What is leave encashment?

When unused leave is paid out

On leaving is the common case. Under the UAE Labour Law a worker who quits before using accrued leave is entitled to a wage for those days, whatever the length of the leave, and to leave pay for the part of the final year they worked, in proportion. The employer also may not stop a worker using leave accrued for more than two years, unless the worker chooses to carry it forward or take a cash allowance for it under the establishment’s rules.

In other countries the answer may come from provincial law, a collective agreement or simply the company’s leave policy — check the one that applies before paying a balance out or refusing to.

How the amount is worked out

The payment is a number of days multiplied by a day’s pay. Two choices drive it: the wage — in the UAE, leave pay on exit is calculated on the basic salary, not the full wage — and how a monthly figure becomes a day’s pay, whether by 30, by working days or by calendar days. Use the basis in the contract or policy, and use it for everyone.

The balance itself is entitlement less leave taken, with the final year prorated. The final settlement calculator puts the encashment line beside the rest of what a leaver is owed.

Leave encashment rules in Ledgr

In Ledgr leave encashment is a section of the final settlement that finance switches on, limited to the employment types that qualify and to people past a minimum number of months’ service. The balance on a leaver’s statement is prefilled from their annual entitlement, the months worked and the leave already taken, and can be overridden where the record needs correcting.