By Employees in the UAE can receive cash payment for unused annual leave when their employment ends and may carry forward up to half of their annual entitlement into the next year of service, according to Emirates 24/7. The report, published on 18 October 2026 by Sanya Nayeem, states that carrying forward unused leave comes with “certain caveats” and requires employer approval.
The article confirms: “You’re entitled to cash payment for unused annual leave when your employment ends, and can carry forward up to half your annual entitlement.” It adds that the UAE Labour Law “has provisions for carrying forward unused leave into your next year of service. However, it comes with certain caveats.”
What the 50% carry-forward rule means in practice
The 50% cap applies to the annual leave entitlement earned in a given year of service. An employee who has accrued the full 30 calendar days of annual leave after one year of service may carry forward a maximum of 15 days into the following year, subject to employer approval. The remaining half must either be taken as leave or, where the employment relationship ends, paid out.
The approval mechanism is not specified in the Emirates 24/7 report. HR and payroll teams should therefore document any carry-forward agreement in writing, whether through an HR system, email confirmation or a signed leave policy addendum. An employer that neither approves nor denies a carry-forward request leaves the employee in an uncertain position, and a written record protects both parties if a dispute later reaches the Ministry of Human Resources and Emiratisation (MoHRE).
How unused leave is calculated and paid
Under UAE Labour Law, annual leave entitlement is 30 calendar days per year for employees who have completed one year of service. Employees with more than six months but less than one year of service accrue two days per month, according to Davidson & Co. Leave salary is calculated on basic salary, not gross salary, unless the employment contract states otherwise. The standard formula is basic salary divided by 30, multiplied by the number of leave days.
For an employee with a basic salary of AED 12,000 and 24 unused leave days, the daily rate is AED 400. If the employer approves a 50% carry-forward, 12 days move to the next year and 12 days are settled at the end of employment at AED 4,800, based on the final basic salary. The payout uses the last basic salary received, which means a salary increase before exit raises the value of all accrued unused leave, including days carried forward from earlier years.
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What the top-ranking pages leave unclear
Davidson & Co covers annual leave entitlement, calculation methods and end-of-service encashment but does not mention the 50% carry-forward cap or the employer-approval condition. Its guidance frames encashment as primarily an end-of-service event and does not address whether employees can cash out unused leave during employment. The Emirates 24/7 report implies cash-out is available at contract end, not as a mid-employment withdrawal right. HR teams should treat mid-employment cash-out as an employer-discretionary benefit unless a specific contract or policy provides otherwise.
The interaction between carried-forward leave and end-of-service gratuity also goes unaddressed. Carrying leave forward does not directly increase gratuity, but if an employee receives a salary increase before exit, the final basic salary used for both leave encashment and gratuity calculations is higher. Cashing out leave during employment, where permitted, would reduce the accrued leave balance but not the gratuity calculation itself.
Free zones and dispute routes
Free zone employees in DIFC, ADGM, DMCC and JAFZA may be subject to their own employment regulations rather than the federal UAE Labour Law. HR teams in free zones should confirm whether the 50% carry-forward rule applies or whether the relevant free zone authority has its own provisions. The Emirates 24/7 report does not distinguish between mainland and free zone employees.
Employees who believe their employer has refused to pay unused leave can raise a complaint with MoHRE through its app, call centre or Tasheel service centres. The specific filing deadline and processing time are not stated in the available research, and employers should confirm current MoHRE procedures before advising staff.
| Scenario | Entitlement | Carry-forward limit | Payout basis |
|---|---|---|---|
| One year of service completed | 30 calendar days | 15 days with employer approval | Final basic salary |
| Six to twelve months of service | 2 days per month | Proportional 50% with approval | Final basic salary |
| Employment ends with unused leave | Full accrued balance | Not applicable | Final basic salary |
What HR and payroll teams should do now
Payroll teams should review leave balances before the end of each accrual year and flag any employee approaching the 50% carry-forward threshold. A clear written policy should state how carry-forward requests are submitted, who approves them, and whether unused carried leave expires if not taken within a defined period. The available research does not specify a use-by deadline for carried leave, so employers should set one in their own policies to avoid indefinite accrual.
The 2026 rules do not appear to introduce a new legal instrument. The Emirates 24/7 report refers to the existing UAE Labour Law rather than a new ministerial resolution or cabinet decision. HR teams should therefore treat the 50% cap and approval requirement as the current interpretation of the law, not a change that took effect in 2026.
Sources: Emirates 24/7
Photo: Dubai Skyline on 10 January 2008 by Imre Solt, CC BY-SA 3.0
