An individual who received a job offer faced a situation where the initially stated monthly salary was divided into a base rate and various allowances, including a significant transport allowance. Before accepting the offer, they wanted to know whether this payment structure would affect the amount they receive during their annual leave.
The question arose as to whether the employer has the right to withhold or deduct the transport allowance for days the employee is absent on leave, since they will not be commuting to work. They were also concerned about accepting an offer where a large part of the promised salary is formed by allowances.
In response to these inquiries, it is assumed that the offer was received from a company based on the mainland of Dubai, so the provisions of UAE labor law apply.
According to the legislation of the United Arab Emirates, an employee is entitled to 30 (thirty) days of annual leave for each full year of service with the company. This corresponds to Article 29(1)(a) of Federal Decree-Law No. 33 of 2021 on the Regulation of Labor Relations (the so-called 'Labour Law'), which states: 'Without prejudice to the rights accrued to the employee prior to the entry into force of this Decree-Law, the employee is entitled to paid annual leave of no less than 30 (thirty) days per year for each year of service.'
Furthermore, the employee is entitled to salary during the annual leave period. This is stipulated in Article 29(6) of the Labour Law, which establishes: 'The employee is entitled to salary for the period of their annual leave.'
In accordance with Article 1 of the Labour Law, the term 'Salary' is defined as follows: 'Basic salary plus allowances, whether monetary or in kind, prescribed for the Employee in the Employment Contract or by this Decree-Law. These may include: any benefits in kind provided by the Employer to the Employee or their monetary equivalent if prescribed as part of the Salary in the Employment Contract or the Establishment's statute, or allowances granted to the Employee in exchange for any additional efforts or risks incurred during the performance of their Work, or for any other reason, or housing allowance, percentage of sales, or percentage of profit paid in exchange for anything sold, produced, or collected by the Employee.'
Based on the aforementioned provision of the Labour Law, the employee is entitled to receive a salary during the annual leave period. Since the law defines 'salary' as including the basic salary and allowances prescribed in the employment contract, an allowance that is part of the contractual salary may be included in the annual leave pay. Consequently, the transport allowance may not be excluded from the employee's annual leave pay, provided it is stipulated as part of the salary in the employment contract.
