Annual Leave Pay Calculation in UAE: Full Salary or Basic Only?

Two Different Rules of Annual Leave Pay

This trips up a lot of people because it genuinely sounds like it should be one consistent rule. It isn’t:

• Taking leave while employed: full wage, meaning basic salary plus fixed contractual allowances like housing and transport, under Article 29.
• Cashing out unused leave when you leave your job: basic salary only, under Article 29(9) and Article 19 of Cabinet Resolution No. 1 of 2022, the same rule that governs gratuity.

For the exact formulas and worked examples for both scenarios, see our leave salary calculator. This page focuses on the surrounding rules that shape how and when each one applies.

While You’re on Leave: Paid in Advance

One requirement that surprises a lot of employees: your leave salary has to be paid to you before your leave actually starts, under Article 29(5), not with your next regular payroll cycle or after you’re back. Some employers include it with your last paycheck before leave begins, others process it as a separate advance payment. Either way, if you’re heading off on leave and haven’t been paid yet, that’s worth raising before you go, not after.

On what counts as “full wage” here, most guidance points to basic salary plus any allowances that are fixed and contractual, like housing and transport. Variable or discretionary components, commissions, performance bonuses, and similar, generally aren’t included. If your contract specifically defines what counts, that written definition governs, so it’s worth checking your own contract’s wording rather than assuming the general rule applies exactly as described here.

You Can’t Work Elsewhere During Your Leave

Under Article 29(7), you’re not permitted to work for another employer while you’re on annual leave from your current one. Annual leave exists for rest, not as a window for a second income stream. If your employer finds out you worked elsewhere during leave, they’re entitled to deny you the leave salary for the days you worked.

Carry-Forward and When Leave Turns Into Cash

You can generally carry forward a portion of unused leave, commonly cited around 15 days or up to half your annual entitlement, into the next year, with your employer’s agreement. Your employer also can’t simply deny you the ability to take leave indefinitely: if you’re blocked from taking accumulated leave for more than two consecutive years, that typically converts into an entitlement to cash compensation for it.

Public Holidays and Sick Days Within Your Leave

If a public holiday or a period of sick leave happens to fall during your scheduled annual leave, it generally still counts as part of your leave days, unless your contract or company policy says otherwise. This is a common source of disappointment for employees who expected their time off to stretch further than it did. Hajj leave is handled separately: Muslim employees are entitled to a one-time unpaid leave of up to 30 days to perform Hajj, and this can’t be deducted from your regular annual leave balance.

If You Took More Leave Than You’d Actually Earned

If your employer allowed you to take leave in advance of what you’d technically accrued, and your employment ends before you’ve earned it back, the excess can be deducted from your final settlement. This should be clearly documented, consistent with your contract, and not just an informal assumption on the employer’s part.