UAE Federal Decree-Law No. 33 of 2021

UAE Leave Salary & Encashment Calculator

Two separate calculators — understand exactly what you receive during annual leave vs. what you are paid for unused days upon resignation.

Leave Salary

Full Monthly Salary

Basic + all fixed allowances ÷ 30 × days

Leave Encashment

Basic Salary Only

Basic salary ÷ 30 × unused days

What this calculates: The salary an employee receives while on paid annual leave. Uses your full monthly salary (basic + all fixed monthly allowances).

Include basic salary + all fixed monthly allowances (housing, transport, etc.)

Standard entitlement: 30 calendar days after 1 year of service

Source: UAE Federal Decree-Law No. 33 of 2021 (MOHRE) — Articles 29–32

Complete Guide: UAE Leave Salary & Encashment (2026)

One of the most common sources of confusion among employees in the UAE is the difference between leave salary and leave encashment. They sound similar, but they are calculated differently, governed by different rules, and apply in different situations. This guide explains both in plain language, with worked examples drawn directly from UAE Labour Law.

1. What Is Annual Leave Salary?

Annual leave salary is the salary you continue to receive while you are on paid annual leave. You are not doing any extra work, and you are not receiving a bonus — you are simply receiving your normal monthly salary for the days you are on vacation.

Under Article 29 of Federal Decree-Law No. 33 of 2021, the employer must pay the employee their wage before the employee begins their annual leave. The wage paid includes basic salary and any fixed monthly allowances stated in the employment contract.

Formula: Leave Salary = (Total Monthly Salary ÷ 30) × Leave Days

"Total Monthly Salary" = Basic Salary + all fixed monthly allowances (housing, transport, etc.)

2. What Is Leave Encashment?

Leave encashment is the cash payment an employee receives for unused annual leave days— typically when they resign, are terminated, or agree with their employer to receive payment in lieu of taking the leave. This is a standard part of any UAE final settlement.

Crucially, UAE Labour Law specifies that leave encashment must be calculated using the basic salary only — not the total salary. Allowances such as housing and transport are excluded from this specific calculation.

Formula: Leave Encashment = (Basic Salary ÷ 30) × Unused Leave Days

"Basic Salary" excludes housing, transport, meal, phone, and any other allowances.

3. Key Difference: Leave Salary vs. Leave Encashment

FactorLeave SalaryLeave Encashment
When it appliesDuring active annual leaveOn resignation/termination
Salary baseTotal monthly salary (gross)Basic salary only
Allowances included?✅ Yes❌ No
Legal referenceArticle 29 (wage during leave)Article 29 (encashment formula)
Payment timingBefore leave startsWithin 14 days of final day

4. Worked Example — Why Are the Numbers Different?

Consider an employee with the following salary structure:

Basic Salary: AED 1,200

Housing Allowance: AED 700

Transport Allowance: AED 300

Total Monthly Salary: AED 2,200

Annual Leave: 30 days

Annual Leave Salary

= (AED 2,200 ÷ 30) × 30

= AED 73.33 × 30

AED 2,200.00

Full monthly salary — you receive your normal pay

Leave Encashment

= (AED 1,200 ÷ 30) × 30

= AED 40.00 × 30

AED 1,200.00

Basic salary only — AED 1,000 less than leave salary

The difference of AED 1,000 is the sum of housing (AED 700) and transport (AED 300) allowances. These are paid during active leave as part of the "full wage" but are excluded from encashment calculations under UAE Labour Law. This is why an employee resigning with 30 unused days receives significantly less than they would have received in salary for the same period.

5. UAE Labour Law — Annual Leave Entitlements

  • 1Under 6 months (probation): No paid annual leave entitlement.
  • 26 months to 1 year: 2 days of paid leave per month of completed service.
  • 3After 1 year: 30 calendar days of fully paid annual leave per year.
📅 Calendar Days, Not Working Days: The 30-day entitlement means 30 calendar days, including weekends. A 2-week vacation uses 14 leave days, not 10. Weekends and public holidays that fall within your leave period are counted against your leave balance.

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⚠️ Disclaimer: This calculator is for informational purposes based on UAE Federal Decree-Law No. 33 of 2021. Always verify your entitlements with your employment contract and consult MOHRE or a qualified legal professional for disputes.

Frequently Asked Questions — UAE Leave Salary

It depends on the context. When you take annual leave and continue employment, UAE Labour Law and most employment contracts entitle you to your full monthly salary (basic + fixed allowances). However, when your unused leave is cashed out upon resignation or termination, it is calculated on basic salary only, as specified in Article 29 of Federal Decree-Law No. 33 of 2021.
Because UAE Labour Law (Article 29) states that employees are entitled to a 'wage' during annual leave. The term 'wage' in UAE law includes both basic salary and fixed monthly allowances. Your employer is legally obligated to pay your normal monthly salary — you should not receive less during your vacation period.
UAE Labour Law specifically uses 'basic wage' (not total wage) when calculating cash compensation for unused leave days. This is because allowances like housing and transport are considered tied to the active employment relationship. Upon termination, only the core salary is used for encashment calculations.
When you resign, your employer is legally required to pay you for all accrued but unused annual leave days. This payment is calculated as: (Basic Salary ÷ 30) × Unused Days. This amount is added to your final settlement along with your end-of-service gratuity and any other dues.
You are entitled to annual leave after completing 6 months of service. Between 6 and 12 months, you accrue 2 days of paid leave per month. Upon leaving, you are paid for these accrued days proportionally. Employees who resign before completing 6 months are generally not entitled to paid annual leave under UAE law.
Fixed allowances are monthly amounts paid consistently as part of your employment contract, such as housing allowance, transportation allowance, and phone allowance. These ARE included when calculating your leave salary during active annual leave (full wage). However, they are NOT included in leave encashment calculations, which use basic salary only.
No. UAE Labour Law prohibits employers from forcing employees to forfeit earned annual leave. The employer must either allow you to take the leave, carry forward up to 15 days to the next year, or pay you cash for those days. Withholding leave encashment from final settlement is a labour law violation.
In your final settlement, the employer must pay for all accrued and unused annual leave. The calculation is: (Basic Salary ÷ 30) × Unused Days. This is separate from your end-of-service gratuity and must be paid within 14 days of the last working day. Use our End of Service Calculator to calculate your full gratuity amount.
After completing 1 year of service: 30 calendar days of paid annual leave per year. Between 6–12 months: 2 days per month of service. Under 6 months (probation): No paid annual leave entitlement. Note that calendar days include weekends — if your leave spans a Friday-Saturday weekend, those days count against your leave balance.
Because they use different salary bases. Example: Basic Salary = AED 1,200, Total Salary = AED 2,200 (includes AED 1,000 housing allowance). For 30 days of leave salary: AED 2,200 (full month). For 30 days of encashment: (AED 1,200 ÷ 30) × 30 = AED 1,200. The difference is AED 1,000 — the allowances excluded from encashment. This protects employees during active leave but limits cash-out value.