UAE Gratuity Explained: Basic Salary vs Gross Salary
UAE Gratuity Explained: Basic Salary vs Gross Salary
Many employees in the UAE are often unsure about how their gratuity (end-of-service benefit) is calculated. A common question is whether it’s based on basic salary alone or gross salary (basic plus allowances). Since gratuity is a key part of your final settlement, understanding the law is essential.
Basic Salary vs Gross Salary
Basic Salary:
The fixed amount stated in your employment contract.
It is your guaranteed minimum pay.
Allowances:
Additional payments, such as housing, transport, or performance incentives.
Gross Salary (Total Wage):
Includes both basic salary and allowances.
Example: Basic Dh8,000 + Housing Dh2,000 = Gross Dh10,000.
What UAE Law Says
According to Article 51 of the UAE Labour Law (Federal Decree-Law No. 33 of 2021):
Gratuity is calculated on basic salary only.
Allowances are excluded.
Maximum gratuity is capped at two years’ total salary (gross).
Rajiv Suri, senior associate at Alsuwaidi & Company, explains that while “wage” can include allowances in general, gratuity is specifically linked to the basic wage.
General Gratuity Rules
| Length of Service | Gratuity Entitlement |
|---|---|
| Less than 1 year | None |
| 1–5 years | 21 days’ basic salary per year |
| Over 5 years | 21 days’ basic salary for first 5 years + 30 days per year for additional years |
| Maximum limit | 2 years’ gross salary |
Example Calculation
Employee with 30 years of service:
Basic salary: Dh9,000
Gross salary: Dh10,000
Step 1: First 5 years → 9,000 × 21 ÷ 30 × 5 = Dh31,500
Step 2: Remaining 25 years → 9,000 × 30 ÷ 30 × 25 = Dh225,000
Total: Dh256,500
Legal cap: 2 × 12 × 10,000 = Dh240,000 → maximum gratuity payable is Dh240,000
Why Basic Salary Matters
Your basic salary affects:
Gratuity calculations
Overtime pay
Public holiday compensation
Job loss insurance (ILOE)
A lower basic salary combined with higher allowances can reduce your gratuity entitlement, so it’s important to check your contract carefully.
How to Check Your Basic Salary
MOHRE App:
Sign in with UAE Pass
Go to Dashboard → View Contract
Download PDF to see basic and gross salary
UAE Pass App:
Open Documents → Request a Document
Choose Professional → Labour Contract
Tap Request to view contract
Key Takeaways
Gratuity is based on basic salary only, not gross salary.
Allowances are excluded.
Maximum gratuity is capped at two years’ gross salary.
Your basic salary affects gratuity, overtime, and holiday compensation.
By knowing these rules, employees can better estimate their end-of-service benefits and avoid surprises when leaving a job.