Unused Annual Leave Encashment in UAE (Article 29): How Leave Payout Is Calculated in Your Final Settlement
When you leave a job in the UAE, your Final Settlement includes two major lump-sum payouts alongside your final month's salary: your End of Service Gratuity (Article 51) and your Unused Annual Leave Encashment (Article 29). Under Article 29(9) of Federal Decree-Law No. 33 of 2021 and Article 19 of Cabinet Resolution No. 1 of 2022, any accrued untaken annual leave days must be paid out in cash calculated on your Basic Wage.
Key Statutory Takeaways (2026)
Open Gratuity & Labour Law Calculator →- Statutory Leave Accrual (Article 29(1)): 2 days per month if service is between 6 months and 1 year; 30 calendar days per year once you complete 1 year of service.
- While taking annual leave during employment, you are paid your FULL Wage (Basic + Allowances). However, when encashing unused leave upon termination, Article 29(9) specifies encashment is calculated on BASIC Wage!
- Leave Encashment Formula: (Basic Monthly Salary ÷ 30) × Accrued Unused Leave Days.
- Even if you leave before completing 1 full year (meaning 0 AED gratuity), you are still legally entitled to cash payout for unused annual leave if you worked 6+ months!
In This Guide (Quick Jump)
- 1. How Annual Leave Accrues Under Article 29 (2 Days/Mo vs. 30 Days/Yr)
- 2. Crucial Tip: Taking Leave (Full Salary) vs. Encashing at Exit (Basic Salary)
- 3. Exact Formula & Worked Example of Final Settlement Leave Pay
- 4. "Use It or Lose It" & Carry-Forward Rules (Article 19 Executive Regs)
- 5. Complete Final Settlement Example: Gratuity + Leave + Notice Pay
- Statutory Comparison Table
- Frequently Asked Questions
1. How Annual Leave Accrues Under Article 29 (2 Days/Mo vs. 30 Days/Yr)
Under Article 29(1) of Federal Decree-Law No. 33 of 2021, every full-time employee in the UAE accrues paid annual leave at the following statutory minimums:
- Less than 6 months of service: No statutory annual leave entitlement.
- 6 months to 12 months of service: 2 days per month (e.g., 16 days for 8 months worked).
- More than 1 year of service: 30 calendar days per year (2.5 calendar days per month, or ~22 working days per year if your contract specifies working days).
2. Crucial Tip: Taking Leave (Full Salary) vs. Encashing at Exit (Basic Salary)
Here is an insider UAE Labour Law detail that can save you thousands of dirhams before you resign:
- When you actually take annual leave while employed (or take approved leave before/during your end of service), Article 29(1) requires the employer to pay your Full Wage (Basic Salary + Housing + Transport Allowances).
- However, when you encash unused leave upon leaving the company, Article 29(9) states that cash in lieu of untaken leave is calculated strictly on your Basic Salary only!
So if your Total Salary is AED 20,000 and your Basic Salary is AED 10,000, taking 15 days of paid holiday before resigning pays you AED 10,000 (Full Wage), whereas encashing those 15 days in your final settlement pays you only AED 5,000 (Basic Wage)!
3. Exact Formula & Worked Example of Final Settlement Leave Pay
Under Article 29(9), the cash value of your unused leave days is computed as:
Leave Encashment = (Last Basic Monthly Salary ÷ 30) × Number of Unused Leave Days
(Note: If your employment contract defines leave in working days—typically 22 working days/year—some companies divide Basic Salary by 22 or 26 working days, or convert 22 working days to 30 calendar days; under the statutory floor, it cannot be less than the Basic Salary ÷ 30 rate.)
4. "Use It or Lose It" & Carry-Forward Rules (Article 19 Executive Regs)
Under Article 19 of Cabinet Resolution No. 1 of 2022, an employee may carry forward up to half of their annual leave to the following year (or agree with the employer to receive cash in lieu). However, under Article 29(8), an employer cannot prevent an employee from using their accrued annual leave for more than two (2) years—if workload prevented you from taking leave, the employer cannot forfeit those accrued days upon termination!
5. Complete Final Settlement Example: Gratuity + Leave + Notice Pay
Suppose you worked exactly 4 years in Dubai with a Total Salary of AED 18,000/month (AED 12,000 Basic + AED 6,000 Allowances) and have 18 days of unused annual leave upon completing your 30-day notice period:
- 1. Final Month's Salary (Full Wage): AED 18,000
- 2. End of Service Gratuity (Article 51):
4 yrs × (12,000 ÷ 30 × 21)= AED 33,600 - 3. Unused Annual Leave Encashment (Article 29(9)):
(12,000 ÷ 30) × 18 days= AED 7,200 - Total Final Settlement Due Within 14 Days: AED 58,800
Wage Base Used Across UAE Labour Law Entitlements (Decree-Law No. 33 of 2021)
| Entitlement Type | Calculated On Basic or Full Wage? | Statutory Formula | Legal Reference |
|---|---|---|---|
| End of Service Gratuity (EOSB) | Basic Wage Only | 21 days/yr (Y1–5); 30 days/yr (Y6+) | Article 51(5) |
| Unused Annual Leave Encashment (At Exit) | Basic Wage Only | (Basic Salary ÷ 30) × Unused Days | Article 29(9) |
| Annual Leave Taken While Employed | Full Wage (Basic + Allowances) | 100% of normal monthly salary | Article 29(1) |
| Notice Period Pay / Allowance | Full Wage (Basic + Allowances) | (Full Salary ÷ 30) × Notice Days | Article 43(3) |
| Arbitrary / Unlawful Termination Compensation | Full Wage (Up to 3 Months) | Court-assessed up to 3 months Full Wage | Article 47 |
Calculate Your Exact Gratuity Portion in Seconds
Use our Article 51 Gratuity Calculator first, then add your unused leave days for your full settlement.