Created with AIPRM Prompt “Write Best Article to rank on Google”
Meta Title (60 characters)
Meta Description (160 characters)
Annual Leave in UAE 2026: Entitlement, Calculation & Labor Law Explained
Understanding annual leave in UAE is a critical responsibility for employers and employees alike in 2026. The UAE Labour Law provides a structured framework that protects employee welfare while enabling organizations to maintain operational continuity. We outline the complete legal entitlements, calculation methods, employer obligations, and best practices for compliance, supported by modern HR technology.
This guide is designed for HR leaders, finance teams, business owners, and professionals who require clarity, accuracy, and implementation-ready knowledge.
Legal Framework Governing Annual Leave in UAE
The UAE Labour Law (Federal Decree-Law No. 33 of 2021 and its amendments) defines the foundation of annual leave in UAE. All employees working under an unlimited or limited contract are legally entitled to paid annual leave after completing six months of service.
Key principles include:
- Leave must be paid at the employee’s basic salary plus allowances.
- Employers must not deny statutory leave entitlements.
- Leave schedules should consider operational requirements but cannot eliminate legal rights.
- Unused leave must be compensated upon termination.
These provisions apply equally across mainland companies and free zone entities, unless internal policies provide more favorable benefits.
Annual Leave Entitlement in UAE for 2026
The statutory entitlements remain consistent in 2026:
- After 6 months but less than 1 year: 2 days per month
- After completing 1 year: 30 calendar days annually
This structure ensures fairness and encourages workforce stability. For employees under probation, leave accumulation begins after six months of continuous service.
Organizations offering extended benefits, such as 35 or 40 days annually, must clearly document such policies in employment contracts and HR manuals.
Employers must ensure that annual leave in UAE is clearly communicated in offer letters, HR handbooks, and payroll documentation.
How Annual Leave is Calculated
Accurate calculation prevents disputes and compliance risks. The standard calculation formula is:
Annual Leave Pay = Basic Salary + Fixed Allowances
Important details include:
- Overtime payments are excluded unless contractually included.
- Variable commissions are not part of leave salary.
- Public holidays during annual leave do not reduce leave days.
For example:
If an employee earns AED 6,000 basic salary and AED 2,000 housing allowance, their daily leave pay equals:
(6,000 + 2,000) ÷ 30 = AED 266.67 per day
Modern HR systems automate this process to ensure precision and transparency.
Carry Forward Rules and Expiry Policies
The law allows unused leave to be carried forward to the next year subject to employer approval. However:
- Employers may restrict accumulation beyond two years.
- Internal policies must define expiry timelines.
- Employees may request encashment instead of leave only with employer consent.
Failure to manage accumulated leave can result in financial liabilities during employee exit or audits.
We strongly recommend that organizations implement automated alerts and dashboards to monitor leave balances in real time.
Public Holidays and Annual Leave Interaction
Public holidays such as Eid, National Day, and Islamic New Year do not count as annual leave if they occur during approved leave periods.
This distinction ensures that employees receive their full statutory entitlement under annual leave in UAE.
HR departments must maintain updated UAE holiday calendars and ensure payroll systems exclude these days from leave deductions.
Termination, Resignation, and Leave Encashment
Upon resignation or termination, employees are entitled to:
- Payment for unused annual leave days
- Calculation based on last drawn basic salary and allowances
Employers must process this payment as part of the final settlement within legally defined timelines.
Failure to comply can result in labor court penalties, fines, and reputational damage.
Digital Compliance with Decibel 360 Cloud
Managing leave manually increases error rates and regulatory exposure. We recommend implementing a centralized HRMS such as Decibel 360 Cloud.
Key features include:
- Automated annual leave in UAE calculation
- UAE-compliant payroll integration
- Leave policy customization
- Employee self-service portals
- Audit-ready reports
- Cloud-based data security
- Real-time dashboards
- Multi-company and multi-location support
Organizations across the UAE leverage this platform to reduce compliance risk and administrative overhead.
Explore the official UAE platform here:
Decibel 360 Cloud
Employer Responsibilities and Compliance Checklist
To remain compliant in 2026, employers must:
- Maintain written leave policies
- Provide payslips showing leave balances
- Process leave payments on time
- Record approvals digitally
- Ensure system-based calculations
- Retain records for inspection
Regulatory authorities increasingly expect digital documentation and structured reporting.
Common Mistakes Companies Must Avoid
- Deducting public holidays from annual leave
- Calculating leave on basic salary only
- Ignoring unused leave liabilities
- Lack of documentation
- Manual spreadsheets without validation
- Delayed final settlements
Avoiding these errors protects businesses from disputes and operational disruption.
FAQs – Annual Leave in UAE
1. What is the minimum annual leave entitlement in UAE?
Employees receive 30 calendar days after one year of service.
2. Is annual leave paid in UAE?
Yes, it is fully paid based on salary and fixed allowances.
3. Can employers refuse annual leave requests?
They may reschedule but cannot deny statutory entitlement.
4. Can unused leave be carried forward?
Yes, subject to company policy and legal limitations.
5. Is annual leave paid upon resignation?
Yes, all unused leave must be compensated.
Managing annual leave in UAE effectively in 2026 is no longer optional. Legal compliance, workforce satisfaction, and operational continuity depend on structured policies and automated HR technology. Companies that invest in digital HR platforms significantly reduce regulatory exposure while improving employee trust and transparency.