# UAE Annual Leave Pay in 2026: Are Your Allowances Included?

Canonical: https://jobxdubai.com/knowledge-hub/legal/uae-annual-leave-pay-allowances
Category: Legal
Updated: 2026-10-04
Source: JobXDubai Knowledge Hub

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Your payslip arrives after a month's holiday and it is lighter than usual. HR says transport allowance "is not paid when you are not commuting", or that leave salary is "basic plus housing only". Is that right?

Usually not. The law treats pay while you are **on** leave differently from cash for leave you **never took** when you exit, and mixing the two up costs employees money.

For entitlement and carry-over rules, see our guide to [UAE annual leave and sick leave rights](/knowledge-hub/legal/uae-annual-leave-sick-leave-rights). This article covers only what goes into your leave pay.

## Pay while on leave: your full wage

Article 29 of Federal Decree-Law 33 of 2021, the UAE Labour Law, says you are entitled to annual leave "with full wage" and, in clause 6, that "the worker shall be entitled to the wage for the period of his annual leave".

The word that matters is **wage**. Article 1 of the same law defines two different terms:

- **Basic wage**: the pay set in your contract for your work, excluding any allowances or benefits in kind.
- **Wage**: the basic wage plus the cash allowances and benefits in kind given to you under your contract or the law.

Because Article 29 uses "wage", not "basic wage", your leave pay should match a normal working month: basic salary plus contractual allowances.

**Where the "basic plus housing" idea comes from.** The old Labour Law (Federal Law 8 of 1980) paid leave salary as basic wage plus housing allowance, if any. That law was replaced on 2 February 2022, but some HR policies still quote its formula.

## What about transport allowance?

This is the most common dispute. If transport allowance is written into your contract as part of your monthly salary, it is part of your "wage", and the employer cannot drop it because you are not commuting. The same applies to other fixed allowances, such as phone or cost of living.

One fair exception: a **reimbursement** of real work expenses, such as fuel or taxi claims against receipts, is not an allowance. No expense on leave means nothing to reimburse. A fixed monthly figure on your offer letter and payslip is an allowance; a claim against receipts is an expense.

Benefits in kind, such as company accommodation, are also part of the wage, so you keep them during leave.

## Cash for unused leave on exit: basic salary only

When your employment ends, you are paid for any annual leave you earned but did not take, including a pro-rata share for the final part-year (Article 29, clause 1). Here the rule changes.

Article 19(2) of Cabinet Resolution 1 of 2022, the law's implementing regulation, says this cash allowance is paid "according to the basic wage". So allowances drop out of the calculation, which is why the split between basic and allowances in your contract matters as much as the total. It is also the base used for your [end-of-service gratuity](/knowledge-hub/legal/uae-gratuity-calculation-guide).

Note the difference with cashing out leave **during** employment. If you agree with your employer to take cash instead of carrying leave forward, Article 19(1) says it is paid according to "the wage they receive", not the basic wage.

## Worked example in AED

Take an employee on this monthly package:

| Component | AED |
|---|---|
| Basic salary | 9,000 |
| Housing allowance | 4,000 |
| Transport allowance | 1,000 |
| Phone allowance | 500 |
| **Total wage** | **14,500** |

**Case 1: a month on annual leave.** They take 30 days of leave covering a whole month. Their leave pay is the full AED 14,500. Paying basic plus housing only (AED 13,000) would short them AED 1,500.

**Case 2: resigning with 18 unused days.** The calculation uses basic salary only. Using the common 30-day monthly divisor, the daily basic rate is 9,000 ÷ 30 = AED 300, so the leave payout is 18 × 300 = **AED 5,400**. On the full wage it would be AED 8,700, but the law does not require that. Some employers use a 365-day divisor instead, which changes the daily rate slightly, so check your contract or policy.

## When your contract is more generous

The law sets a minimum. Article 65 of the decree-law keeps any contract term, company policy or benefit that is more favourable to the employee. If your contract says unused leave is paid on gross salary, or that leave salary is paid in advance before you travel, that term binds your employer.

Free zones with their own employment law (DIFC and ADGM) and government employers follow separate rules, so check your own framework if you work there.

## Key takeaway

While you are on annual leave, you are owed your full wage: basic salary plus the allowances in your contract, including transport. When you leave the company, unused leave is cashed out on basic salary only, unless your contract offers more. If your leave pay is short, raise it with HR in writing first, then file a complaint with MOHRE.

## FAQ

### Is housing allowance paid during annual leave in the UAE?

Yes. Housing allowance is part of your "wage" under Article 1 of Federal Decree-Law 33 of 2021, and Article 29 entitles you to your full wage during annual leave.

### Can my employer stop transport allowance while I am on leave?

Not if it is a fixed allowance in your contract. It forms part of your wage, which must be paid in full during annual leave. Only genuine expense reimbursements, such as receipt-based fuel or taxi claims, can stop when you are not working.

### Is unused annual leave paid on basic or gross salary?

On basic salary, under Article 19(2) of Cabinet Resolution 1 of 2022, unless your contract or company policy promises gross. It is paid with your final settlement.

### What can I do if my leave salary was underpaid?

Raise the shortfall with HR in writing, keeping your contract and payslips. If it is not fixed, file a complaint through MOHRE's app, website or call centre on 600590000. Our [MOHRE salary dispute guide](/knowledge-hub/jobs-careers/uae-salary-dispute-mohre-guide) walks through the steps.

### Does the "basic plus housing" leave salary rule still apply?

No, not for private-sector employees under the current UAE Labour Law. That formula came from the 1980 law, replaced in February 2022.

## Further reading

- [Annual leave and sick leave in the UAE: your 2026 rights](/knowledge-hub/legal/uae-annual-leave-sick-leave-rights)
- [End of service gratuity in the UAE: how to calculate yours](/knowledge-hub/legal/uae-gratuity-calculation-guide)
- [UAE Labour Law 2026: the full overview](/knowledge-hub/legal/uae-labour-law-2026-overview)
- [UAE salary disputes: how to file with MOHRE](/knowledge-hub/jobs-careers/uae-salary-dispute-mohre-guide)

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