How Is Leave Salary Calculated in the UAE?
- Each unused leave day is paid at basic salary ÷ 30.
- Unused leave is part of your final settlement, payable within 14 days of exit.
- Check your balance before resigning — some employers make you take the leave during notice instead of encashing it.
The formula
Leave encashment = (basic monthly salary ÷ 30) × unused leave days
Rules worth knowing
- Basic salary only — same as gratuity, allowances excluded
- Employees earn 30 days of annual leave per year (2 days/month in the first 6–12 months)
- Employers can require leave to be taken, not encashed, during employment — encashment mainly applies at exit or by agreement
- Unused leave is part of your final settlement, payable within 14 days of your last working day
- Carry-forward of unused leave depends on company policy and mutual agreement
Unused leave scenarios with numbers
The formula is simple — (basic ÷ 30) × unused days — but the numbers get real when it's your balance on the line:
| Employee | Basic salary | Unused days | Encashment |
|---|---|---|---|
| A | AED 6,000 | 12 | AED 2,400 |
| B | AED 12,000 | 22 | AED 8,800 |
| C | AED 20,000 | 30 | AED 20,000 |
Employee C's case is the one that surprises people: a full unused year of leave encashes to an entire month of basic. And all three payouts use basic, not gross — the same basic-salary rule as gratuity — so a low-basic, high-allowance split shrinks this payout too.
Take the leave or encash it? A decision table
| Take the leave | Encash it | |
|---|---|---|
| Best when | You need rest or have travel planned — the days are worth more to you as time off | You're exiting and the employer allows encashment — the cash beats leave you can't use |
| Watch out | Some employers require leave to be taken during the notice period instead of encashed — confirm the policy before you resign | Encashment runs at basic ÷ 30, so it never equals a full month of gross pay; carried-over balances may also be capped by company policy |
One more angle people miss: spending leave during your notice period doesn't change your contractual end date or your service length — it simply converts the balance into time off instead of cash. Neither option affects your gratuity, which accrues on service time either way.
There's also a middle path many employees don't know about: some employers allow you to encash part of your balance during employment by mutual agreement — say, 5 days a year — rather than only at exit. It's not a legal entitlement, so it depends entirely on company policy, but it's worth asking HR about if your balance keeps climbing past the carry-forward cap. Every day you encash now is one less day at risk of lapsing in January.
Finally, watch the interaction with your basic salary over time. Because encashment uses the basic in effect at payout, a raise in your final year increases the value of every unused day you held. An employee with 20 unused days who gets a raise from AED 10,000 to AED 12,000 basic sees those days jump from AED 6,667 to AED 8,000 — another reason to keep your basic as high as possible.
Before-you-resign leave checklist
- Get your balance in writing — ask HR for the exact unused-day count, not a verbal estimate
- Ask the encashment question directly: "Will my unused leave be encashed at exit, or must I take it during notice?" — and get the answer by email
- Check carry-forward caps — if your company caps carried leave, anything above the cap may already be lost
- Confirm the payout math — unused days × (basic ÷ 30); cross-check it against your final settlement
- Don't resign first and ask later — once your notice period starts, your negotiating position on encashment is gone