Can Employers Deduct Salaries or Allowances During Annual Leave?

In the UAE, annual leave is an important employee right. While many workers, especially expatriates, often wonder if their full salary will be paid during their leave or if the company is allowed to deduct allowances during this period, the Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (commonly called the UAE Labour Law) has clearly state provisions protecting employees.

In this article, we will shed light on the provisions of the law regarding annual leave pay, the concept of “leave salary,” and whether or not an employer can legally deduct allowances.

What is Annual Leave in the UAE?

Under the UAE Labour Law, employees are entitled to a minimum of 30 days leave every year, which is a paid leave. Paid annual leave is basically meant to keep the employee financially secure during the time an employee has taken the leave and away from the work.

This entitlement is guaranteed under Article 29(1)(a) of the Labour Law, which says,

“Without prejudice to the worker’s acquired rights for the period preceding the date of enforcement of the provisions of this Decree-Law, the worker shall be entitled to an annual leave with full wage, of not less than Thirty days for each year of extended service.”

Note: 30 days leave apply once you have completed one year of service. If you have worked more than six months but less than one year, you are entitled to two days per month.

Thus, irrespective of your designation or the nature of your industry, if you working within mainland UAE or free zones governed by the Labour Law, you must receive your leave entitlement with full salary.

What Does “Leave Salary” Mean?

Leave salary is the term used to refer to the pay while on annual leave. In simple terms, it is the usual monthly salary, which is paid while away from work.

According to Article 29(6) of UAE Labour Law:

“The employee shall be entitled to the salary for the period of his annual leave.”

In clear terms, it is established that the salary has to be paid without interruption when the employee is on leave.

Does Leave Salary Include Allowances?

Employees generally ask if allowances such as housing, transportation, or others are part of their leave salary. The law specifies this thoroughly under Article 1, which gives the meaning of salary as follows:

Basic Salary: That fixed amount agreed upon by both the parties involved on the employment contract.
Allowances: This may cover housing, transport, food, or any other regular payments given as part of the employment contract.
Benefits in kind or commissions: These could include sales percentages, performance-based commissions, or profit shares if stated in the contract.

Thus, salary during annual leave is not limited to the basic salary alone. It includes both the basic salary and regular allowances, provided these allowances are made part of your employment.

Is the Company Allowed to Make Any Deductions for Annual Leave?

The simple answer is no-an employer may not deduct from your basic salary or any contractual allowances when on annual leave. Since Labour Law says “full salary,” any reductions will be considered a violation of rights on the part of employees.

The exceptions are:

In case of irregular allowances (like discretionary bonuses not tied to the contract).
If allowances are tied directly to actual work performed (like overtime or commissions that are sales made within working days).

In these cases, an employer does not have a duty to pay for such variable elements while the employee is on leave.

Why Does This Law Protect Employees

The Federal Decree Law No. 33 of 2021 has strongly emphasized the rights of employees in the UAE. Paid annual leave allows workers to rest, recharge, and work toward enhancing their work-life balance without being financially strained.

Employers must therefore strictly adhere to these provisions, and failure to do so may result in complaints lodged with MOHRE.

Takeaways for Employees

You are entitled to a minimum of 30 days of paid annual leave every year.
Leave salary must be given in full, covering both basic salary and regular allowances.
Employers may not withhold allowances or basic pay when on annual leave unless the allowance is irregular or not guaranteed under the contract.
If the employer unlawfully cuts your pay, then you can complain to MOHRE.

Final Thoughts

Leave is more than mere time off from work; it is actually a right under UAE Labour Law that safeguards financially employees while they are away from work. It’s a law that guarantees full salary, including contractual allowances, when employees go on leave.

If your employer tries to deduct allowances or reduce your salary while you are on leave, then that could be a violation of Labour Law. In such situations the employee must take legal advice.

How HHS Lawyers Can Help

Understanding UAE labour law can sometimes be challenging, especially when salary deductions, unpaid allowances, or disputes with the employer are involved. At HHS Lawyers, our experienced employment lawyers in the UAE can assist you in: