How annual leave works for private-sector employees in the UAE — entitlement rules, salary calculation, carry-forward limits, encashment on termination, and DIFC/ADGM exceptions.
Every private-sector employee in the UAE accrues paid annual leave under Federal Decree-Law No. 33 of 2021 — 30 calendar days per year after completing one year of service. Getting the calculation right matters because leave salary during employment is based on full wages (basic plus allowances), while encashment on termination uses basic salary only. Misunderstanding this distinction is one of the most common causes of payroll disputes filed with MOHRE.
This guide covers the complete annual leave framework: who qualifies, how entitlement accrues, how leave salary is calculated at each stage, carry-forward and encashment rules, what happens with public holidays during leave, part-time employee adjustments, and the separate regimes that apply in the DIFC and ADGM. All rules reference Articles 29–31 of the Labour Law and the Executive Regulations under Cabinet Resolution No. 1 of 2022.
Who Is Covered by UAE Annual Leave Rules
The federal annual leave entitlement under Federal Decree-Law No. 33 of 2021 applies to all private-sector employees working on the UAE mainland — both UAE nationals and expatriates. This includes employees on fixed-term contracts (the only contract type available since all unlimited contracts were required to convert by the end of 2023), full-time staff, and part-time workers registered through MOHRE.
The law does not cover federal or local government employees, members of the armed forces and police, or domestic workers — each of these groups falls under separate legislation. Employees working within the DIFC and ADGM financial free zones are also excluded from the federal regime and follow their own employment regulations, detailed later in this article.
Annual Leave Entitlement by Length of Service
Article 29 of Federal Decree-Law No. 33 of 2021 defines annual leave entitlement based on the employee’s continuous service period. The entitlement is expressed in calendar days, not working days — a distinction that affects scheduling, since weekends and rest days falling within the leave period are counted.
| Length of Service | Annual Leave Entitlement | Notes |
|---|---|---|
| Less than 6 months | No statutory entitlement | Employer may grant leave at discretion during probation |
| 6 months to less than 1 year | 2 calendar days per month worked | Pro-rated; 6 months = 12 days, 9 months = 18 days |
| 1 year or more | 30 calendar days per year | Statutory minimum; employer may offer more |
These are minimum statutory entitlements. An employer can offer more generous terms — for example, 35 days per year or working-day-based calculations — but cannot lawfully reduce the entitlement below these floors. Any employment contract clause that reduces entitlement below the statutory minimum is void under the law.
Probation Period
During probation (up to six months), annual leave accrues but the employer retains discretion over whether to approve its use. If the employee passes probation and continues in service, accrued leave from the probation period is fully available. If employment is terminated during probation, the employee is entitled to payment for any accrued but unused leave.
Part-Time Employees
Part-time workers registered through MOHRE are entitled to annual leave calculated proportionally based on actual working hours compared to a full-time equivalent in the same role, as specified in Article 18 of the Executive Regulations. For example, an employee working 24 hours per week against a 48-hour full-time benchmark would receive 50% of the standard entitlement — 15 calendar days instead of 30. The exact calculation must be outlined in the employment contract.
How Annual Leave Salary Is Calculated
One of the most disputed aspects of annual leave in the UAE is the salary calculation, because the law uses different wage bases depending on whether the employee is taking leave during employment or receiving encashment upon termination. Understanding this distinction is essential for both payroll accuracy and dispute prevention.
Leave Salary During Employment (Taking Leave)
When an employee takes annual leave during the course of employment, they are entitled to receive their full wage for the leave period. Under Article 29(1) of the Labour Law, this means the basic salary plus any fixed contractual allowances (such as housing and transportation) that the employee normally receives in a working month. The employee should receive the same salary they would have earned if they were working.
The standard formula is:
Daily leave salary = (basic monthly salary + fixed monthly allowances) ÷ 30
Total leave pay = daily leave salary × number of annual leave days taken
The leave salary must be paid before the employee begins the leave period. For example, an employee with a total monthly package of AED 15,000 (AED 10,000 basic + AED 3,000 housing + AED 2,000 transport) taking 15 days of leave would receive: AED 15,000 ÷ 30 × 15 = AED 7,500 in leave pay.
Leave Encashment on Termination
When employment ends — whether through resignation, dismissal, mutual agreement, or contract expiry — the calculation changes. Under Article 29(9) of the Labour Law, encashment of unused annual leave at termination is calculated on the basic salary only, excluding all allowances.
The formula for termination encashment is:
Unused leave salary = (basic monthly salary ÷ 30) × number of unused annual leave days
Using the same example: an employee with AED 10,000 basic salary who has 20 unused days at termination would receive: AED 10,000 ÷ 30 × 20 = AED 6,667. This is notably lower than the AED 10,000 they would have received taking those 20 days as actual leave (at the full-wage rate). This difference creates a strong financial incentive to use leave during employment rather than accumulate it for encashment, and is a common source of disputes where employees are unaware of the distinction.
Employers must settle all final dues, including leave encashment, within 14 days of the employment end date. Failure to do so can result in penalties and MOHRE labour complaints. The employee is entitled to encashment of any accrued leave fraction — there is no forfeiture of unused days upon termination, regardless of the reason for leaving.
Carry-Forward and Accumulation Rules
Annual leave is intended to be used within the year it accrues. However, the law allows for limited carry-forward under specific conditions, governed by Article 29 of the Labour Law and Article 19 of Cabinet Resolution No. 1 of 2022.
The rules work as follows:
- An employee may carry forward up to half of their annual leave entitlement to the following year, with the employer’s consent and in accordance with company policy.
- Alternatively, the employee may agree with the employer to receive a cash allowance in lieu of the carried-forward portion, calculated on the wage at the time the leave becomes due.
- The employer cannot prevent an employee from using accrued annual leave for more than two consecutive years, unless the employee voluntarily chooses to carry it forward or accept cash compensation.
In practice, many employers have internal policies that require employees to use a minimum number of days each year and cap carry-forward at a specific number. These policies are valid provided they do not reduce the employee’s statutory rights. Systematically blocking leave for operational reasons without providing alternatives within the two-year window can place the employer in breach of the law and expose them to MOHRE complaints.
Public Holidays and Annual Leave
The treatment of public holidays that fall during an annual leave period is a frequent source of confusion. According to the official UAE Government Portal (u.ae), public holidays or agreed leave days that fall within the annual leave period are considered part of the annual leave — unless the employment contract or company policies provide more favourable terms.
This means that by default, a public holiday falling during your 30-day leave does count as a leave day. However, many employers adopt a more employee-friendly policy where public holidays are excluded from the annual leave count. Always check your employment contract and company leave policy for the specific rule that applies to you.
If an employee is required to work on a public holiday that falls outside annual leave, the employer must compensate them — either through an alternative rest day or payment equivalent to the regular daily wage plus an additional 50% of the basic salary, as outlined in Article 28 of the Labour Law.
Employer Obligations: Scheduling and Notice
The employer has the right to determine the timing of annual leave according to operational requirements, but this right comes with specific obligations under the law:
- The employer must notify the employee of the leave dates at least one month in advance.
- Leave should be used in the year of entitlement. The employer may divide it into two periods if necessary.
- The employer cannot require the employee to work during annual leave in a manner that conflicts with the legal rules — if work is required during leave and the leave is not carried forward, the employer must pay the employee’s leave salary plus additional compensation for the days worked.
- An employee who does not return to work on the scheduled date after annual leave forfeits the right to wages for the absence period. If the absence exceeds seven consecutive days after the leave end date, the employer may terminate the contract.
Annual Leave Calculation Examples
The following worked examples illustrate how leave entitlement and salary are calculated in common scenarios.
Example 1: Full-Year Employee Taking Leave
| Parameter | Value |
|---|---|
| Service duration | 2 years, 4 months |
| Basic salary | AED 8,000 |
| Housing allowance | AED 3,000 |
| Transport allowance | AED 1,000 |
| Leave days requested | 20 days |
| Annual leave entitlement | 30 calendar days |
| Daily leave salary | (8,000 + 3,000 + 1,000) ÷ 30 = AED 400/day |
| Total leave pay | AED 400 × 20 = AED 8,000 |
Example 2: First-Year Employee (Pro-Rated)
| Parameter | Value |
|---|---|
| Service duration | 8 months |
| Basic salary | AED 6,000 |
| Housing allowance | AED 2,000 |
| Accrued leave | 2 days × 8 months = 16 calendar days |
| Daily leave salary | (6,000 + 2,000) ÷ 30 = AED 267/day |
| Total leave pay (16 days) | AED 267 × 16 = AED 4,267 |
Example 3: Leave Encashment on Termination
| Parameter | Value |
|---|---|
| Service duration | 3 years, 2 months |
| Basic salary | AED 12,000 |
| Total salary with allowances | AED 18,000 |
| Unused leave at termination | 25 days (30 full-year + pro-rated fraction of 2 months = 4 days, minus 9 used) |
| Daily rate (basic only) | AED 12,000 ÷ 30 = AED 400/day |
| Encashment amount | AED 400 × 25 = AED 10,000 |
Note the difference: if those 25 days had been taken as actual leave, the pay would have been AED 18,000 ÷ 30 × 25 = AED 15,000 — a difference of AED 5,000. This illustrates why employees should generally use annual leave rather than accumulate it for encashment. The employer must include leave encashment in the end-of-service settlement alongside gratuity and any other final dues.
DIFC and ADGM: Separate Annual Leave Regimes
Employees based in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) are not covered by the federal Labour Law. Each free zone has its own employment legislation with distinct annual leave entitlements.
| Feature | Federal (MOHRE) | DIFC | ADGM |
|---|---|---|---|
| Minimum annual leave | 30 calendar days | 20 working days | 20 working days |
| Day type | Calendar days (includes weekends) | Working days (excludes weekends) | Working days (excludes weekends) |
| Eligibility start | After 6 months (pro-rated) | After 90 days | Accrues from start (1/12th per month in first year) |
| Carry-forward limit | Up to half the entitlement | Up to 20 working days (expires after 12 months) | At least 5 days (more by agreement); expires after 12 months |
| Public holidays | Count as leave days (unless contract says otherwise) | Separate from vacation leave | Exclusive of national holidays |
| Governing law | Federal Decree-Law No. 33/2021 | DIFC Employment Law No. 2 of 2019 (as amended) | ADGM Employment Regulations 2024 (effective 1 April 2025) |
The practical difference in effective time off is smaller than it appears. Under the federal regime, 30 calendar days typically translates to roughly 20–22 working days (depending on weekends and rest days). DIFC and ADGM give 20 working days outright, excluding weekends, so the effective rest period is broadly comparable. However, DIFC and ADGM both treat public holidays as entirely separate from vacation leave by default, which can result in slightly more total paid time off over the year.
For ADGM employees, the new Employment Regulations 2024 (in force from 1 April 2025) introduced updated carry-forward rules: employees can carry forward at least 5 days by right, with additional days subject to employer agreement. Carried-forward leave expires after 12 months.
Common Disputes and How to Avoid Them
Annual leave is one of the most common subjects of labour complaints filed with MOHRE. Based on typical dispute patterns, here are the most frequent issues and how to prevent them.
Wage Base Disputes
Many disputes arise because either party misunderstands which wage base applies. During employment, leave is paid at full wages including allowances. On termination, encashment uses basic salary only. Employers should define clearly in the contract which components constitute “basic salary” versus “allowances” to avoid ambiguity — a contract that bundles everything into one figure without distinction creates uncertainty at termination.
Calendar Days vs Working Days Confusion
Under the federal regime, the 30-day entitlement is expressed in calendar days. Some employers mistakenly apply it as working days, which effectively extends the entitlement. Others count only working days within the 30-calendar-day block, shortchanging employees. The correct interpretation: 30 consecutive calendar days, including any weekends or rest days that fall within the period.
Blocking Leave Beyond Two Years
Employers who systematically deny leave requests beyond the two-year carry-forward limit are in breach of the law. If operational demands prevent leave, the employer should offer a carry-forward arrangement or cash compensation within the legal framework. Simply ignoring leave requests is not a valid approach and can trigger penalties.
Non-Payment of Leave Salary Before Travel
The law requires leave salary to be paid before the leave starts. Employers who process leave pay through the normal payroll cycle (i.e., at month’s end) may inadvertently violate this requirement if the employee’s leave begins before the pay date.
Annual Leave and the End-of-Service Settlement
When employment ends, unused annual leave must be included in the final settlement package alongside end-of-service gratuity, any pending salary, notice period compensation (if applicable), and repatriation flight costs. The leave component is calculated on basic salary only, pro-rated for any partial year of service. Employers are required to settle all final dues within 14 days of the termination date.
If an employee has used more leave than accrued at the point of termination (for example, where the employer advanced leave days), the employer may deduct the excess from the final settlement. However, any such deduction should be clearly documented and consistent with the employment contract terms.
FAQ
How Many Days of Annual Leave Are Employees Entitled to in the UAE?
Under Article 29 of Federal Decree-Law No. 33 of 2021, employees who complete one year of continuous service are entitled to 30 calendar days of paid annual leave per year. Employees with more than six months but less than one year of service receive 2 calendar days per month. There is no statutory entitlement for service under six months.
Is Annual Leave Calculated in Calendar Days or Working Days?
Under the federal Labour Law (MOHRE regime), annual leave is calculated in calendar days. This means weekends and rest days falling within the leave period are counted toward the 30-day entitlement. In the DIFC and ADGM, leave is calculated in working days (20 working days), so weekends are excluded.
Do Public Holidays Count as Annual Leave Days?
Under the default federal rule, public holidays that fall within the annual leave period are counted as part of the leave. However, the law explicitly allows employment contracts or company policies to provide more favourable terms — and many employers exclude public holidays from the leave count. Check your contract and company leave policy for the specific rule that applies.
How Is Leave Salary Calculated During Employment vs on Termination?
During employment, leave salary is based on the employee’s full wage (basic salary plus fixed allowances like housing and transport). On termination, encashment of unused leave is calculated on basic salary only, excluding allowances. This difference means taking leave during employment is financially more valuable than cashing it out at the end.
Can Unused Annual Leave Be Carried Forward to the Next Year?
Yes, with the employer’s consent. An employee may carry forward up to half of the annual leave entitlement, or agree to receive cash compensation for the carried portion. The employer cannot block an employee from using accrued leave for more than two consecutive years, unless the employee voluntarily agrees to the carry-forward or encashment.
What Happens to Unused Leave When an Employee Resigns or Is Terminated?
The employee is entitled to cash payment for all accrued but unused annual leave, calculated on basic salary. This applies regardless of whether the employee resigned, was terminated, or reached the end of a fixed-term contract. The employer must include leave encashment in the final settlement within 14 days of the employment end date.
Are Part-Time Employees Entitled to Annual Leave in the UAE?
Yes. Part-time employees receive annual leave pro-rated based on their actual working hours compared to a full-time employee. For example, a worker on a 24-hour weekly schedule (against a 48-hour full-time benchmark) would receive 15 calendar days per year instead of 30. The specific calculation must be detailed in the employment contract.
Can an Employer Force an Employee to Take Annual Leave?
The employer has the right to determine when annual leave is taken, provided they give at least one month’s notice. Employers may schedule leave to align with business needs — for example, during annual shutdown periods. However, the employer cannot deny leave entirely or prevent its use for more than two consecutive years.
Official Sources
This article references information from the following UAE government authorities and legal texts:
- UAE Government Portal (u.ae) — Annual Leave in the Private Sector
- MOHRE — Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (full text PDF)
- UAE Government Portal — Types of Leaves and Entitlements in the Private Sector
- UAE Legislation Portal — Federal Decree-Law No. 33 of 2021
- ADGM — Employment Affairs Office Guidance on Employment Regulations 2024
UAE labour regulations and internal policies can change. Verify requirements with MOHRE, your employer’s HR department, or a qualified UAE employment lawyer before making decisions based on this guide. This content is informational and does not constitute legal advice.
About the authors
Omar Al Nasser is a Senior Content Creator & Analyst at UAE Experts HUB, specializing in Dubai real estate registration, title deeds, and official government procedures.
Head of Legal & Compliance Department
Author & Editor
Head of Legal & Compliance Department
Author & Editor
