Federal Decree-Law No. 33 of 2021 on the Regulation of Labor Relations, which will take effect on 2 February 2022 and replace the Old Law, was released on 15 November 2021. The New Law is the first significant revision to the UAE’s federal employment and labor law in forty years. Except for those headquartered in the financial free zones, the DIFC and ADGM, the New UAE Labor Law has the same scope of application as the Old Law and applies to employers and workers in the private sector in the UAE (which have their own employment laws).
The goal of this New Law, according to the Ministry of Human Resources and Emiratization (MOHRE), is to promote workers’ rights and unite the labor force. However, the New Law significantly increases the duty on companies to amend not just their employment contracts, rules, or handbooks, but also their work practices.
Note: All essential information is already provided on this page. Please contact us only if you require specific legal advice or professional assistance. Legal consultation fees start from AED 500.
UAE Annual Leave Calculator
Estimate leave salary based on basic salary and unused leave days.
Unused Annual Leave Salary Encashment in UAE Under the New Labour Law
Is it possible for a worker who hasn’t utilized all of their annual leave to request the unused annual leave encashment of those remaining days? The new UAE Labor Law and subsequent decrees issued by the Ministry of Human Resources and Emiratization (MOHRE) set out certain requirements that must be satisfied in order for an employee to take advantage of this option.
Employees having accumulated yearly leave may apply to be “paid in lieu of leave according to the Establishment bylaws and as provided by the Executive Regulations of this Decree-Law,” according to Federal Decree Law No. 33 of 2021, Article 29(8) of the new UAE Labor Law.
You should know: How is gratuity computed under the new UAE labour law?
Here is a full explanation of what Clauses 8 and 9 of Article 29 say:
Need Labour Law Help?
Dubai's Expert Advice at Your Fingertips.
UAE Labour Law on Annual Leave: MOHRE Clauses 8 and 9 of Article 29
Unless the employee requests to carry over or be compensated in place of leave in accordance with the Establishment bylaws and as stated by the Executive Regulations of this Decree-Law, the employer may not restrict the employee from utilizing his accumulated annual leave for more than two years.
No matter how long it is, a worker is entitled to payment for the days of leave he did not use if he quits the job before using it. The employee is entitled to leave pay for the fractions of the year in accordance with the duration of service, and the same is computed on the basis of the basic salary. An employee has the right to 30 calendar days of annual leave each year in the UAE. This complies with Article 29(1) (a) of UAE Labour Law.
For unused annual leaves, an employee can be eligible for “cash in lieu.” This computation is based on the employee’s base monthly compensation. If the employee decides not to use the yearly leave, they might jointly decide to receive compensation from the company in its place.
According to Article 19(1) of Cabinet Resolution No. 1 of 2022, an employee may carry over a maximum of half of his annual leave to the following year or agree with his employer to be paid in lieu of it based on his wage at the time of annual leave entitlement, subject to the provisions of Article 29(8) and (9).
A worker is also permitted to carry over half of their yearly leave to the next year.
An employee cannot work for an employer for two years in a row without receiving an annual leave. According to Article 29(8) of the Employment Law, this is true.
You should read: Remove Labour Ban Status in UAE in 2026
Cabinet Resolution No. (1) of 2022 on Unused Annual Leave Encashment in UAE
In addition to this law, MOHRE also released Cabinet Resolution No. (1) Of 2022, which states that a worker “may carry forward not more than half of the annual leave to the following year, or he may agree with the employer to receive a cash allowance thereof, according to the wage he receives at the time of his entitlement to the leave.”
Therefore, if your company’s regulations permit it or if you and your employer have an arrangement for getting cash in place of accrued annual leave, you may profit by taking this action.
Carrying forward annual leaves or receiving cash compensation therefor: CABINET RESOLUTION NO. (1) OF 2022, ARTICLE (19).
According to Article (19) of the Cabinet Resolution No. 1 of 2022:
- The employee may carry over no more than half of his or her annual leave to the next year.
- Upon termination of employment, the employee will receive a cash allowance equal to the basic wage for the remaining time he is legally entitled to take off for yearly leave.
FAQs on Unused Annual Leave Calculation Encashment in UAE
Is unused annual leave paid after resignation or termination in the UAE?
Yes. In the UAE, an employer must pay an employee for all unused annual leave days when employment ends due to resignation or termination. The compensation is usually calculated based on the employee’s basic wage.
Can an employee automatically take cash instead of annual leave?
No. An employee cannot automatically choose cash instead of taking annual leave. Cash in lieu of leave is allowed only when permitted by company policy, employment contract, or mutual agreement between the employer and employee, in line with UAE Labour Law.
Can an employee use only part of their annual leave?
Yes. An employee and employer may agree on how annual leave is used, provided the arrangement does not violate UAE Labour Law and its Executive Regulations.
Can an employer prevent an employee from using accrued annual leave for more than two years?
No. An employer cannot prevent an employee from using accrued annual leave for more than two consecutive years unless the employee agrees to carry it forward or receive payment instead.
How is annual leave encashment calculated in the UAE?
Annual leave encashment for unused leave is generally calculated based on the employee’s basic wage, unless the employment contract or company policy provides otherwise.
What happens if an employee leaves the company with accumulated unused leave?
If an employee leaves the company without using accumulated annual leave, they are entitled to receive payment for all unused leave days based on their basic wage.
Do UAE annual leave encashment rules apply to all private sector employees?
These rules generally apply to private sector employees covered by Federal Decree-Law No. 33 of 2021. Employees working in DIFC or ADGM may be subject to separate employment regulations.
Is employer approval required to pay unused leave after termination?
No. Once employment ends, the employer must compensate the employee for unused annual leave. No further approval is required at that stage.
Is unused annual leave encashment a mandatory right in the UAE?
Yes. Unused annual leave encashment is a statutory right under UAE employment law when employment ends, and employers cannot waive it.
What can an employee do if the employer does not pay unused annual leave?
The employee may file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE) or seek legal assistance to recover unpaid leave salary.
Need Labour Law Help?
Dubai's Expert Advice at Your Fingertips.
Conclusion on Unused Annual Leave Encashment in UAE
According to the aforementioned legal restrictions, an employee may be eligible for the unused Annual Leave Salary Encashment if both the employee and employer agree to it.
For any query about Unused Annual Leave Salary Encashment under New UAE Labor Law, don’t hesitate to contact our labour lawyers at HHS Lawyers and Legal Consultants.
