The current geopolitical situation may create operational, logistical and financial pressure for certain employers, particularly where business activity is affected by travel disruption, supply-chain constraints, delayed projects, reduced demand or temporary business disruption. However, under the UAE Labour Law, such circumstances or temporary business disruptions do not automatically entitle an employer to shift commercial or financial risk to employees by forcing them onto unpaid leave, reducing wages or delaying salary payments.
Under Federal Decree-Law No. 33 of 2021, as amended, regarding the Regulation of Employment Relations, annual leave is paid statutory entitlement. Article 29 of the UAE Labour Law provides that the employee shall use annual leave in the year of entitlement, and that the employer may determine the dates of such leave in accordance with work requirements, either in agreement with the employee or by granting leave in rotation among employees to ensure continuity of workflow. However, the employer must notify the employee of the scheduled leave date within a sufficient period of not less than one month.
Accordingly, an employer may require employees to utilise their accrued paid annual leave where there is a genuine operational requirement, provided that the leave is properly scheduled, paid in full and the statutory notice requirement is observed. At the same time, to the extent permitted under the UAE Labour Law and its Executive Regulations, employees may carry forward up to half of their annual leave entitlement to the following year, or agree with the employer to receive a cash allowance for unused annual leave, calculated based on the wage payable at the time the leave became due.
However, annual leave should not be used as a disguised cost-saving measure to impose unpaid leave, withhold salary, reduce wages or avoid the employer’s statutory wage obligations.
This distinction is important because the UAE Labour Law requires employers to pay employees’ wages on their due dates, subject only to lawful deductions or withholding permitted under Article 25 of the UAE Labour Law. Further, Article 26 provides that where the employer does not enable the employee to perform the work, the employer remains obliged to pay the agreed wage.
Impact of the Updated Wage Protection System
The position is further reinforced by the updated Wage Protection System (WPS) framework. Ministerial Resolution No. 0340 of 2026 concerning the Wage Protection System, effective from 1 June 2026, establishes a revised wage payment compliance framework for private sector establishments and repeals Ministerial Resolution No. 598 of 2022 concerning the Wage Protection System. The Resolution also designates the first day of each Gregorian month as the unified due date for the payment of workers’ wages.
The updated WPS framework introduces an 85% compliance threshold for wage payments. An establishment may be considered compliant where it transfers at least 85% of the total wages due to its workers by the due date, without prejudice to the workers’ right to claim any unpaid balance. Similarly, an employee will not be treated as unpaid if they receive at least 85% of their entitled wage, provided that any shortfall results from lawful deductions or withholdings in accordance with Article 25 of the UAE Labour Law.
This does not mean that an employer may lawfully reduce salaries or withhold payment as a cost-saving measure. The 85% threshold is a compliance mechanism for WPS monitoring purposes and does not waive the employee’s right to claim the full wage legally due. Therefore, any leave arrangement, salary adjustment or temporary cost-saving measure should be properly agreed, documented and reflected in payroll and WPS compliance, in accordance with the applicable MoHRE rules, regulations and procedures.
Practical Approach
In practical terms, an employer may schedule an employee’s accrued paid annual leave where there is a genuine business requirement, provided that the employer complies with Article 29 of the UAE Labour Law, gives the required notice and pays the employee’s leave salary in full.
However, an employer should not unilaterally impose unpaid leave, reduce salaries or benefits, or deduct from unaccrued future annual leave merely because of business disruption arising from current geopolitical uncertainty or cost-saving requirements. Such measures should be implemented only with the employee’s written consent and, where required, through the appropriate employment contract variation or applicable MoHRE process.
Employers should also ensure that all payroll arrangements remain compliant with the WPS framework. Where business operations are affected, employers may consider lawful and commercially practical alternatives, such as remote work, temporary workload adjustments, agreed reduced working arrangements, redeployment, revised work schedules or lawful restructuring measures, provided that such arrangements are implemented with the employee’s consent, where required, and in compliance with the applicable MoHRE rules, regulations and procedures.
Conclusion
In summary, the current geopolitical situation may justify operational planning and workforce management, but it does not, by itself, permit an employer to compel employees to take unpaid leave or absorb the employer’s commercial losses.
Any leave or cost-saving arrangement must remain consistent with the UAE Labour Law, particularly the rules on paid annual leave, wage protection, employee consent, lawful deductions, WPS compliance and the employer’s obligation to enable employees to work.
For guidance on employment law, employee relations, and regulatory compliance in the UAE, please contact please contact Suneer Kumar at suneer@alsuwaidi.ae,Vida Grace Serrano at vida@alsuwaidi.ae,