UAE Leave Encashment Guide: How Unused Annual Leave Is Paid Out
Leftover annual leave doesn't just disappear when you leave a UAE job — it's paid out in cash. But it's paid on your basic salary, not your full package, and that catches almost everyone out.
When your employment in the UAE ends with unused annual-leave days on the books, your employer must pay you for them. This is leave encashment, and it's a standard line in every end-of-service settlement. The rules come from Federal Decree-Law No. 33 of 2021 (Article 29) and Cabinet Resolution No. 1 of 2022.
How much annual leave do you earn?
- 30 calendar days per year once you've completed one year of service.
- 2 calendar days per month if you have between 6 months and 1 year of service.
Those days accrue as you work. Whatever you haven't taken when you leave is your encashable balance.
The formula — and the big catch
Leave encashment on termination is calculated like this:
Encashment = (basic monthly salary ÷ 30) × unused leave days
The catch is in two words: basic salary. Even though leave you actually take while employed is paid at your full wage (basic plus housing, transport and other allowances), leave encashed at the end of service is paid on basic salary only. Because allowances often make up 40–60% of a UAE package, the difference is large — and it's the single most common misunderstanding about UAE leave pay.
Worked example
Ahmed is leaving his job with 18 unused annual-leave days. His total monthly salary is AED 14,000, of which AED 8,000 is basic and AED 6,000 is allowances.
- Daily wage for encashment = 8,000 ÷ 30 = AED 266.67 (basic only)
- Encashment = 18 × 266.67 = AED 4,800
Had it been paid on his gross salary (14,000 ÷ 30 × 18) it would have been AED 8,400 — so knowing the basis is worth AED 3,600 to Ahmed in getting his own expectations right. Our UAE Leave Encashment Calculator does this instantly — just enter your basic salary and the day balance from your payslip.
Carry-over rules
You can't always bank unlimited leave. In the UAE, up to half of your unused annual leave may be carried over to the next year, or you can agree with your employer to be paid cash for the carried-forward portion. Any balance still outstanding when you leave is encashed on termination.
Do you enter accrued days yourself?
Yes. Our calculator doesn't try to reconstruct how many days you've accrued from your start date — payroll systems, approved leave, sick days and public holidays all affect the real figure. Instead, enter the unused-leave balance shown on your payslip or HR record, and the tool converts it to money on the correct basic-salary basis.
Where leave encashment fits in your settlement
Leave encashment is one of four main components of a UAE end-of-service payout, alongside your gratuity, any notice-period pay, and outstanding dues. Our UAE Final Settlement Calculator combines all of them, and the full and final settlement checklist walks through each line. Note that gratuity and leave encashment both use basic salary, while notice pay in lieu uses the gross wage — keeping the bases straight is how you check a settlement is right.
Quick reference
| Item | Rule |
|---|---|
| Entitlement (1 yr+) | 30 calendar days/year |
| Entitlement (6 mo–1 yr) | 2 days/month |
| Encashment basis | Basic salary only |
| Daily rate | Basic ÷ 30 |
| Leave taken while employed | Paid at full wage (basic + allowances) |
| Carry-over | Up to half, or cash by agreement |
Sources: cross-checked against the U.AE government portal and Khaleej Times, as documented on our UAE leave encashment guide.
Frequently asked questions
Is UAE leave encashment on basic or gross salary?
Basic salary only — even though leave taken while still employed is paid at your full wage (basic plus allowances).
How many annual-leave days do I earn in the UAE?
30 calendar days per year once you pass 1 year of service; 2 calendar days per month if you have 6 months to 1 year of service.
How is the daily rate for leave encashment worked out?
Your basic monthly salary divided by 30 gives the daily rate, which is then multiplied by the number of unused annual-leave days you are owed.
Can I carry my leave over to next year?
Up to half of your unused leave can carry over, or you can agree with your employer to be paid cash for the carried-forward portion.
When is leave encashed?
Typically at the end of your employment for any unused balance — see our UAE Final Settlement Calculator for the full end-of-service picture.