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How to encash unused annual leaves in UAE: Calculations, when it becomes due; all your questions answered

KT reader asks: Is there a limit to how many leaves I can get cash allowance for in a year?

Question: I have several annual leaves pending. I have been told to clear them as they will apparently 'lapse'. What are the general rules around encashing them? Is there a limit to how many leaves I can encash?

Response: Pursuant to your queries, it is assumed that you are employed by a mainland employer based in the UAE for more than one year of continuous service. Therefore, the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the ‘Employment Law’) and those of Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relations ('Cabinet Resolution No. 1 of 2022') are applicable.

In the UAE, an employee is entitled to 30 days of annual leave for each year of service with the employer. This is in accordance with Article 29(1)(a) of 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 a. 30 days a year for each year of service.”

Further, an employee may only carry forward 15 days of his or her annual leave to the following year. This is in accordance with Article 19 of Cabinet Resolution No. 1 of 2022, 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."

The annual leave of an employee becomes due on completion of each year of service. Therefore, any cash allowance may be paid by an employer on completion of each year of service or as agreed between both parties. Based on the aforementioned provisions of law, you may carry forward only 15 days of your current year’s annual leave to the following year, or may request your employer to pay you cash allowance for the same. The calculation of cash allowance in lieu of annual leave is based on your basic salary.

At the end of the service with the current employer, you may claim cash allowance for the annual leave which [is] not availed by you during your service period. 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."

It may be noted that the employer may have the discretion of scheduling the annual leave of an employee as mentioned in Article 29(4) of the Employment Law.

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 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.

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