UAE Leave Settlement Calculator — Annual Leave Encashment & Gratuity

Understanding how leave settlement and final settlement work in the UAE is critical for any employee approaching the end of their employment — whether through resignation, termination, or mutual agreement. Under Federal Decree-Law No. 33 of 2021 (UAE Labour Law), employees are protected by clear entitlements that must be settled in full upon contract termination. **Annual Leave Entitlement Under UAE Law** The UAE Labour Law establishes a tiered system of annual leave accrual. In the first year of service, employees earn 2 days of leave per month, but only after completing 6 months. Once a full year of service is completed, the entitlement rises to 30 calendar days per year — equivalent to 2.5 days per month. For employees who leave mid-year, a pro-rata calculation applies to determine the total leave days accrued. Public holidays that fall during an employee's approved leave period are generally counted as part of the leave, not in addition to it, unless specified otherwise in the employment contract. **Leave Salary Encashment at Termination** When employment ends — whether by resignation, termination, or expiry of a fixed-term contract — any unused annual leave must be paid out. This is known as leave salary encashment or leave settlement. The formula mandated by UAE law is straightforward: **Leave Encashment = (Basic Monthly Salary ÷ 30) × Unused Leave Days** Critically, only the *basic salary* is used for this calculation, not the gross salary. Housing, transport, education, or other allowances are not included in the daily rate for encashment purposes. This distinction often surprises employees who assume their full package applies. **Impact of Unpaid Leave on Settlement** Unpaid leave — taken with employer consent under Article 33 of the law — does not accrue annual leave entitlements and is excluded from the service period for both leave accrual and gratuity purposes. If an employee takes 30 days of unpaid leave over their tenure, those 30 days reduce their effective service period accordingly. **End-of-Service Gratuity — The Full Picture** Gratuity, or end-of-service benefit, is the other major component of a UAE final settlement. It is calculated entirely on basic salary and requires at least 1 full year of service: - **Years 1–5**: 21 days' basic salary per year of service - **Year 6 onwards**: 30 days' basic salary per year of service beyond 5 years - **Maximum cap**: 2 years' total basic salary Like leave encashment, gratuity is based on basic salary only. Unpaid leave days are deducted from the total service period. The gratuity amount is computed on the *last drawn* basic salary, not a historical average, which means salary increases benefit the employee at settlement time. **Leave Settlement Calculation in Practice** Consider this example: An employee with a basic salary of AED 12,000 who worked for 3 years and 6 months, took 10 days of leave, and had no unpaid leave would have: - Accrued leave: 3.5 years × 2.5 days/month × 12 = 105 days; minus 10 taken = 95 unused days - Leave encashment: AED 12,000 ÷ 30 × 95 = AED 38,000 - Gratuity: (AED 12,000 ÷ 30) × 21 × 3.5 = AED 29,400 - Total settlement estimate: AED 67,400 This is exactly the kind of calculation our UAE Leave Settlement Calculator handles automatically, including pro-rata adjustments, unpaid leave deductions, and the gratuity cap. **Leave Balance Settlement: What Employers Must Pay** Employers in the UAE are legally obligated to pay all leave balance settlement amounts within 14 days of the last working day. Failure to do so entitles the employee to file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE). Employees are advised to document all leave taken during their employment to avoid disputes over unused leave balances. **Resignation Settlement vs. Termination Settlement** Under the current UAE Labour Law, the distinction between resignation and employer-initiated termination has narrowed significantly for gratuity purposes. Both scenarios entitle the employee to the same gratuity formula and leave encashment calculation. However, if termination is deemed arbitrary by a court, the employer may owe additional compensation — another reason accurate settlement calculations matter. **Checklist for Final Settlement in UAE** Before leaving employment in the UAE, employees should verify: their exact start and end dates, total annual leave accrued and taken, any unpaid leave periods, their current basic salary (the basis for all calculations), any owed notice period pay, and any signed receipts or settlement agreements. Using a UAE leave settlement calculator helps employees verify that the settlement offered by their employer matches their legal entitlements before signing any documents. **Disclaimer**: This calculator and article are for informational purposes only and do not constitute legal or financial advice. Calculations are based on Federal Decree-Law No. 33 of 2021 and its executive regulations. Consult MOHRE or a qualified legal professional for advice specific to your situation.