UAE annual leave pay: Are you entitled to your full salary, including allowances?
What salary and allowances are UAE employees entitled to during annual leave?
Dubai: Taking your annual leave shouldn't mean taking a pay cut but many employees in the UAE aren't sure exactly what their paycheck should look like while they're off work.
If your employer trims your monthly pay down to just your basic salary and housing allowance during leave, is that within their rights, or are you owed more?
The answer lies in how UAE Labour Law actually defines ‘salary’ and it may not match what many companies are practicing.
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Reader query:
According to UAE Labour Law, what salary and benefits is an employee entitled to receive during annual leave? My company pays only my basic salary and housing allowance (HRA) while I am on leave and excludes my other regular allowances. Is this compliant with UAE Labour Law, or should employees receive their full salary, including all applicable allowances, during annual leave
Statutory leave pay: Full salary required
"A common misconception among employees in the UAE is that annual leave pay consists only of the basic salary or basic salary plus housing allowance. Under UAE Labour Law, this practice is non-compliant," says Salam Pappinissery, CEO of YAB Legal Services.
Under Article 29 of Federal Decree-Law No. 33 of 2021 (the UAE Labour Law), an employee taking annual leave is entitled to receive their full salary (full wage) during the leave period.
According to the law, "wage" is defined as the basic wage plus all allowances (such as housing, transport, and other regular allowances) and contractual benefits.
"Therefore, while an employee is actively taking their statutory annual leave (30 calendar days per year), the employer must pay the employee their full salary, including all regular allowances that they normally receive during a regular working month. Paying only the basic salary and housing allowance (HRA) while excluding other regular allowances during leave violates statutory requirements," Pappinissery said.
A common misconception among employees in the UAE is that annual leave pay consists only of the basic salary or basic salary plus housing allowance. Under UAE Labour Law, this practice is non-compliant.
Important distinction: termination encashment
It is vital to distinguish between taking leave during employment and encashing unused leave at termination:
While on annual leave: The employee receives their full salary (basic salary plus all regular allowances).
Cash in lieu upon termination: Encashment for accrued, unused annual leave days at the end of employment is calculated strictly on the basic salary only, unless the employment contract provides more favourable terms.
"If an employer excludes regular allowances from monthly pay while an employee is on annual leave, the employee may raise the issue internally with HR by referencing Article 29 of Federal Decree-Law No. 33 of 2021, or lodge a formal inquiry with the Ministry of Human Resources and Emiratisation (MoHRE)," he advised.
