Leave Salary in the UAE: How to Calculate It

"Leave salary" is one phrase for three different payments, and that is why it causes so many payroll disputes. The pay an employee receives while on annual leave, the payment for unused leave when employment ends, and a cash payment for carried-over days are each calculated on a different wage. This guide sets out which wage applies to each, how to work out the daily rate, and worked examples for the common cases.

Who these rules cover

The rules come from Federal Decree-Law No. 33 of 2021, the UAE labour law, and its executive regulations, Cabinet Resolution No. 1 of 2022. They apply to private-sector employees on the mainland in every emirate. The DIFC and ADGM free zones, the government sector and domestic workers have their own rules. The leave entitlement itself, how many days and when, is in our guide to annual leave in the UAE.

The three kinds of leave salary

Payment	When	Calculated on	Legal basis
Pay during annual leave	While the employee is on leave	The full wage	Article 29
Payment for unused leave	When employment ends	The basic wage	Article 29 and Article 19 of the executive regulations
Cash for carried-over days	By agreement, instead of carrying them over	The wage when the days were earned	Article 19 of the executive regulations

The full wage, in the law's definition, is the basic wage plus the cash allowances and benefits that come with the job (Article 1). The basic wage leaves those out. Most leave salary mistakes are the wrong one of these two in the wrong place; our guide to basic salary under UAE labour law sets out which entitlements use each.

The daily rate

The law does not set a daily-rate formula for leave salary. It does say that, for the time periods in the law, a month counts as 30 days (Article 67), which is why monthly pay divided by 30 is the usual daily rate, and the one the end-of-service gratuity uses for its daily wage. Some contracts or company rules use a more generous method; the law sets the minimum, not the maximum.

Worked examples

For an employee on AED 6,000 basic and AED 2,000 in allowances, a full wage of AED 8,000, with a daily rate of monthly pay divided by 30:

Situation	Calculation	Amount
Takes 30 days of annual leave	The full wage for the leave period	AED 8,000, the normal monthly pay
Leaves with 10 days of unused leave	10 × (AED 6,000 ÷ 30)	AED 2,000
Leaves after 9 months, no leave taken	9 months × 2 days = 18 days × AED 200	AED 3,600
Leaves 4 months into a new leave year, after using the previous year's leave	30 days × 4 ÷ 12 = 10 days × AED 200	AED 2,000
Cashes in 5 carried-over days by agreement, earned when the full wage was AED 7,500	5 × (AED 7,500 ÷ 30)	AED 1,250

The first year rule comes from the entitlement itself: an employee with more than six months and less than a year of service earns two days a month, and from the first anniversary at least 30 days a year, with the part of the final year paid pro rata (Article 29).

When leave salary is paid

During employment. The employee is entitled to the wage for the leave period. The law sets no rule that it must be paid before the leave starts; when it is paid depends on the contract and the company's payroll policy, and it still goes through the Wage Protection System.

At the end of employment. Every day of annual leave earned and not taken is paid, whatever the balance and whatever the reason employment ends, together with the leave earned in the final part year. It is part of the final settlement, due within 14 days of the contract ending.

Carried-over days. With the employer's approval, unused days can be carried into the next year, capped at half of the annual entitlement, or the employer and employee can agree on a cash payment instead, at the wage that applied when the days were earned. An employer cannot stop an employee from using leave built up over more than two years.

Common payroll mistakes

Paying out unused leave on the full wage, or leave taken on the basic wage. The two rates are deliberate: leave taken keeps the employee's normal pay, while the payout at the end uses the basic wage.

Forgetting the part year. The leave earned in the final, incomplete year is owed at the end of service, on top of any full-year balance.

Ignoring the carry-over cap. Balances that roll over without approval, and beyond half of the entitlement, become a disputed liability at the exit.

Losing the first year. An employee who leaves between six months and a year has earned two days a month, which is easy to miss when no leave was ever booked.

What employers need in place

A leave balance calculated every month, not kept in a spreadsheet updated when someone remembers.

Both wages held for every employee, because leave salary uses each in different places.

A monthly provision for unused leave, next to the provision for gratuity, so the final settlement is funded before it is due. Our gratuity calculator gives the other half of that figure.

For the wider picture, see our UAE labour law guide for employers.

The bottom line

In the UAE, leave salary for days taken is the full wage, the payout for unused leave at the end of service is the basic wage, and carried-over days cashed in by agreement use the wage when they were earned. The law sets no daily-rate formula, but counts a month as 30 days, which makes monthly pay divided by 30 the usual method.

When tamdeed runs the employment administration for a company that sponsors its own staff, leave balances and payroll sit on one platform, so each kind of leave salary is calculated on the right wage automatically. See how tamdeed runs PEO in the UAE, or for a company with no UAE entity, employer of record.

Sources: Federal Decree-Law No. 33 of 2021, Articles 1, 29, 53 and 67; Cabinet Resolution No. 1 of 2022, Article 19; the UAE Government portal's guidance on types of leave in the private sector. Checked on 14 October 2026. This guide is general information, not legal advice; confirm your own case with MOHRE or a qualified adviser.

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