Making payments for your employees is always a difficult thing to handle, especially when you don’t have enough information or knowledge about Employment Visa Outsourcing what is involved in each one. For this reason, we compiled this guide of everything you need to know about leave salary calculation in the UAE.
In this article, you’re going to get a clear understanding of how to calculate leave salary in the UAE, 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 leave salary calculated in the UAE?
- 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 get you an accurate leave salary calculator?
1. Everything you need to know about leave salary in the UAE
The UAE leave salary is of high importance for employees; therefore, employers need to know how to make the calculations correctly and how they can optimize the process of Hiring 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.
Know the importance of the PEO & Payroll outsourcing solutions in the UAE
However, many companies face troubles with it because the laws governing the annual leave calculator in the UAE are precise about how it should be done, and if the team in charge doesn’t do it correctly, employers may face the consequences. It is critical to know how to calculate annual leave in the UAE.
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 Employer of Record Services and making the calculation of leave salary 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 on resignation in the UAE, and more.
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 in the UAE, 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 and How Contract staffing Companies Work, if applicable.
PEOs can handle all your HR needs: know the benefits and impact on businesses
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 experts in this matter, and Connect Resources can help you solve this issue quickly.
3. How is leave salary calculated in the UAE?
In our guide of how leave salary is calculated in the UAE, it’s essential that you get a clear understanding of how to properly make these calculations. Your employees should receive the payment that is established in the law, so you don’t incur any liabilities.
According to Article 75 of the UAE Labor Law, the employers should calculate the leave salary based on the period that the employee has been working for the company:
- 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.
Here we’ll show you the difference between Outsourcing payroll and inhouse
If 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. This is the case for the leave salary calculation in the UAE in case of resignation.
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 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. As an employer, you should use a leave salary calculator in the UAE to do this correctly. There are a few ways to do this, but we recommend you to find a leave salary calculator online.
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.
Interview Tips: Learn some tips that will give you an edge in interviews over other candidates.
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 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 leave salary calculator 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.
In this article you’ll learn more about PEO & Payroll solutions in the UAE
The important is that 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 UAE leave salary 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 you are a freshers looking for a job, in this article we explain some tips to get a job in UAE
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 great employee management, which is excellent to deal with the leave salary payment for your employees with no troubles.
7. How can Connect Resources get you an accurate UAE leave salary calculator?
Now that you have read everything you need to know about annual leave salary calculation in the UAE, you should understand that it’s an essential aspect that you should know how to handle correctly so you won’t have any friction with your workforce about this crucial matter. Further, Connect Resources have been the best services provider in the field of Freelance visa.
Would you like to contact Connect Resources to receive assistance and information about our annual leave salary calculator in the UAE? We will provide you with a leave salary formula so that you can easily calculate this compensation for your workers. Further, if you are looking for Recruitment Agencies in Dubai then You can call at +971 433 166 88 or send an email to contact@connectresources.ae, and you’ll talk to one of their representatives that will gladly answer all of your questions.
