How to Do Leave Salary Calculation in UAE: A Comprehensive Guide
It is required in the UAE to pay remuneration in exchange for labor. However, you are entitled to paid leave from your company in such instances. That is why it is essential to understand how to do leave salary calculation in UAE.
In this article, we will show you how to calculate your leave salary in the UAE. In addition, you will learn about the many legislations that will be in effect in 2022 for such calculations. This way, you will know the economic benefits you will receive based on the sort of license you need. As a result, these are the things that we will discuss in this essay.:
- What is leave salary?
- How is leave salary calculated in UAE?
- To calculate your leave salary, you first need to know your basic salary.
- What are the labor laws that have started to come into force this year for leave salary calculation in 2022?
- How leave salary calculation in UAE is done in case of resignation?
- Work hand in hand with EOR Middle East for a correct leave salary calculation in UAE
1. What is leave salary?
Before going into how to make the necessary calculations, we must clarify what is the leave salary. The company deducts your leave money from your overall salary. It is determined by the number of days of leave you have. You can determine the leave compensation as a proportion of your basic income. Even so, the rates vary depending on how long you have been working in the UAE.
For example, if you have worked for less than a year, your leave compensation will be 100% of your basic income. It will be equal to 95% of your basic pay if you have worked for 1-3 years. However, if you have worked for the same firm for more than three years, it will be equal to 90% of your basic salary.
For us at EOR Middle East, it is very important to clarify these percentages. Not everyone has the necessary knowledge in this administrative area to be able to perform the calculations on their own.
2. To calculate your leave salary, you first need to know your basic salary
You must first know your base income to determine your leave salary. A worker’s basic salary is his or her starting compensation. It is the total amount paid to an employee before any allowances are deducted. The basic salary can be paid monthly, but it can also be paid at other times.
Typically, the basic salary is paid before any overtime or additional compensation is determined. The amount of money you will get throughout your leave is referred to as the leave salary. It may contain some of your basic salaries, but it will not be your complete compensation.
The basic salary is the cash you receive for doing tasks as specified in your contract. Your basic salary comprises all payments received under your employment contract, including any commissions or incentives derived from it.
Furthermore, standard allowances are additional payments that are not included in your base salary and may vary depending on when they were enacted into legislation (for example, if they were enacted before to 2006).
3. How is leave salary calculated in UAE?
Following this same idea, from our company we will explain to you the correct way to calculate your leave salary. Calculating leave compensation is a straightforward operation that requires just a few calculations. You must understand how to do these calculations correctly. Your staff should be paid by the law so that you do not incur any obligations.
According to Article 75 of the UAE Labor Law, companies must compute the leave compensation depending on the employee’s length of service with the company:
- If an employee has worked for more than six months but less than a year, they should be given two days of paid leave each month.
- An employee has worked for the firm for more than a year, they should be given 30 days off every year.
- If it works in the private sector and decides to quit or their employment is terminated they are entitled to end-of-service benefits; the amount they will get is determined by the kind of contract.
The payout is referred to as gratuity pay. This is true for the calculation of leave salary in the UAE in the event of resignation.
3.1 Calculation under limited contract
When calculating leave salary in UAE for a short contract, you must consider different conditions. The following conditions are to make a suitable payment and avoid problems with your employees.
Based on the length of time the person has worked for the firm, the payout is calculated as follows:
- Less than one year: the employee is not entitled to gratuity compensation.
- More than one year but less than five years: each year, full gratuity paid based on 21 days’ salary
- Over five years: full gratuity compensation based on 30 days’ salaries for each year after the first five.
3.2 Calculation under unlimited contract
To calculate the leave salary in UAE for an unlimited contract, you must consider the event of termination. If the employer quits the contract, the following is the estimate:
- Less than a year: no right to gratuity pay.
- More than one year but less than five years.
- Less than five years: 21 calendar days’ basic pay.
- More than five years: 30 calendar days’ basic salary.
If the employee resigns, the following calculation is used:
- Less than a year: no right to gratuity pay.
- 1-3 years: 1/3 of basic pay of 21 days.
- 3-5 years: 2/3 of a basic salary of 21 days.
- More than five years: full 21-day basic salary.
4. What are the labor laws that have started to come into force this year for leave salary calculation in 2022?
Such laws have been developed to meet the needs of both the employee and the business. However, many businesses have difficulties since the regulations governing the calculation of annual leave in the UAE are very specific about how it should be done.
As a result, the passage of this new legislation assures that the calculations are right. Below are ten modifications in distinct leaves that must be considered when calculating them.
4.1 At least one paid day of relaxation every week
According to UAE labor legislation, all private sector workers are entitled to a paid weekly rest day, with the employer’s option to increase the weekly rest day.
4.2 Annual vacation
Probation terms cannot exceed six months (but can be less). Employees are entitled to two days of paid leave for each month of the first year after six months of work.
According to the amended UAE Labor Laws, an employee is entitled to 30 calendar days of paid leave each year after the first year of work.
4.3 UAE National Holidays
Employees are entitled to paid leave on public holidays, according to a February 15, 2022 update (available here), which states:
“If an employee is required to work during holidays or leaves, he will be compensated with another rest day or be paid for that day. A salary as he would be paid on a normal day plus addition of at least 50% on his basic salary.” (See Article 28 of the UAE Labor Law.)
4.4 Leave of absence
Employees can take sick leave after passing probation. Sick leave can be either continuous or intermittent, and the salary is calculated as follows:
- 15 days of paid sick leave each year.
- Sick leave at the half salary for the following 30 days.
- There will be no remuneration for any further sick days taken after the initial 45 days.
4.5 Sick leave for Covid-19
Employees who have contracted Covid-19 should be compensated in full if they return within 15 days. When it comes to remuneration, if an employee catches the Covid-19 virus, it should be considered the same as any other sickness absence. Covid-19 infections typically last 10 to 14 days.
4.6 Leaves for maternity and paternity
After six months of pregnancy, a pregnant woman in the UAE may be eligible for up to 60 days of paid maternity leave. This conforms with UAE employment legislation Articles 30(1) and (3).
Additionally, private-sector workers will be awarded five days of paternity leave.
4.7 Bereavement leave
It is critical to pay the licensing fee to the employee for any reason related to humanitarian considerations. As a result, these humanitarian situations have been considered in the new UAE Labor Law. Employers should provide employees with three to five days of compassionate leave.
4.8 Leave for Hajj and Umrah
Employees may be granted exceptional leave to do Hajj under the following conditions:
- Is offered without compensation
- No more than 30 days
- Is only awarded once throughout the employee’s tenure with the organization.
The UAE Labor Law contains no provisions that allow employees to take Umrah to leave. If an employee wants Umrah to leave, the company must agree and either subtract it from the employee’s yearly leave or consider it unpaid leave.
4.9 Paid time off
With your permission as an employer, your employee in the UAE may take unpaid leave. This complies with Employment Law Article 33.
4.10 Dismissal while on leave
An employer cannot fire an employee while they are on leave. If the employer does this, the employee may file a lawsuit against the company.
5. How leave salary calculation in UAE is done in case of resignation?
First and foremost, businesses should analyze the sort of contract they have with their employees. Depending on the contract, employees will earn cash benefits based on the number of years they have worked for the organization. Gratuity pay is the name given to this form of reward.
5.1 Workers on a limited contract
Gratuity remuneration is calculated based on hours worked for workers with a limited contract as follows:
- Employees who have worked for a firm for less than a year do not earn gratuity money.
- Gratuity compensation will be given to employees who have worked for the firm for between one and five years. This payout is worth the equivalent of 21 days’ salary for each year worked.
- Workers with more than 5 years of experience will be paid 30 days for each year worked.
5.2 Employees with an indefinite contract
Gratuity remuneration varies based on the scenario for employees with unlimited contracts. Whether the contract is ended by the firm or the employee, the benefits received by the employee vary.
When the corporation is liable for contract termination, the salary benefits are as follows:
- Employees who have worked for a firm for less than a year will not be eligible for gratuity compensation.
- Gratuity compensation will be given to employees who have worked for the firm for between one and five years. This payout is worth the equivalent of 21 days’ basic salary.
- Employees with more than 5 years of experience will be paid 30 calendar days of basic salary.
When an employee resigns, the following gratuity payments are made:
- Employees who have worked for a firm for less than a year will not be eligible for gratuity compensation.
- Gratuity compensation will be given to employees who have worked for the firm for between one and three years. This stipend is comparable to one-third of a week’s basic salary.
- Gratuity compensation is given to employees who have worked for a firm for three to five years. This reward is comparable to two-thirds of a week’s basic salary.
- Workers with more than 5 years of experience will be paid the entire 21-day base salary.
6. Work hand in hand with EOR Middle East for a correct leave salary calculation in UAE
Taking a leave of absence in the UAE was once harshly punished. However, owing to numerous labor legislation enacted by the government, remuneration for each license has improved. As a result, the leave salary calculation must be done accurately. In this way, UAE companies can feel confident that when hiring new personnel, there will be no problems with leave of absence.
EOR Middle East offers the best consultancy services for calculating leave salary in the UAE. Our professional staff will assist you with any administrative task you require. Whether from the standpoint of an employee’s or an employer’s demands. We provide our services in the following regions:
Furthermore, our PEO, HR Management, and Payroll Outsourcing services will enable your organization to assure proper leave payment. This ensures that both you and your employee receive monetary compensation for any leave of absence.
Do you have an interest in obtaining the services of EOR Middle East? Contact us at [email protected] or call us at +971 43 316 688 if you need assistance with your leave salary calculation in the UAE. If you have any doubts, our professional agents will clear all of them.
Are you looking for a job in the United Arab Emirates? You can submit your resume or CV to thetalentpoint.com to apply for the best companies in the country. You can also send it to us by email at [email protected]. We guarantee that we will find you the ideal labor opportunity!
