UAE Leave Salary Calculation In Uae After Resignation: Your Ultimate 2025 Guide to Getting Paid Fairly

Introduction: Navigating Your Final Paycheck in the UAE

Resigning from a job in the UAE involves several important steps, and understanding your final settlement components is crucial. Among these, calculating your leave salary – the payment for accrued but unused annual leave days – is often a point of confusion. Getting this calculation right ensures you receive the full compensation you’re entitled to under the UAE Labour Law.  

This comprehensive guide will walk you through everything you need to know about leave salary calculation in the UAE after resignation in 2025. We’ll cover the legal framework, eligibility, calculation methods, common pitfalls, and how to ensure you get what you deserve.

What Is Leave Salary and Why Is It Important?

Leave salary, in the context of resignation, refers to the payment an employee receives for any statutory annual leave days they earned (accrued) but did not use before their employment ended. It’s essentially your employer buying back your unused vacation time.

Why is it important?

• Legal Right: It’s a mandatory entitlement under UAE Labour Law for eligible employees.
• Financial Component: It can form a significant part of your final settlement package.
• Fair Compensation: It ensures you are compensated for the leave benefit you earned through your service.

Understanding how it’s calculated empowers you to verify your final settlement and address any discrepancies.

Understanding the Legal Foundation: UAE Labour Law

Legal Framework: UAE Labour Law on Leave Salary

The primary legislation governing employment relationships, including leave entitlements and final settlements in the private sector, is the UAE Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (the “New Labour Law”) and its executive regulations.   

Key articles relevant to annual leave and its encashment upon resignation include:

• Article 29 (Annual Leave): Outlines the entitlement to paid annual leave (minimum 30 calendar days per year after the first year, 2 days per month during the first year after probation). 
• Article 29(9): Explicitly states that an employee is entitled to receive cash in lieu of unused annual leave days upon termination of employment. This payment is calculated based on the employee’s basic salary applicable at the time the leave was due. 
• Article 51 (End of Service Gratuity): While separate from leave pay, it’s part of the final settlement framework.
• Article 53 (Payment upon Termination): Stipulates that employers must pay all wages and entitlements due to the employee within 14 days from the employment termination date.

Knowing these legal provisions provides a strong foundation for understanding your rights.

Are You Eligible? Qualifying for Leave Salary Post-Resignation

Eligibility Criteria for Leave Salary After Resignation

Generally, to be eligible for payment in lieu of unused annual leave upon resignation, you must:

• Have Completed the Probation Period: While leave technically accrues from day one (or after probation, depending on contract interpretation), entitlement to encashment typically solidifies after successfully completing probation.
• Have Accrued Unused Annual Leave: You must have earned leave days according to the law (or your contract, if more favourable) that you haven’t taken.
• Be Covered by the UAE Labour Law: Most private sector employees fall under this law. Employees in free zones like DIFC or ADGM have their own employment laws, although principles are often similar. Domestic workers are covered by a separate law.
  How Your Contract Shapes Your Entitlements

Types of Employment Contracts and Their Impact on Leave Salary

The New Labour Law mandates limited (fixed-term) contracts for all employees, although these can be renewed. Previously, unlimited contracts were common.

For leave salary calculation upon resignation:

• Limited Contracts: The calculation follows the standard principles outlined in the law based on accrued, unused leave days and basic salary. The contract duration itself doesn’t change the rate of leave accrual or the calculation method for unused days upon leaving.
• Probation Clause: Your contract specifies the probation period (maximum 6 months). Leave encashment rights typically apply after this period  

Always review your specific employment contract, as it might offer more favourable terms than the minimum legal requirement, but it cannot offer less.

Cracking the Code: Calculating Your Leave Salary

Calculation of Leave Salary: Basic Formula Explained

The fundamental principle for calculating payment for unused leave days upon resignation (or termination) is based on your basic salary only.

The most common formula used is:

Leave Salary Payment = (Basic Monthly Salary / 30 days) * Number of Unused Accrued Leave Days

• Basic Monthly Salary: This is your foundational salary excluding all allowances (housing, transport, food, etc.).
• 30 days: This represents the average number of days in a month, commonly used for daily rate calculation in payroll. Some companies might use 21.67 (average working days), but 30 is prevalent for leave pay based on calendar day accrual. Clarify this with your HR.
• Number of Unused Accrued Leave Days: This is the total leave you’ve earned minus the leave you’ve already taken.

What Is Considered Basic Salary in UAE Leave Calculation?

This is a critical point often causing confusion. Article 1 of the Labour Law defines Basic Wage as:

"The wage stipulated in the employment contract, which is paid to the worker in consideration of his work under the employment contract, on a monthly, weekly, daily, hourly or piecework basis, and does not include any other allowances or benefits in kind."  

Therefore, for leave salary calculation upon resignation:

• INCLUDE: Only the core salary amount mentioned as “Basic Salary” in your contract or payslip.
• EXCLUDE: Housing allowance, transport allowance, communication allowance, education allowance, bonuses, commissions (unless structured as part of basic pay, which is rare), overtime pay, and any other benefits or allowances.

Using the total salary instead of the basic salary is a common error that significantly inflates the expected amount.

How Annual Leave Is Accrued in the UAE

Understanding accrual is key to knowing how many unused days you have. As per Article 29:

• First Year of Service (after probation): Employees accrue leave at a rate of two (2) calendar days per month.
• After One Year of Service: Employees are entitled to thirty (30) calendar days of annual leave per year.  
• Part-time workers: Accrue leave on a pro-rata basis according to their contracted working hours/days. 

Pro-rata Leave Calculation for Incomplete Years

When you resign mid-way through a service year, your leave for that final, incomplete year is calculated on a pro-rata basis.

Example:

• You resign effective June 30th (completing 6 full months of the service year).
• Your annual entitlement is 30 days.
• Leave accrued in the final year = (30 days / 12 months) * 6 months = 15 days.

You would then add these 15 days to any carried-over unused leave from previous years (if applicable and permitted by company policy/law) and subtract any leave already taken during the current service year to find the final number of days to be paid out.

Key Considerations When Leaving Your Job

Difference Between Resignation and Termination in Leave Pay

Regarding the calculation of payment for unused leave days itself, there is generally no difference whether you resign or are terminated by the employer. In both scenarios, you are entitled to be paid for accrued, unused annual leave based on your basic salary.

However, the reason for leaving (resignation vs. termination with/without cause) can significantly impact other final settlement components like:

• End-of-Service Gratuity: Eligibility and calculation might differ based on the reason for separation and length of service.
• Notice Period: Whether you work it, are paid in lieu, or potentially forfeit pay depends on the circumstances of departure.

But for the unused leave days payment calculation, the formula (Basic Salary / 30 * Unused Days) remains the standard.

Unused Leave Days: How They’re Compensated Upon Resignation

As established, Article 29(9) mandates payment for these days.

• Basis: Basic Salary only.
• Timing: Paid as part of the final settlement, typically within 14 days of your last working day. 
• Carry Forward Limits: While the law allows carrying forward some leave, upon termination/resignation, all accrued, untaken leave from the last two years (or as per company policy if more generous) should generally be paid out. Check your contract and company policy regarding carry-over limits during employment vs. payout at termination.

Leave Salary Calculation for Employees on Probation

Under the New Labour Law:

• Employees are not typically entitled to paid annual leave during the probation period.
• If an employee resigns during probation, they are usually not entitled to payment for any fractionally accrued leave unless the employment contract specifically states otherwise.
• If an employee resigns after successfully completing probation, leave accrued during the first year (at the rate of 2 days per month starting from the date of joining or end of probation, check contract) becomes payable on a pro-rata basis.

The Bigger Picture: Final Settlement Components

Your leave salary payment is part of a larger final settlement package.

How Gratuity (End of Service) Affects Leave Salary

Gratuity and leave salary are separate entitlements, calculated differently:

• Leave Salary: Based on basic salary and unused leave days.
• Gratuity: Based on basic salary and length of service (calculated as 21 days’ basic pay per year for the first 5 years, and 30 days’ basic pay per year thereafter, subject to certain conditions and caps).

They are calculated independently but typically paid together in the final settlement cheque or transfer. One does not directly affect the calculation of the other, but both rely on the correct identification of the ‘basic salary’.

Deductions from Final Settlement – What to Expect

Your employer is legally permitted to make certain deductions from your final settlement (which includes your leave pay), such as:

• Repayment of outstanding loans or advances from the employer.
• Contributions owed by the employee to social security or pension funds (if applicable).
• Deductions based on a court judgment.
• Costs of repairing damage caused by the employee’s fault (subject to specific procedures).
• Any other deductions legally permitted and stipulated (e.g., salary paid in lieu of notice if you fail to serve it).

Unauthorized or unclear deductions should be questioned.

H3: Notice Period and Its Influence on Leave Pay

• Working the Notice Period: If you work your contractual notice period after resigning, you continue to accrue leave during this time. This accrued leave should be included in the final calculation.
• Payment in Lieu of Notice (by Employer): If the employer asks you not to work the notice period but pays you for it, leave typically stops accruing on your last physical day of work.
• Payment in Lieu of Notice (by Employee): If you resign and do not serve the notice period (and the employer agrees or demands payment in lieu), you might owe the employer payment equivalent to your notice period salary. This doesn’t directly impact the calculation of leave already accrued but can be a deduction from the final amount paid to you. You wouldn’t accrue further leave after your last working day.

Putting it into Practice: A Calculation Example

Real-life Example: Step-by-Step Leave Salary Calculation

Let’s take a hypothetical scenario:

• Employee: Fatima
• Resignation Date (Last Working Day): August 31, 2025
• Date Joined: March 1, 2023
• Total Service: 2 years and 6 months
• Basic Monthly Salary: AED 10,000
• Total Annual Leave Entitlement: 30 days per year (since service > 1 year)  
• Leave Taken in Current Service Year (Mar 1, 2025 – Aug 31, 2025): 5 days
• Unused Leave Carried Over from Previous Year: 3 days

Calculation Steps:

• Calculate Leave Accrued in the Final (Incomplete) Service Year:

  • Service period in the final year: March 1, 2025, to August 31, 2025 = 6 months.
  • Accrual rate: 30 days / 12 months = 2.5 days per month.
  • Leave accrued in final year = 2.5 days/month * 6 months = 15 days.

• Calculate Total Accrued Unused Leave:

  • Accrued in final year: 15 days
  • Carried over from previous year: 3 days
  • Total accrued = 15 + 3 = 18 days.
  • Leave taken in final year: 5 days
  • Total Unused Leave Days = 18 – 5 = 13 days.

• Calculate Daily Basic Salary Rate:

  • Daily Rate = Basic Monthly Salary / 30 days   vc
  • Daily Rate = AED 10,000 / 30 = AED 333.33 (approx.)

• Calculate Leave Salary Payment:

  • Leave Salary = Daily Basic Rate * Total Unused Leave Days
  • Leave Salary = AED 333.33 * 13 days = AED 4,333.29 (approx.)

So, Fatima would be entitled to approximately AED 4,333.29 as payment for her unused annual leave days as part of her final settlement.

Specific Employee Categories

Leave Salary for Part-time or Temporary Workers in UAE

The New Labour Law explicitly addresses part-time work. Part-time employees covered by the law are generally entitled to annual leave calculated on a pro-rata basis relative to a full-time employee’s entitlement. The calculation for unused leave pay upon resignation would follow the same principle: (Basic Salary / 30) * Unused Pro-Rata Leave Days. The specifics should be detailed in their employment contract. Temporary workers’ entitlements depend heavily on their contract structure and whether they fall under the main Labour Law. 

Domestic workers (e.g., housemaids, nannies, drivers employed directly by households) are not covered by the main UAE Labour Law (Federal Decree-Law No. 33 of 2021). They are governed by Federal Law No. 10 of 2017 on Domestic Workers.

This law also grants domestic workers paid annual leave (typically 30 days per year after the first year). Upon termination or resignation (after completing probation), they are entitled to payment in lieu of accrued, unused leave days, calculated based on their last received monthly wage (which often includes basic pay and potentially agreed-upon allowances, differing slightly from the private sector’s ‘basic salary only’ rule for leave pay – check the specifics of Law No. 10).   

Potential Issues and Solutions

Common Mistakes in Leave Salary Calculation to Avoid

• Using Total Salary: Calculating based on total salary (basic + allowances) instead of just the basic salary.
• Incorrect Accrual Rate: Using the wrong number of days accrued per month or year.
• Miscalculating Pro-Rata Leave: Errors in calculating leave for incomplete service years.
• Ignoring Carry-Over: Forgetting to include legally carried-over unused leave from previous years.
• Probation Period Misinterpretation: Incorrectly including or excluding leave accrued during probation based on contract and law.
• Incorrect Daily Rate Divisor: Using working days (e.g., 22 or 26) instead of calendar days (e.g., 30) if the accrual is in calendar days (which is standard).

Can Employers Delay or Deny Leave Salary After Resignation?

No. Employers are legally obligated under Article 53 of the Labour Law to pay all entitlements, including leave salary, within 14 days of the employee’s last working day. Unjustified delay or denial is a violation of the law.   

If an employer refuses to pay or disputes the calculation unfairly, the employee has recourse.

Timeframe for Receiving Leave Salary After Final Settlement

As mentioned above, the legal timeframe is 14 calendar days from the employment termination date (your last day of work). This payment should include your final salary, unused leave pay, end-of-service gratuity (if applicable), and any other dues, minus legitimate deductions.  

How to File a Complaint for Unpaid Leave Salary in UAE

If you believe your leave salary has been calculated incorrectly, withheld, or delayed beyond the 14-day limit without justification, you can take the following steps:

• Discuss with HR/Employer: First, try to resolve the issue directly. Clearly present your calculation and understanding of the law.
• Contact MOHRE: If direct discussion fails, you can file a labour complaint with the Ministry of Human Resources and Emiratisation (MOHRE). This can often be done online through the MOHRE website or app, or by calling their helpline (80060).
• Provide Documentation: Have copies of your employment contract, payslips, leave records, resignation letter, and any communication regarding the dispute ready.
• Mediation/Court: MOHRE will typically attempt mediation. If unresolved, the case may be referred to the labour courts 

FAQs: Leave Salary and Resignation in the UAE

Can I encash my annual leave while still employed?

Generally, no. The purpose of annual leave is for rest. Encashment is typically only permitted upon termination/resignation for unused days, unless the contract explicitly allows otherwise under specific, limited circumstances (which is uncommon and may contradict the law’s spirit).

What if my contract states a different leave calculation method?

Your contract cannot offer terms less favourable than the UAE Labour Law. If your contract provides a more beneficial calculation (e.g., includes certain allowances in the calculation base, though rare), that higher benefit usually prevails. If it offers less, the Labour Law minimums apply.

Does taking unpaid leave affect my annual leave accrual?

Generally, annual leave does not accrue during periods of unpaid leave, unless the law or contract specifies otherwise for particular types of unpaid leave (like statutory sick leave beyond the paid entitlement).

What if I resign before completing one year but after probation?

You are entitled to leave calculated on a pro-rata basis for the period served after probation, at the rate of 2 days per month worked. 

Is leave pay calculated differently if I am terminated versus resigning? No,

the calculation method for the payment of unused leave days (based on basic salary and accrued days) is the same regardless of whether you resign or are terminated.

Conclusion: Know Your Rights, Get What You Deserve

Resigning from your job is a significant step, and ensuring your financial entitlements are correctly calculated and paid is vital. Leave salary is a key component of your final settlement in the UAE.   

By understanding the definition of basic salary, how leave accrues, the correct calculation formula based on UAE Labour Law (Federal Decree-Law No. 33 of 2021), and your rights regarding payment timelines and dispute resolution, you can confidently navigate your exit process.

Key Takeaways:

• Leave salary upon resignation is paid for accrued, unused annual leave days.  
• Calculation is based strictly on your Basic Salary.
• Accrual is 2 days/month in the first year (post-probation) and 30 days/year after that.
• Pro-rata calculations apply for incomplete service years.
• Payment is due within 14 days of your last working day.
• Know your rights and don’t hesitate to seek clarification or file a complaint with MOHRE if needed.

Always double-check your final settlement calculation against your contract and the principles outlined here. Being informed empowers you to ensure you receive the compensation you rightfully earned.

(Disclaimer: This blog post provides general information based on the UAE Labour Law as of early 2025. Laws and regulations can change. This content does not constitute legal advice. For specific advice regarding your situation, consult with a qualified legal professional in the UAE or contact MOHRE.)