The leave salary calculation is itself a very confusing topic among employees and organizations. However, both employees and organizations must understand this topic.Â
This blog will cover everything related to leave salaries in the UAE. It is crucial to understand which leaves and clauses are applicable in the UAE. We will help you understand how to calculate leave salaries in the UAE.
What are the different types of leaves in the UAE?
It is important to understand the number of leaves applicable in UAE to calculate the leave salary in UAE. Moreover, those employees who fall sick during their labor days can enjoy several benefits while they recover from the disease.
Various leave applicable in UAE is classified as:
1. Annual leaves
Under the recent UAE labour law, employees are entitled to annual leave if they complete a minimum period of six months in the organization. Even the employees who are working on a contract basis as mentioned in Executive Regulations of Labour Law.Â
The Ministry of UAE has created various rules and regulations regarding annual leaves:
1. Employees are provided with 30 days of full paid leave if they completed a minimum of 1 year in the company. They can avail two leaves per month if they have completed a minimum of six months in the organization. These leaves can vary from organization to organization. Â
2. It is necessary for organizations to inform the employees about their annual leaves at least a month before so that both parties can agree on the terms and conditions to avoid legal implications.
3. If companies need their employees all around the year they must pay the employees for their leave.
4. Official holidays announced by the government of UAE and all sick leaves must be included while calculating the leave salary calculation in UAE. Â
2. Sick Leaves
Employees can apply for sick leave to recover from a disease or an injury. Employers must provide a certain number of sick leaves to employees in the UAE. Employees are also granted some salary benefits by their employer for these kinds of leaves. Â
There are some rules regarding these leaves that employees and the employer must keep in mind:
1. An employee is eligible for sick leave if they have completed a minimum of 3 months in the organization. However, they cannot be absent for more than 90 days in a calendar year.
2. For the first 15 days of sick leave employees are paid in full.
3. Then, for the next 30 days they will receive 50% of their total salary amount.
4. Finally for the rest of 45 days they will not receive any salary from their employer.
5. Illness caused to workers on the part of misconduct at work is not counted in the sick leaves of an employee.Â
6. Health issues caused by alcohol consumption are excluded from sick leave according to the labour law guidelines.Â
7. Employees are not provided with any salary if they are found working with another employer during their sick leave.
3. Maternity leave
If a woman has worked with a company for at least one year they are entitled to a maternity leave. If she has completed less than one year in the organization she is entitled to half of her salary during the maternity leave period.
According to new amendments in Maternity Leave in UAE, women are entitled to up to 90 days of maternity leave. 45 leaves are full paid leaves, half of the salary is provided in 30 days of maternity leave and the remaining 15 days of maternity leaves are unpaid.
4. Holiday Leaves
Article 21 of UAE Labor Law states that workers can enjoy free time during government holidays. Employees are entitled to full salary payment during these public holidays in the UAE. Additionally, employees are entitled to 50% of their salary amount if they are working during these days.
5. Other types of leaves
The other types of leaves provided to the employees are:
1. Male employees are entitled to 5 days of parental leave after the birth of their child.
2. After the death of a family member or a spouse employees are entitled to 5 days of paid leave and in case of death of their child, parents are entitled to additional 3 days of paid leave. These leaves are known as compassionate leaves.
3. If employees are associated with any educational institute in UAE they are entitled to additional 10 days of free days. These days are only paid if they have spent more than 2 years with the same organization.Â
How is leave salary calculation done in the UAE?
To calculate the salary benefits of employees during their annual leave, we must consider the UAE Labour Law. According to the current rules of UAE Labour Law, employees must consider various articles to comply with the authorities.Â
In Article 75, the labour law states that employees have the right to get an annual vacation of 30 days if they complete one year with the organization. These leaves are paid leaves for employees.
In case the employees have completed less than one year with the organization they can apply for the leave under certain conditions.Â
Employees will receive a basic salary along with their housing allowance for the annual leave period.Â
What is the formula for leave salary calculation in UAE?
Firstly, it is important to understand that leave salary calculation in UAE is done the employees take their leaves. At the time of leave salary calculation employees and employers should keep certain key pointers in mind to meet legal requirements. Here is the list of legal compliances:
- Employers have to provide a 30-day annual leave salary to employees. This amount depends on the salary of the employee.
- This calculation also includes the benefits mentioned in the employment contract along with the basic salary. Still, both parties will decide the date of annual leave and the financial benefits included in annual leave.
How is leave salary calculation done in UAE in case of employee resignation?
It is necessary to consider the type of contract of an employee. Depending upon the type of contract, employees will receive financial benefits which are based on the number of years spent in the organization. Â
Employment contracts can be categorized into two parts – limited contracts and unlimited contracts.
1. Workers on a limited contract
Those employees who are working on a limited contract basis, get the gratuity pay according to the time worked as follows:
- Employees who have completed less than a year with an organization will not receive any gratuity pay
- Those employees who are working for 1 to 5 years for a company will receive gratuity pay. The amount of this payment is based on the additional 21 days of salary for each year they worked
- Employees who have been working for more than 5 years will receive an extra 30 days of pay for each year of service.
2. Workers on unlimited contract
In the case of an unlimited contract, gratuity paid to employees may vary depending on the situation.
In case the organization terminates the employee, the salary benefit can be calculated as follows:
- Employees who have worked for less than a year will not receive any gratuity pay
- Those employees who have worked for 1 to 5 years will receive gratuity pay based on the 21 days salary for a year
- For employees who have worked for more than 5 years, the gratuity amount will depend on the 30 days of salary for a year.
In case the employee resigns from their position, gratuity pay will be calculated as follows:
- Employees who have worked for less than 1 year will not receive any gratuity pay
- Those employees who have worked for 1 to 3 years will receive â…“ of 21 days of salary for a year
- Employees who are with the company for 3 to 5 years will receive â…” of 21 days salary for a year
- Those employees who are working for more than 5 years receive full 21 days salary as a gratuity for a year
FAQs (Frequently Asked Questions)
Leave salaries are calculated based on the employee’s salary and duration of their annual leave entitlement.
The employee is entitled to leave salary payment even if he is terminated or resign from his job position.
Leave salary and gratuity are two different things. Leave salary means payment of leaves by the employer while gratuity means end of service benefits provided to the employees.
If the employer terminates the employment contract the calculation is done as follows:
- Less than one year- No gratuity payment
- More than one year but less than five year- Based on 21 calendar days salary
- More than five years- 30 calendar day basic salary