What the new UAE labour law says about the employee’s right to encash unused leaves
Dubai: If you were waiting with anticipation for your month-long vacation this summer, but the plans fell through due to personal or professional reasons, do you have the option to encash the unused leave?
The UAE’s Labour Law – Federal Decree Law No. 33 of 2021 – provides clear guidelines on when and how employees are entitled to take annual leaves and what an employer’s rights and responsibilities are in these cases.
So, if you want to understand how leave encashment works under the UAE labour law and whether you are entitled to it, here is all you need to know.
What is the policy of unused leaves in the UEA’S labour law?
The policy for leaves and leave encashment are stipulated in Article 29 of the UAE Labour Law.
Noora Al Doseri, a paralegal at ADG Legal, a Dubai-based law firm, explained that employees in the UAE are entitled to 30 calendar days of annual leave, which they must make use of in the year that it is due.
She said: “The Labour Law does not make provisions for unused annual leaves to be automatically carried forward to the following year.”
She added that cash in lieu of unused leaves is also not a practice laid out in the UAE’s Labour Law.
“Employees should be aware that there is no reference in the Labour Law that cash in lieu of annual leave should be paid out by the employer on an annual basis,” she said.
What happens to my unused leaves?
Al Doseri clarified that carrying forward annual leaves or receiving cash in lieu of unused leaves is dependent on the company policy, or if an agreement is reached between the employer and employee to carry forward the annual leaves.
“If the employee does not intend to avail the annual leaves in the same year, then the employee can agree with the employer on an arrangement either for the annual leaves to be carried forward to the following year, which can be no more than half of the annual leaves, or receive remuneration for the unused leaves, as per Article 19 (1) of Cabinet Resolution No. 1 of 2022,” Al Doseri explained
She added that the amount for encashment will be based on the employee’s basic salary
Exception in the case of termination
Al Doseri added: “One of the limited circumstances in which an employee is statutorily entitled to cash in lieu of annual leave, is upon termination, which is calculated on the basis of basic salary only, as per Article 29 (9) of the UAE Labour Law.”
What happens if my employer denies annual leave?
Ahmed Ragab Alkotby, Partner at ADG Legal, reiterated the fact that employees are required to use their annual leaves within the year it falls due, adding that employers cannot deny annual leave and must allow workers to utilise at least half of the leaves due.
“An employer cannot employ an employee continuously for two years without granting annual leave, according to Article 29 (8) of the UAE Labour Law. The Law, along with its Executive Regulations, stipulates that at least 50 per cent of the leave entitlement should be utilised within the year. If the employer denies this, then the employer has to pay in lieu of the untaken annual leave on the basis of basic salary,” AlKotby said
What if i am asked to work during my annual leave?
If a worker does not avail their annual leave, because the employer has postponed it due to work commitments, Reda Hegazy, Senior Associate and Arbitrator at Alsuwaidi & Company LLC Advocates and Legal Consultants, provides two scenarios that are available to a worker.
“If the employee decides not to take his annual leave because the employer requires him to work, then the said employee can either postpone his annual leave to a later date or he can request the annual leave balance converted to cash, only if the company’s policy allows such an encashment option,” he said.
“In case an employee is on annual leave and works during this period, and the employer does not object to it, then the employee is entitled to receive payment on the period he spent working,” he added.