculation in UAE is important.

The leave salary is very important to employees because they can solve their immediate problems with the money or invest it in their leave holidays.

According to the UAE Labor Law, employers need to know how to handle the leave salary for each employee, so they don’t make any mistakes.

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How can Outsourcing help you with Leave salary calculation in UAE?

If you find it difficult to calculate your employees’ leave salary, go for Outsourcing. Outsourcing is an excellent service that will solve all of your troubles in terms of leave salary.

Outsourcing is all about hiring an outsider to render services within an organization. Companies usually go for Outsourcing to cut costs.

There are many Payroll outsourcing or HR outsourcing companies in the UAE that you can hire to do the dirty job for you. 

Outsourcing companies render some good services that help companies better manage their workforce, including dealing with salaries.

What is the leave salary?

Leave salary is money paid to an employee for going on leave. Leave salary is a fundamental right for any employee that works in a company. In the UAE labor law, an employee is entitled to receive the payment after one year of working in any organization.

In the UAE, When the employee requests the leave salary, they receive:

  • The basic wage and
  • The housing allowance

Many employees get confused about what they will receive in their leave salary. As an employer in the UAE, you have to know what your company’s handbook says about leave salary. Each company pays the leave salary according to the company’s policy.

Determining the leave salary for your employee is one of the HR needs that a PEO can handle for you. Since there are many doubts about what should be included in the annual leave, it’s essential to have a team of experts who can advise you and make the calculations.

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Who determines the duration of the leave?
  • Your company decides the date of commencement of the annual leave
  • The employer may decide if the employee should divide the leave into two parts
  • The employee may decide when the annual leave starts

How to calculate the leave salary 

As an employer in the UAE, you have to ensure that your employees receive the payment as established in the law to avoid any liabilities.

According to Article 75 of the UAE Labor Law, the employers should calculate the leave salary based on the period that the employee has been working for the company:

  • If the employee has been working for more than six months but less than a year, then a minimum of two days’ leave should be given every month. 
  • If the employee has worked for the company for more than one year, they should receive 30 days annually.

If the employee works in the private sector, and they decide to resign, or their work is terminated, they’re entitled to the end of service benefits, and the payment they’re going to receive depends on the type of contract. The payment is known as gratuity pay.

Calculation under limited contract

When it comes to making the leave salary calculation in UAE for a limited contract, you must take the following provisions into account to make a proper payment and don’t have any trouble with your employees.

  • Less than one year: the employee doesn’t receive gratuity pay
  • More than one year but less than 5: full gratuity pay based on 21 days’ salary for each year
  • More than five years: full gratuity pay based on 30 days’ salary for each year following the first five.
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Calculation under unlimited contract

If the employer terminates the contract, the estimate is as follows:

  • Less than one year: not entitled to gratuity pay
  • More than one year but less than 5: 21 calendar days’ basic salary
  • More than five years: 30 calendar days’ basic salary

If the employee resigns, the calculation is done as follows:

  • Less than one year: not entitled to gratuity pay
  • Between 1-3 years: 1/3 of 21 days’ basic salary
  • Between 3-5 years: 2/3 of 21 days’ basic salary
  • More than five years: full 21 days’ basic salary

When should the employee receive their leave salary?

The employee should receive the leave salary before taking the leave, according to Article 80 of the UAE Labor Law. The employee must receive the full wage plus the days they deserve based on the calculation.

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