Leave encashment in the UAE is calculated as (monthly basic salary ÷ 30) × unused annual leave days, under Article 29 of Federal Decree-Law No. 33 of 2021. Only basic salary counts — housing, transport, and all other allowances are excluded. Payment is due within 14 days of your final working day, whether you resign or are terminated.
UAE Leave Encashment Calculator
How Leave Salary Calculation Works
The formula has two steps, and both use only your basic salary — the fixed contractual amount before any allowance is added.
- Daily rate: basic salary ÷ 30
- Encashment: daily rate × unused leave days
| Basic Salary | Unused Days | Daily Rate | Encashment |
|---|---|---|---|
| AED 5,000 | 10 | AED 166.67 | AED 1,666.70 |
| AED 10,000 | 15 | AED 333.33 | AED 5,000.00 |
| AED 15,000 | 30 | AED 500.00 | AED 15,000.00 |
| AED 20,000 | 22 | AED 666.67 | AED 14,666.74 |
A common employer error is dividing by the number of working days in the month rather than a flat 30 — the law fixes the divisor at 30 regardless of the calendar month. If a settlement uses 26 or 31 as the divisor, the figure is wrong and challengeable.
Compensation for Unused Annual Leave UAE — Your Legal Rights
Leave encashment is a mandatory termination benefit, not a discretionary payment. Article 29 makes three things non-negotiable.
Your employer cannot waive this right by contract. Any employment contract clause claiming unused leave is forfeited on exit has no legal force — the statutory entitlement overrides it.
Payment covers all accrued unused days, pro-rated for partial years of service. It applies to every private sector employee, on resignation or termination alike, and must be settled within 14 days of the last working day.
Leave encashment is paid tax-free — the UAE has no personal income tax, so the calculated amount is received in full.
Leave Encashment vs Gratuity — Two Separate Payments
End-of-service settlements often bundle figures together, which is where underpayment hides. Leave encashment and gratuity are calculated separately and owed separately.
| Leave Encashment | Gratuity | |
|---|---|---|
| Legal basis | Article 29 | Article 51 |
| Based on | Basic salary ÷ 30 | 21/30 days’ basic pay per year |
| Minimum service | 6 months | 1 year |
| Covers | Unused annual leave | Length of service |
Check both figures independently before signing any final settlement — use the gratuity calculator UAE for the second number.
Public Holidays Do Not Count Against Your Leave Balance
A common point of confusion in final settlements is whether public holidays reduce accrued annual leave. They do not.
UAE public holidays are separate from annual leave entitlement under labour law — if a public holiday falls within an approved leave period, it does not deduct from the leave balance, and some employers owe an extra day in lieu depending on internal policy. This distinction matters directly at termination, since an inflated “used leave” figure that wrongly counts holidays as leave days shrinks the encashment total. Checking official dates against your leave records is worth doing before signing any settlement — see the full UAE public holidays 2026 list, or the UAE public holidays 2025 and UAE public holidays 2024 pages if reconciling a settlement from a prior year.
Pro tip: Request your leave balance in writing from HR before your last working day. The accrued-days figure is the number most often disputed after exit, and an email record from before termination is the strongest evidence in a MOHRE complaint.
Frequently Asked Questions
How is leave encashment calculated in the UAE?
Leave encashment equals your monthly basic salary divided by 30, multiplied by your unused annual leave days. Allowances for housing, transport, phone, and education are excluded entirely. The 30-day divisor is fixed by law and does not change with the calendar month.
Can I encash leave while still employed?
UAE labour law does not require employers to pay out unused leave during employment — encashment is a termination benefit under Article 29. Some companies offer internal cash-out policies voluntarily, but an employee cannot legally compel payment before their final settlement.
Is leave encashment based on basic or total salary?
Basic salary only. This is the most financially significant rule in the calculation: an employee earning AED 15,000 total with AED 8,000 basic is encashed on the AED 8,000 figure. Verify which amount your settlement uses before signing.
What if my employer refuses to pay?
File a complaint with the Ministry of Human Resources and Emiratisation (MOHRE) on 600590000 or via the MOHRE app. Payment is a legal obligation that cannot be waived by contract, and claims must generally be raised within one year of the entitlement date.
Last verified: July 2026 Reviewed by: UAE Content Team Source: Federal Decree-Law No. 33 of 2021, Article 29 — MOHRE
Sana Jamal - Sana Jamal holds an MSc in Finance from an American university in the UAE and has lived and worked in the UAE for over 20 years — giving her first-hand, resident-level experience with UAE banking, salary systems, and everyday personal finance processes, not just theoretical knowledge. With a background in journalism, she specializes in turning UAE banking procedures and government financial services into clear, accurate, practical guidance — from checking a FAB account balance to understanding Ratibi and salary protection status. Sana writes and reviews UAEWOW's finance and banking content to keep it accurate and current with how these services actually work.