Making payments for your employees is always a difficult thing to handle, especially when you don’t have enough information or knowledge about what is involved in each one. For this reason, we compiled this guide of everything you need to know about leave salary in the UAE.
In this article, you’re going to get a clear understanding of how to deal with the leave salary, and you’re going to have an answer to the most typical questions related to this matter. Let’s observe:
- Everything you need to know about leave salary in the UAE
- What is the leave salary?
- How is the leave salary calculated?
- When should the employee receive their leave salary?
- What about the leave salary during the COVID-19 pandemic?
- Why has the leave salary become irrelevant?
- How can Connect Resources help you with the leave salary for your employees?
1. Everything you need to know about leave salary in the UAE
The leave salary is of high importance for employees; therefore, employers need to know how to make the calculations correctly and how they can optimize this process to achieve a great solution.
Most employees look forward to their annual leave because it’s a time that they can use to relax and to reload energy, as well as to receive the money they deserve.
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However, many companies face troubles with it because the laws governing the annual leave in the UAE are precise about how it should be done, and if the team in charge doesn’t do it correctly, the employers may face the consequences.
1.1 Why is the leave salary significant?
The leave salary is highly relevant to employees because they can use that money to invest it in their holidays, or any other subject that they’d like. Employers need to know how to handle the leave salary for each employee according to the UAE Labor Law, so they don’t make any mistakes.
If you’re looking for making the leave salary calculation in UAE for a limited contract or for any other employee that is included in your payroll, you can request Connect Resources to help you with this. It’s an agency that provides a comprehensive service, so you don’t have to worry about any payments for your employees.
1.2 How outsourcing can help you with leave salary for your employees?
If you don’t know what payroll outsourcing is and how you can get the most out of this service, you need to understand that it is an excellent service that is going to solve all of your troubles in terms of leave salary.
Payroll outsourcing and HR outsourcing are two services that help companies have better management of their workforce, and this also includes dealing with salaries.
2. What is the leave salary?
One of the aspects you should understand is the definition of the leave salary, and for this reason, it’s included in this guide of everything you need to know about leave salary in the UAE.
The leave salary, also known as annual leave, is a fundamental right for any employee that works in a company, and it’s established in the UAE Labor Law. The employee is entitled to receive the payment and the holiday after one year of working for any business.
2.1 What is it payable to the employee in the leave salary?
When the employee requests the leave salary, he or she should receive the following:
- The basic wage
- The housing allowance
Many employees get confused about what they’re going to receive in their leave salary. Still, they should be aware that they receive those two basic concepts and anything else that is stipulated in the contract, if applicable.
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Determining the leave salary for your employee is one of the HR needs that a PEO can handle for you. Since there are many doubts about what should be included in the annual leave, it’s essential to have a team of experts that can advise you and make the calculations for you.
2.2 Who determines the start and duration of the leave?
If you have any doubts about who gets to determine some fundamental aspects of the leave like the start and duration, you should know the following:
- The employer decides the date of commencement of the annual leave
- The employer may decide if the employee should divide the leave into two parts
- The employee may decide when the annual leave starts
When you’re trying to make the leave salary calculation in UAE for an unlimited contract, you may not know precisely how to do it since there are many provisions that you have to take into account. For this reason, it’s crucial to count on with experts in this matter, and Connect Resources can help you solve this issue quickly.
3. How is the leave salary calculated?
In our guide of everything you need to know about leave salary in the UAE, it’s essential to understand how to make the calculations. Your employees should receive the payment that is established in the law, so you don’t incur any liabilities.
- If the employee has been working for more than six months, but less than a year they should receive two days leave for every month
- If the employee has exceeded the year working for the company, they should receive 30 days annually.
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In case the employee works in the private sector, and he or she decides to resign, or their work is terminated, they’re entitled to the end of service benefits, and the payment they’re going to receive depends on the type of contract. The payment is known as gratuity pay.
3.1 Calculation under limited contract
When it comes to making the leave salary calculation in UAE for a limited contract, you must take the following provisions into account so you can make a proper payment and don’t have any trouble with your employees.
The calculation of the payment is done as follows based on the time the employee has been working for the company:
- Less than one year: the employee doesn’t receive gratuity pay
- More than one year but less than 5: full gratuity pay based on 21 days’ salary for each year
- More than five years: full gratuity pay based on 30 days’ salary for each year following the first five.
3.2 Calculation under unlimited contract
In terms of the leave salary calculation in UAE for an unlimited contract, you need to take into account the event of the termination. If the employer terminates the contract, the estimate is as follows:
- Less than one year: not entitled to gratuity pay
- More than one year but less than 5: 21 calendar days’ basic salary
- More than five years: 30 calendar days’ basic salary
If the employee resigns, the calculation is done as follows:
- Less than one year: not entitled to gratuity pay
- Between 1-3 years: 1/3 of 21 days’ basic salary
- Between 3-5 years: 2/3 of 21 days’ basic salary
- More than five years: full 21 days’ basic salary
With Connect Resources, you’re going to receive all the advantages of HR outsourcing because you won’t have to deal with all of these calculations since you’ll have a dedicated account manager that is going to solve all of these issues for you.
4. When should the employee receive their leave salary?
One crucial aspect of everything you need to know about leave salary in the UAE is when the employee should receive the payment, as you need to respect the provisions of the law in this matter.
The employee should receive the leave salary before taking the , as stated in Article 80 of the UAE Labor Law. The employee must receive the full wage plus the wage of the days they deserve based on the calculation.
If you carry out the leave salary payment timely and adequately, you’ll be applying one of the top retention strategies for employees, and you’ll be able to keep the high-level workers with you since your workforce appreciates that they receive the payments correctly.
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5. What about the leave salary during the COVID-19 pandemic?
One of the critical aspects that you should understand in everything you need to know about leave salary in the UAE is how the coronavirus has impacted this matter. Many employers and employees had to deal with unforeseen and unpredictable scenarios during this challenging time, so they had to make decisions that probably weren’t the ideal for them.
The COVID-19 has impacted jobs and salaries in the UAE in many ways. Because the MOHRE has authorized employers to make some decisions in terms of their expatriate employees, the leave salary has also been affected.
5.1 Can the employer request the employee to consume the annual leave?
According to the directions of the MOHRE, the employer has the right to request the employee to consume the annual leave, but only if the remote working system doesn’t apply to the nature of the company’s work.
5.2 What if the employee doesn’t have any balance of annual leave?
If the employee doesn’t have any balance of annual leave, which may happen, the employer can request them to opt for the unpaid leave. However, it should be an agreement between both of them, and additionally, it should be approved by the MOHRE/MOL.
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The important is that the employers can’t force their employees to take unpaid leave without their consent since they will be breaking the law.
6. Why has the leave salary become irrelevant?
In this guide of everything you need to know about leave salary in the UAE, it’s also covered one crucial aspect that has been causing some issues to employers in terms of payment calculations for their employees.
Most employers provide the leave salary to their employees before the start of their vacation, but there has been happening an inconvenience related to the processing of payments. Although it was an arrangement accepted by the employees, the change in the WPS rules makes it difficult to deal with this.
6.1 The alternative to process the leave salary
Since the employers decided to pay the leave salary to the employee, but the WPS did not process the salaries for the following month, the employee’s account gets blocked.
This has caused businesses to take an alternative route, which consists of an easy and straightforward process that can be implemented by any company. Let’s observe:
- The team in charge processes the salary for the following month for all the staff
- The team create and additional SIF file for the employees that are supposed to be on their annual leave in advance
- This payment is considered as an advance salary for the consecutive month
- Once the payment is made, the WPS system won’t block the account because it has the reference of the payment for the upcoming month as an advanced payment.
If the company makes this process for the employees that request their leave salary, basically they’re eliminating the concept of “leave salary” and treating it as an “advance salary,” thus making it irrelevant.
If you have the help of Connect Resources, with the payroll outsourcing service, you can have a great employee management, which is excellent to deal with the leave salary payment for your employees with no troubles.
7. How can Connect Resources help you with the leave salary for your employees?
Now that you have read everything you need to know about leave salary in the UAE, you understand that it’s an essential aspect that you should know how to handle correctly so you won’t have any frictions with your workforce about this crucial matter.
Would you like to contact Connect Resources to receive assistance in salary calculations? You can call at +971 433 166 88 or send an email to firstname.lastname@example.org, and you’ll talk to one of their representatives that will gladly answer all of your questions.