If you are managing the leave salary calculations in UAE, you know how challenging the job is. For perfect calculation, you will have to abide by the specific UAE labour law guidelines. However, understanding these calculations is pretty important. So, if you are struggling to keep things in line, help is here. Keep scrolling to learn how to manage UAE leave salary calculations more efficiently.
Understanding the Basics
In the UAE, employees usually become eligible for annual leave entitlements once they complete six months of service. Every year, they receive 30 days of leave. Employees who have completed 6-12 months of service can get two days of paid leave every month. Now, the salary calculation, according to UAE labour law, is a combination of allowances and base pay.
This can include different benefits like travel, housing, etc. So, it’s crucial in HR works to factor in these allowances when calculating leave pay. But how does the calculation work? Let’s figure out.
Step 1: Understanding the Components
In UAE, leave salary calculation starts with a mandatory step – determining the monthly salary of an employee. The total monthly salary includes allowances + basic pay. That way, employees get their full entitlement. For instance, Mr. X’s basic salary is AED 8000. He also gets a housing allowance of AED 2000 and a transport allowance of AED 500. Hence, his monthly salary with the benefits stands at the AED 10500 mark.
Now, sometimes, the benefits may have a more complex nature, and it may complicate the entire calculation method. In such scenarios, reliable HR software can help. It lets you calculate salaries quickly but doesn’t compromise on accuracy.
Step 2: Calculating Daily Wage
Once you are done with the monthly salary calculation, you will have to calculate your daily wage. According to UAE labour guidelines, you can do that by dividing the monthly salary by 30. Remember, this daily rate is extremely important for leave salary calculation. The formula is:
Daily Wage = Monthly Salary / 30
Let’s get back to Mr. X’s example. His monthly salary is AED 10500. Therefore, his daily wage would be 10500/30 = AED 350. HR tools like HRMS can help you automate these calculations. Consequently, you can sidestep errors and save vigorous manual effort. Moreover, accurate daily wage calculations are necessary for transparent payroll processes.
Step 3: Calculating Total Leave Salary
In the next step, you will have to figure out the total leave salary depending on leave days and daily wage. You can simply multiply the daily wage by the number of leaves. Here’s the formula:
Leave Salary = Daily Wage X No. Of Leave Days
So, for Mr. X, the daily wage is AED 350. Now he has taken a leave of 15 days. So, his leave salary would be 350 x 15 = AED 5250.
This calculation becomes way easier if you carry it out using good HR software. The benefit of using such tools, however, goes beyond calculation – you can store and manage records effortlessly.
Step 4: Adding Up Unused Leave Entitlements
Now, if an employee has unused leave days, it’s essential to compensate them according to UAE labour laws. This becomes even more important when it comes to paying off employees at the end of their contract. The calculation is simple. You will have to multiply the leave balance by your employee’s daily wage. For instance, Mr X gets AED 350, has a daily wage, and he has ten unused leaves. So, he is entitled to an unused leave salary of 350 x 10 = AED 3500.
Indeed, it’s crucial to maintain accuracy here, and you can use HR works to streamline the process.
Step 5: Managing Deductions
Sometimes, employees take unpaid leave. In those scenarios, companies can deduct from their salaries. You can use the daily rate or wage to determine the deduction for each unpaid leave. For example, Mr X has taken three days of unpaid leave, and he is entitled to a daily wage of AED 350. So, the deduction will be 350×3 = AED 1050.
Special Cases (Sick & Maternity Leaves)
According to UAE labour laws, there are sick and maternity leave entitlements. Usually, employees get paid sick leave of upto 90 days, depending on particular pay percentages.
- First 15 days = Full pay
- Next 30 days = 50% pay
- Remaining days = Unpaid
For maternity leave, employees can get full payment for 45 days if they have completed at least one year of service in a dedicated company. However, you may find these categories a little complicated. To speed up the process and guarantee accuracy, you can switch to HRMS.
That’s how you can accurately calculate leave salary in the UAE. Remember, understanding labour laws and considering all salary components is crucial. If manual intervention looks inefficient and time-consuming, switch to automation.