How To Calculate Salary Per Day in the UAE as an Employer
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How To Calculate Salary Per Day in the UAE as an Employer
When recruiting leading global talent in the UAE market, forward-thinking employers strategically focus on competitive total annual packages before mentioning how many days the salary covers. To put this in a relatable setting — imagine you’ve found the perfect candidate to help your business grow. After weeks of sifting through CVs, interviewing applicants, and finally coming to a decision, you sit down to discuss the offer with your new hire.
Calculating salary per day in the UAE is an essential part of the recruitment process in the UAE that empowers UAE employers to demonstrate transparency and fairness with world-class talent. This article will help you better understand how to calculate salary per day in the UAE as an employer for smoother conversations with candidates.
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Basic Concepts of Salary Calculation in the UAE
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Most employment contracts in the UAE are structured around a monthly salary. This monthly figure is typically fixed and paid at the end of each calendar month. In most cases, the salary covers 30 days, regardless of how many days the month contains. This includes weekends and public holidays, meaning employees are generally compensated for the whole calendar month, not just working days, demonstrating the nation's commitment to employee wellbeing.
Basic Salary vs Total Salary: What’s the Difference?
A critical distinction in UAE salary calculations is between basic and total salaries. The basic wage is the core component, usually specified in the employment contract. It is used to calculate statutory entitlements such as end-of-service gratuity, overtime pay, and certain types of leave payment.
Deciphering Salary Components
Conversely, the total salary includes the basic salary plus all regular allowances such as housing, transport, and other fixed benefits. Bonuses and commissions, if specified in the employment contract or awarded consistently, may also be included in the broader compensation package but are typically treated separately from the fixed monthly wage.
The Importance of Basic Salary
Understanding these distinctions is essential because many legal entitlements in the UAE, such as severance pay or public holiday compensation, are calculated using the basic salary, not the total salary. Ensuring accurate classification helps avoid disputes and supports compliance with the UAE Labour Law.
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How To Calculate Salary Per Day in UAE
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In the UAE, two commonly accepted methods can be used to calculate an employee’s daily salary. The method used depends on the company’s payroll policy and the purpose of the calculation, whether it’s for leave deductions, overtime, or final settlements.
1. Calendar Days Approach
- Formula: Daily Salary = (Basic Monthly Salary × 12) ÷ 365
- Explanation: This method annualises the monthly salary and divides it by 365 days to provide a precise daily wage. It’s often used for end-of-service gratuity or legal compensation purposes.
- Example: If an employee earns AED 3,200 per month, the daily salary = (3,200 × 12) ÷ 365 = AED 105.20
2. 30-Day Month Approach
- Formula: Daily Salary = Basic Monthly Salary ÷ 30
- Explanation: This more straightforward method assumes each month has 30 days and is widely used in everyday payroll operations, such as calculating paid leave or absence deductions.
- Example: If the same employee earns AED 3,200 per month, the daily salary = 3,200 ÷ 30 = AED 106.67
Legal Clarity in Salary Calculation
Both methods are legally acceptable, but employers should maintain consistency and clarify their approach, especially in employment contracts or HR policies. Optimise your HR operations with Cercli, the only platform built specifically for MENA businesses that unifies workforce management needs in one powerful system.
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Calculating Salary for Incomplete Months or Unpaid Leave
It’s common for employees to transition between roles, and it’s not unusual for new hires to start mid-month. In either case, the employee’s pay should be calculated for a partial month or prorated to reflect the days worked. This also applies to employees who take unpaid leave during a month. In these situations, HR or payroll professionals must calculate the employee’s salary according to the UAE Labour Law.
1. 30-Day Month Basis
This method assumes a uniform 30-day month, regardless of the number of days in the calendar month. It is frequently used to calculate unpaid leave deductions and partial monthly payments.
Example: If an employee with a salary of AED 9,000 works 10 days in the month:
(10 ÷ 30) × 9,000 = AED 3,000.
2. Calendar Days Basis (365-Day Year)
This approach annualises the salary and divides it by 365 to get the daily rate. It is often preferred for more precise calculations in legal or final settlements.
Example: For an employee earning AED 9,000 monthly (AED 108,000 annually), who works 10 days: (10 ÷ 365) × 108,000 = AED 2,958.90.
Employers should specify the method used in employment contracts or policies. Consistency ensures fairness, clarity, and compliance with payroll standards in the UAE.
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- How To Calculate Salary Per Month In UAE
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Common Mistakes To Avoid
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Using Gross Salary Instead of Basic for Legal Entitlements
Accurate salary calculation is essential for both legal compliance and maintaining employee trust. Nevertheless, several recurring errors can affect payout accuracy. One of the most frequent errors is basing calculations on the total (gross) salary rather than the basic salary, which is the correct reference for most statutory entitlements.
Calculating End-of-Service Benefits
In the UAE, payments for gratuity, overtime, and leave encashments should be calculated using the basic salary only, unless otherwise stated in the employment contract. Including allowances like housing or transport in these calculations without a clear contractual basis can lead to overpayments or legal disputes.
Misapplying the 30-Day Division in Annual Leave Payouts
Many companies use the 30-day month method for calculating daily salary, which is acceptable. Nevertheless, a common mistake is misapplying this formula when paying for unused annual leave or when employees take leave that crosses months of different lengths. For example, using the same flat rate regardless of whether the month has 28, 30, or 31 days can distort payouts.
It’s essential to be consistent and ensure the method aligns with company policy and employee agreements.
Forgetting to Prorate Allowances Properly
Allowances such as housing, transport, or mobile expenses are typically provided monthly. Still, they must be prorated accurately during partial months, whether for:
- A new joiner
- A leaver
- Someone on unpaid leave
Merely dividing the total allowance without considering the number of days worked can result in overpayment or underpayment, leading to discrepancies and non-compliance with payroll regulations.
Related Reading
- Unpaid Leave UAE
- Leave Salary Calculation In UAE
- HR Duties And Responsibilities In UAE
- How To Calculate Public Holiday Pay In UAE
