FinalSettlementUAE end of service, calculated correctly

Six years with four months of unpaid leave

Unpaid leave is the deduction people forget, partly because it was approved at the time and felt like a favour. Under the decree-law, approved or not, days without pay are not service. This case puts a number on four months of it.

The facts

The rule

Two provisions point the same way. Article 33(2) says unpaid leave "shall not be included in the worker's service term at the employer". Article 51(4), in the gratuity article itself, says "the unpaid days of absence from work shall not be included in the calculation of the service term". The employer's approval does not change that. It is the absence of pay, not the absence of permission, that takes the days out.

Step 1 — the service period

On the calendar, 1 March 2020 to 1 March 2026 is six years. Take off the 120 unpaid days and the effective end of service moves back to 1 November 2025:

It does not matter that the leave was taken in 2023. The deduction shortens the total, and the shortened total is what goes into the formula.

Step 2 — the entitlement

Daily basic: 12,000 ÷ 30 = 400 AED.

Without the unpaid leave: 105 + 30 = 135 days × 400 = 54,000 AED.

The 3,945 AED cost

The four months cost 3,945 AED. Notice why it is that much: the deduction comes off the end of the service period, which here is time beyond the fifth year earning 30 days a year. 120 days is 0.329 of a year; 0.329 × 30 days × 400 AED = 3,945. Had the same 120 days been deducted from someone with under five years' service, it would cost at the 21-day rate instead — 2,762 AED on the same basic.

When unpaid leave wipes out the gratuity

The deduction can also take service below the one-year threshold. Suppose the same employee had left on 1 March 2022, two years in, having taken a 400-day unpaid sabbatical in the middle. Two calendar years less 400 days is 330 days of service — 0.904 of a year. No gratuity is payable at all, because the year of continuous service required by Article 51(2) has not been completed.

It is an extreme example, but shorter versions of it happen: a year and two months on paper, with eight weeks of unpaid leave, is under a year of service.

What is not unpaid leave

The deduction is for days without pay. These do not come off:

Two kinds of absence are expressly excluded by the decree-law itself, alongside ordinary unpaid leave:

The rest of the settlement

ItemAmountBasis
End-of-service gratuity50,055125.14 days at 400 AED
Final salary20,000Full package for February
Untaken annual leaveby daysAt 400 AED a day, Article 29(9)
Notice pay—Notice worked
Repatriation expensescheckArticle 13(12)

How to check the employer's number

  1. Ask for the unpaid-day count in writing, with the dates. Payroll systems sometimes record half-days, or record a day of unauthorised absence as unpaid leave. Both affect the figure.
  2. Check it against your own record — the approval emails, the payslips for the months concerned. The payslip will show the deduction from salary, and the days deducted from pay should match the days deducted from service.
  3. Work backwards from the offer. Divide the gratuity offered by your daily basic wage. If the result is 125 days here, the employer has made the same deduction we have. If it is fewer, ask what else was taken off.
A deduction is not a penalty

The unpaid days reduce service. They do not justify any further reduction — an employer cannot treat a period of approved unpaid leave as a break in continuity that restarts the clock. The years before and after the leave join up; only the leave itself drops out.

Questions

My manager approved the unpaid leave. Surely it still counts?

No. Article 33 requires the employer's approval for unpaid leave in the first place, and Article 33(2) then excludes it from the service term. Approval makes the absence lawful; it does not turn it into service.

Does unpaid leave break my continuity of service?

Approved unpaid leave reduces the length of service but does not, on its own, break continuity. The periods either side are added together.

I was on half-pay sick leave for a month. Does that come off?

No. Half pay is pay. Only the unpaid part of sick leave — after the first 45 days in a year — is excluded.

Related

Figures are for the case described. Published 2026-10-18 and reviewed against Federal Decree-Law No. 33 of 2021. General guidance, not legal advice — see the disclaimer.