The leave salary calculation in UAE is itself a very confusing topic among employees and organizations. However, both employees and organizations must understand this topic.
This blog will cover everything related to leave salaries in the UAE. To begin with, it is crucial to understand which leaves and clauses are applicable in the UAE. Furthermore, we will help you understand how to calculate leave salaries in the UAE.
What Are the Different Types of Leave Calculation in UAE?
It is important to understand the number of leaves applicable and the leave salary calculation 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 Leave
Under the recent UAE labour law, employees to annual leave after they complete a minimum of six months with the organization. Additionally, even the employees who are working on a contract basis as mentioned in Executive Regulations of Labour Law.
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.
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.
2. Sick Leave
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. The employer also grants employees some salary benefits for these types of leaves.
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.
6. Health issues caused by alcohol consumption are excluded from sick leave according to the labour law guidelines.
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 works with a company for at least one year, she is entitled to full maternity leave. If she has worked for less than one year, the company pays her half of her salary during the maternity leave period.
According to the new amendments to maternity leave in UAE, employers permit women up to 90 days of maternity leave. Specifically, they provide full pay for 45 days, half salary for 30 days. However, they do not pay for the remaining 15 days.
4. Holiday Leave
Article 21 of UAE Labor Law states that workers can enjoy free time during government holidays. Employers pay employees their full salary during public holidays in the UAE. Moreover, employers pay employees 50% of their salary if they work 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 work for an educational institute in UAE, their employer permits them an additional 10 days of leave. The employer pays for these days only if the employees have worked with the same organization for more than 2 years.
How do Employers Calculate Leave Salary in UAE?
To calculate the salary benefits of employees during their annual leave, we must consider the UAE Labour Law. Moreover, employees must consider various articles to comply with the authorities.
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.
In case the employees have completed less than one year with the organization they can apply for the leave under certain conditions.
Employees will receive a basic salary along with their housing allowance for the annual leave period.
What is the Formula for Leave Salary Calculation in UAE?
Firstly, understand that employers calculate leave salary in UAE when employees take their leave. At the time of leave salary calculation in UAE 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.
Leave Salary Calculation in UAE When an Employee Resigns
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.
Employers categorize employment contracts into two types: 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. If the organization ends the employee, the employer can calculate the salary benefit 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.
If the employee resigns from their position, the employer will calculate the gratuity pay 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 ⅓ of 21 days of salary for a year
- Employees who are with the company for 3 to 5 years will receive ⅔ 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
