Table of Contents
- How to Calculate Leave Salary in UAE
- Unused Annual Leave Salary Encashment in UAE Under Labour Law
- UAE Labour Law on Leave Salary: Article 29 Explained
- Annual Leave Encashment During Employment vs After Termination
- FAQs on Unused Annual Leave Calculation and Encashment in UAE
- Conclusion on UAE Leave Salary and Unused Annual Leave Encashment
Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations has been in force since 2 February 2022 and governs private-sector employment relationships covered by the UAE federal labour regime. Employees working in the DIFC and ADGM are subject to their respective employment laws.
Under the UAE Labour Law, employees may be entitled to annual leave, cash compensation for eligible carried-forward leave during employment, and payment for unused statutory annual leave when employment ends. The method of leave salary calculation in the UAE depends on when the leave is being paid.
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UAE Annual Leave Calculator
Estimate leave salary based on basic salary and unused leave days.
How to Calculate Leave Salary in UAE
The calculation of annual leave salary depends on whether the employee is taking annual leave, receiving cash instead of eligible leave during ongoing employment, or receiving payment for unused leave when employment ends.
For unused annual leave on termination, Article 29(9) of Federal Decree-Law No. 33 of 2021 and Article 19(2) of Cabinet Resolution No. 1 of 2022 provide that the cash equivalent of the employee’s statutory unused annual leave balance is calculated according to the employee’s basic salary.
For a monthly-paid employee, a simple estimate of unused leave salary on termination can be calculated as:
Daily basic salary = Monthly basic salary ÷ 30
Unused leave salary = Daily basic salary × Number of unused annual leave days
Example: If an employee’s monthly basic salary is AED 6,000 and the employee has 10 unused annual leave days:
- Daily basic salary: AED 6,000 ÷ 30 = AED 200
- Unused leave salary: AED 200 × 10 = AED 2,000
This termination calculation should not be confused with cash compensation agreed during ongoing employment, which is governed separately under Article 19(1) of Cabinet Resolution No. 1 of 2022.
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Unused Annual Leave Salary Encashment in UAE Under Labour Law
Can an employee receive payment for annual leave that has not been used? UAE Labour Law provides different rules depending on whether the employment relationship is continuing or has ended.
Under Article 29(8) of Federal Decree-Law No. 33 of 2021, an employer may not prevent a worker from benefiting from entitled annual leave for more than two years unless the worker wishes to carry the leave forward or receive a cash allowance in accordance with the establishment’s applicable regulations and the Executive Regulations.
Article 29(9) provides that when an employee leaves employment before using accrued annual leave, the employee is entitled to payment for the unused leave days. The employee is also entitled to leave for the relevant fraction of the final year of service, with the termination payment calculated according to the basic salary.
You should know: How is gratuity computed under the new UAE labour law?
UAE Labour Law on Leave Salary: Article 29 Explained
Article 29 of Federal Decree-Law No. 33 of 2021 governs annual leave for employees covered by the federal UAE Labour Law.
An employee is generally entitled to:
- 30 days of annual leave for each year of service
- Two days per month where the employee has completed more than six months but less than one year of service
- Leave for the relevant fraction of the final year where employment ends before the employee uses the annual leave balance
The employee is entitled to the wage for the period of annual leave.
Article 29(8) also provides that an employer may not prevent an employee from benefiting from entitled annual leave for more than two years unless the employee chooses to carry it forward or receive a cash allowance in accordance with the applicable establishment regulations and Executive Regulations.
Where employment ends before the employee uses the annual leave balance, Article 29(9) provides for payment for the unused leave days, calculated according to the employee’s basic salary.
An employee cannot therefore be prevented by the employer from using accrued annual leave for more than two years unless the circumstances allowed under Article 29(8) apply.
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Cabinet Resolution No. 1 of 2022 on Unused Annual Leave Encashment in UAE
Cabinet Resolution No. 1 of 2022, containing the Executive Regulations of Federal Decree-Law No. 33 of 2021, further regulates carrying forward annual leave and receiving cash compensation instead.
Under Article 19 of Cabinet Resolution No. 1 of 2022:
- During ongoing employment, a worker may carry forward no more than half of the annual leave to the following year or agree with the employer to receive its equivalent in cash according to the wage received when the leave becomes due.
- When employment ends, the worker is entitled to receive a cash equivalent for the statutory unused annual leave balance calculated according to the employee’s basic salary.
This distinction is important for UAE leave salary calculation. Cash compensation agreed while employment continues is not calculated under exactly the same rule as unused annual leave paid when employment terminates.
Annual Leave Encashment During Employment vs After Termination
The basis of calculation differs depending on when the payment is made.
| Situation | Applicable Basis |
|---|---|
| Cash in lieu of eligible carried-forward annual leave during ongoing employment | Wage received when the annual leave becomes due, subject to agreement with the employer and Article 19(1) |
| Unused statutory annual leave when employment ends | Basic salary under Article 29(9) and Article 19(2) |
This distinction is particularly important when using a UAE leave salary calculator because entering total salary instead of basic salary for a termination calculation may produce an incorrect estimate.
FAQs on Unused Annual Leave Calculation and Encashment in UAE
Is unused annual leave paid after resignation or termination in the UAE?
Yes. When employment ends, an employee covered by the federal UAE Labour Law is entitled to payment for the statutory annual leave balance that remains unused. The payment is calculated according to the employee’s basic salary.
How is annual leave salary calculated in the UAE?
For unused statutory annual leave at termination, the payment is calculated according to the employee’s basic salary. For a monthly-paid employee, a common estimate is the monthly basic salary divided by 30 and multiplied by the number of unused leave days.
Is UAE leave salary calculated on basic salary or total salary?
For unused statutory annual leave paid when employment ends, Article 29(9) of the UAE Labour Law and Article 19(2) of its Executive Regulations provide that the payment is calculated according to the employee’s basic salary.
Can an employee automatically take cash instead of annual leave?
Not during ongoing employment. Article 19(1) allows a worker to agree with the employer to receive cash instead of eligible carried-forward leave. Different rules apply when employment ends, when payment for the statutory unused leave balance becomes due.
How much annual leave can be carried forward in the UAE?
Under Article 19(1) of Cabinet Resolution No. 1 of 2022, a worker may carry forward no more than half of the annual leave entitlement to the following year, subject to the applicable legal requirements.
Can an employer prevent an employee from using accrued annual leave for more than two years?
Generally, no. Article 29(8) provides that an employer may not prevent a worker from benefiting from entitled annual leave for more than two years unless the worker chooses to carry it forward or receive a cash allowance in accordance with the applicable regulations.
What happens if an employee leaves the company with accumulated unused leave?
The employee is entitled to payment for the statutory unused annual leave balance. The termination payment is calculated according to the employee’s basic salary.
Do UAE annual leave encashment rules apply to all private sector employees?
These rules apply to employees covered by Federal Decree-Law No. 33 of 2021. Employees in DIFC and ADGM are subject to their respective employment laws, and other categories may also be governed by separate legislation.
Is employer approval required to pay unused leave after termination?
Payment for the statutory unused annual leave balance at termination is a legal entitlement under the applicable federal Labour Law. It is different from an agreement to receive cash instead of leave while employment is continuing.
What can an employee do if the employer does not pay unused annual leave?
An employee covered by the federal UAE Labour Law may raise a labour complaint with the Ministry of Human Resources and Emiratisation (MOHRE) where applicable or seek legal advice regarding recovery of unpaid employment entitlements.
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Conclusion on UAE Leave Salary and Unused Annual Leave Encashment
The rules for annual leave salary calculation in the UAE depend on whether employment is continuing or has ended. During employment, eligible leave may be carried forward or converted to cash in accordance with Article 19(1). When employment ends, the statutory unused annual leave balance is compensated according to the employee’s basic salary.
Employees should therefore distinguish between ordinary annual leave pay, cash in lieu during ongoing employment, and unused leave salary payable on resignation or termination.
For any query about unused annual leave salary encashment under UAE Labour Law, you may contact our labour lawyers at HHS Lawyers and Legal Consultants.
