Leave salary and leave encashment are two different pays
People say leave salary for two different things, and the law pays them on two different wages. Article 29 of the UAE Labour Law (Federal Decree-Law No. 33 of 2021) sets both.
| What it is | Paid on | Law | |
|---|---|---|---|
| Leave salary | Your pay for the days you are on annual leave | Full wage (basic + allowances) | Article 29(1), 29(6) |
| Leave encashment | Cash for leave days you never took, paid when the job ends | Basic salary | Article 29(9) |
If you only want the number, the UAE leave salary calculator does it for you. If you want to check your employer's figure, follow the four steps below.
- 1Count the leave days you earned
- 2Take away the days you used
- 3Pick the right wage: full or basic
- 4Daily wage × days left
Step 1: count the leave days you earned
| Your service | Leave earned |
|---|---|
| Under 6 months | None yet |
| 6 to 12 months | 2 days for each month |
| Each full year | 30 days |
| Last, part year | In proportion to the months worked |
So 2 years and 3 months of service earns 30 × 2 + 30 × 3/12 = 67.5 days. The UAE annual leave calculator counts this from your dates.
Step 2: take away the days you used
Subtract every day of annual leave you have already taken. Public holidays that fell inside your leave count as leave days, unless your contract gives more (Article 29(7)). What is left is the number you are paid for.
Step 3: pick the right wage
- Taking leave: use your full monthly wage. Article 29(1) says annual leave is "with full wage", and Article 1 defines wage as the basic plus cash allowances and benefits.
- Leaving the job with days unused: use your basic salary. Article 29(9) says this pay "shall be calculated according to the basic wage".
Many websites still say leave pay is "basic + housing". That rule comes from the old 1980 labour law (Article 78). The 2021 law replaced it with the full wage.
Step 4: daily wage × days left
Daily wage = monthly wage ÷ 30. Then multiply by the days.
The law does not set the divisor itself. Dividing by 30 is what most employers and payroll systems use. Some employers use monthly × 12 ÷ 365, which gives a slightly lower figure:
| Basic AED 6,000, 20 unused days | Daily wage (AED) | Pay (AED) |
|---|---|---|
| ÷ 30 (usual practice) | 200.00 | 4,000.00 |
| × 12 ÷ 365 | 197.26 | 3,945.21 |
Six worked examples
Example 1: taking 30 days of leave
Full wage AED 8,000 (basic 5,000, housing 2,000, transport 1,000).
- 8,000 ÷ 30 × 30 = AED 8,000 for the leave month
- Under the old "basic + housing" rule it would be AED 7,000, so the old rule costs you AED 1,000
Example 2: leaving after 2 years and 3 months
Basic AED 5,000, 40 days of leave taken.
- Earned: 67.5 days. Left: 67.5 − 40 = 27.5 days
- Daily basic: 5,000 ÷ 30 = AED 166.67
- 5,000 ÷ 30 × 27.5 = AED 4,583.33
Example 3: leaving in the first year
Joined 1 January, left 31 August (8 months), basic AED 3,000, no leave taken.
- 8 months × 2 days = 16 days
- 3,000 ÷ 30 = AED 100 a day
- 16 × 100 = AED 1,600
If the same person had left after 5 months, there would be no leave to pay: leave starts only after 6 months.
Example 4: five years without leave
Basic AED 4,000, 5 years, no leave ever taken: 150 days.
- 4,000 ÷ 30 = AED 133.33 a day
- 4,000 ÷ 30 × 150 = AED 20,000
Some employers pay only the last 2 years (60 days = AED 8,000). The law does not allow that cut. See "Is there a 2-year limit?" below.
Example 5: cash instead of leave while still working
15 days, full wage AED 8,000, basic AED 5,000.
- On the full wage: 8,000 ÷ 30 × 15 = AED 4,000
- On the basic: 5,000 ÷ 30 × 15 = AED 2,500
This needs your employer's agreement. The Executive Regulation pays it on "the salary he receives at the time of his entitlement to leave", and lawyers read that in different ways. Ask your employer which wage they use, and get it in writing.
Example 6: the divisor
Basic AED 6,000, 20 unused days: AED 4,000 at ÷ 30, AED 3,945.21 at × 12 ÷ 365 (the table in Step 4).
Work out your own leave salary →
Is there a 2-year limit on unused leave pay?
No. Article 29(9) pays accrued leave "regardless of the leave duration". In December 2024 the Abu Dhabi Court of Cassation overturned a lower court that had paid only 2 years, and awarded a worker 13 years of unused leave (AED 59,290) on the final basic salary. The employer has to prove that leave was taken or paid.
The "2 years" people remember is a different rule. Article 29(8) says your employer cannot stop you from taking leave that has built up for more than two years.
There is one time limit: since the 2024 amendment (Decree-Law No. 9 of 2024), a labour claim must be filed within 2 years of the job ending (Article 54). That limit is on the claim, not on the number of days.
How many days can I carry forward?
Not more than half of a year's leave, so 15 of 30 days, and only with your employer's approval (Article 29(5) and Article 19(1) of the Executive Regulation, Cabinet Resolution No. 1 of 2022).
Which basic salary if I got a pay rise?
Usually your last basic salary. The Abu Dhabi court used the final basic in the 2024 case. If your employer used an older, lower basic, ask them to show the rule in your contract.
Mistakes people make
- Using the total salary for leave encashment. At the end it is the basic.
- Using the basic for leave you take. While on leave you get the full wage.
- Accepting only 2 years of unused leave. The law pays all of it.
- Forgetting the part year. 3 extra months add 7.5 days.
Unused leave is one line of your final settlement, paid within 14 days of the end of the contract (Article 53). Gratuity is separate and also on the basic. See the UAE final settlement calculator, UAE final settlement explained and the UAE gratuity calculator. For leave days, dates and probation, read UAE annual leave rules.
This is an estimate under the published law, not legal advice. Your employer, MOHRE or a court gives the final figure.
Questions people ask about leave salary
How is leave encashment calculated in the UAE? Basic salary ÷ 30 × unused leave days, when the job ends (Article 29(9)). Basic AED 5,000 and 12 days left gives AED 2,000.
Is leave salary calculated on basic or gross salary? Leave you take is paid on the full wage. Leave you cash in when you leave is paid on the basic salary.
Is unused leave paid if I resign? Yes. Article 29(9) pays it whenever the job ends, whether you resign or are dismissed.
Is leave salary paid before I go on leave? The 2021 law says you are paid your wage for the leave period, but it does not say it must be paid in advance. Many companies do. Check your contract.
Does unused leave expire? Not when you leave the job: all accrued days are paid. While you work, only half a year's leave can be carried forward with your employer's approval.
Do I get leave pay if I fail probation? Yes. You keep the right to be paid for the leave you earned (Article 29(3)).
Sources
- Federal Decree-Law No. 33 of 2021, English translation on u.ae (Articles 1, 29, 53, 54)
- u.ae: types of leave in the private sector
- Khaleej Times: Executive Regulation Article 19 on encashing unused leave
- Khaleej Times: Abu Dhabi court awards 13 years of unused leave
- LY Lawyers: Decree-Law No. 9 of 2024 amendments
This guide is general information, checked in October 2026.