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Can employers enforce pay cuts or unpaid leave? What UAE labour law says
An employer’s financial difficulties do not automatically excuse them from fulfilling their contractual obligations to their employees
- PUBLISHED: Sun 15 Mar 2026, 9:15 AM
Questions: My company in mainland Sharjah is going through some financial woes. I am told they would give some employees two options: Pay cut or leave without pay. I just wanted to understand the legality of these options. What happens if I refuse both? Can I be asked to leave?
Answer: Pursuant to your queries, the provisions of the UAE employment law and the subsequent resolutions are applicable.
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In the UAE, an employee is entitled to receive salary and statutory leave benefits in accordance with the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the “Employment Law”).
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Under Article 22 (2) of the Employment Law, the salary should be paid by an employer to an employee in accordance with an employment contract executed by an employer and an employee and the applicable regulations.
“2. An employer is obligated to pay the salary to its employees on their due dates in accordance with the systems approved by the ministry and the conditions, controls and procedures specified in the executive regulation of this decree by law."
Further, Article 29 of the Employment Law provides for annual leave with full pay and states that:
“Without prejudice to the employee's rights acquired for the period preceding the date of enforcement of the provisions of this Decree by law, the employee shall be entitled to an annual leave with full pay of not less than:
a. Thirty days for each year of his extended service.”
Accordingly, an employer is required to grant statutory leave with pay to its employees as prescribed under the Employment Law, and any adjustment to leave without pay or any reduction of salary would require the written consent of an employee and an amendment to the employment contract in accordance with the applicable regulations.
Further, the financial difficulty of an employer does not in itself relieve an employer from its contractual obligations towards its employees.
In accordance with the aforementioned provisions of the law, while Article 43 of the Employment Law allows an employer to terminate employment of an employee for a valid reason by serving the required notice period, the mere refusal by an employee to accept a temporary reduction in salary or unpaid leave may not, by itself, justify termination, particularly if an employee wishes to continue employment under the existing contractual terms.
Accordingly, an employer experiencing financial constraints may propose alternatives such as salary reductions or proceeding on unpaid leave, but such a proposal would require the employee’s acceptance.
In the absence of such acceptance, an employee may expect that an employer may either continue the employment in accordance with the existing contractual terms or proceed with termination in compliance with the Employment Law, including serving a notice period and settling all applicable statutory dues.
Applicable laws:
Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations
Federal Decree Law No. 51 of 2023 on Financial Restructuring and Bankruptcy
Ashish Mehta is the founder and managing partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm are on www.amalawyers.com. Readers may e-mail their questions to news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.
Disclaimer: The information provided above is intended for general guidance and does not constitute legal advice. It is recommended to seek formal legal counsel.