Leave Salary Payments in the UAE: A Guide for Employers

As an employer in the United Arab Emirates, it is crucial to understand every aspect of salary processing, WPS payroll, and how to run payroll efficiently, to ensure that your workforce remains happy and motivated.

As part of this, it is equally important for you and your HR team to understand what the UAE law says about leaves and how to process payments for your employees, in order to have a rewarding employer-employee relationship. 

Leaves in the UAE 

A leave is an approved period of time (can be paid or unpaid) during which your employees have been permitted to miss work. The types of leave available to UAE workers include annual leave, sabbatical leave, study leave, compassionate (bereavement) leave, Hajj and Umrah leave, maternity leave, parental leave, sick leave, and Official leaves and vacations.  

• Unless the Employment Contract states otherwise, the UAE law says that if a full-time employee has worked for a year in your company, he/she is eligible for 30 days paid annual leave. However, this does not apply to freezone companies.

• However, if the full-time employee has worked only for six months, then he/she is entitled to only 2 days leave per month until they have worked for a year. 

• Part-time employees are entitled to annual leave according to the actual working hours they spent at work, as specified in the employment contract, and in accordance with the Executive Regulations of the Labour Law. 

How to calculate Leave Salaries 

Calculating leave salary payments can be a complex task, involving precision and accuracy, and are based on the employee’s salary and the duration of their annual leave entitlement. 

Factors such as allowances or benefits can affect the leave salary calculation that contribute to an employee’s total salary. Ensure that you factor in all such applicable elements which will help you to determine the accurate leave salary. 

Here’s the basic formula for calculation:  

Leave Salary = (Basic Salary ÷ 30) x Number of Leave Days 

UAE regulations around Leave Salaries  

It is important to keep these regulations related to leaves in mind: 

1. You have to pay the employee their full salary for the work done right before their applied leave kicks off, i.e. the employee must be paid for their annual leave before the leave begins. 

2. The employee can decide when to begin his/her leave, but they must give at least a 10-day notice. 

3. If the work demands, the employer can change the date on which the annual leave begins, or divide it (for example, 15 days this month and 15 days next month). If the employer sets the date when the annual leave begins, then they must also give a month’s notice about this to the employee. 

4. An employee can carry forward their annual leave from that year into the next year, provided there is an agreement with the employer. However, the employer must not prevent the employee from using his/her accrued annual leave for more than two years. For example, the annual leave of 2018 must be used within the next two years, by 2019 or 2020. 

5. If any accrued leave still exists at the time of the employee’s contract termination, then he/she must receive payment for them, on the basis of the basic salary (rather than full salary, which includes allowances). 

6. No termination of contract can occur during annual leave.  

7. If you require your employee to work during annual leave, then you must pay him/her for that work (in addition to the salary already paid for the annual leave).   

8. During an employee’s probationary period, he/she is not eligible for any paid sick leave. Paid sick leave becomes operational three months after the probationary period. 

9. The Federal Law No. 33 of 2021 has increased maternity leave from 45 days to 60 days – such that women will be entitled to maternity leave full pay for the first 45 days, and half pay for the next 15 days – provided she has served continuously for a minimum of one year. 

Provisions for unused leave and deductions 

Employees may not fully use their annual leave entitlement each year. In such cases, the UAE Labour Law allows employees to carry forward a portion of their unused leave to the following year. Make sure to account for any provisions regarding leave carry forward and adjust the leave salary calculation accordingly. 

When an employee takes leaves without pay (LWOP), it affects their total salary and leave salary calculations. You should deduct the LWOP days from the total leave entitlement and adjust the leave salary calculation accordingly. Clearly communicate your business policy regarding LWOP and its impact on leave salaries to avoid any possible confusion later.  

Conclusion  

Navigating the intricacies of leave salary payments can be challenging. Paying leave salaries to your employees accurately and promptly is a crucial responsibility for business owners in the UAE. By understanding the legal framework, accurately calculating leave salaries, and maintaining accurate records, you can simplify this process and foster a positive work environment.  

Remember, working with a Ministry-approved payroll card provider can help ensure that your salary processing operations, i.e. WPS payroll and WPS-compliant salary processing in the UAE remains efficient, accurate, and compliant.