UAE labour law explained: Can you encash unused annual leave and carry it forward?

Question: I want to understand leave balance laws in the UAE. I have several weeks of pending leave accumulated over the past few years. As per the law, can I encash it? How does the process work?

Answer: Pursuant to your queries, the provisions of the UAE employment law and its subsequent cabinet resolutions are applicable.

In the UAE, an employee is entitled for 30 days of annual leave for each completing year of service with the employer. This is in accordance with Article 29(1)(a) of the Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the ‘Employment Law’), which states:

"Without prejudice to the rights accruing to the employee prior to the entry into force of this Decree-Law, the employee shall be entitled to a paid annual leave of not less than 30 days a year for each year of service.”

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Further, an employee may carry forward up to half of the unused annual leave to the next year, or, may agree with an employer to receive a cash payment for the same based on the salary applicable at the time the leave is due.

An employee is entitled to a cash payment for any unused annual leave, calculated based on the basic salary of an employee. This is in accordance with Article 19 of Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relations, which states: “Subject to the provisions of clauses (8) and (9) of Article 29 of the Employment Law:

1. The employee 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 salary he receives at the time of his entitlement to leave.

2. If the employee's service ends, he shall be paid a cash allowance for the balance of his legally due annual leave, according to the basic salary."

An employee is entitled to annual leave on completion of each year of service. Therefore, any cash allowance may be paid by an employer to an employee on completion of each year of service or as agreed between an employer and an employee.  The calculation of cash allowance in lieu of annual leave is based on the basic salary. 

The approval of the annual leave is at the discretion of your employer who decides whether to grant you annual leave of 30 (thirty) calendar days continuously or in different intervals based on the HR policy of your employer. Further, the maximum  number of days of annual leave which an employee may avail depends on various scenarios. Generally, the annual leave is availed by an employee for 30 (thirty) calendar days in a year for a continuous period or in intervals. In some instances, an employer may allow an employee to avail annual leave once in 2 (two) years. This is in accordance with the Article 29(8) of the Employment Law.

However, at the end of the service with the current employer, you may be able claim cash allowance for the annual leave which are not availed during your service period with the employer. This is in accordance with Article 29 (9) of the Employment Law, which states:

“An employer shall be entitled to be paid for his days of leave if he leaves the work before the use thereof, irrespective of the length thereof, for the period for which he did not use his leave. The employee shall be entitled to the leave pay for the fractions of the year in proportion to the period of service, and the same is calculated on the basis of the basic wage."

In accordance with the aforementioned provisions of law, the encashment of accumulated annual leave during employment is generally subject to mutual agreement with the employer and applicable policy of the employer. However, upon termination of employment, you may be entitled to receive a cash allowance for any accrued unused leave, calculated based on your basic salary.

Applicable laws: 

1. Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations

2. Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relations 

Ashish Mehta is the founder and managing partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm are on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai. 

Disclaimer: The information provided above is intended for general guidance and does not constitute legal advice. It is recommended to seek formal legal counsel.