UAE Gratuity Explained: Basic Salary vs Gross Salary
<p><strong>UAE Gratuity Explained: Basic Salary vs Gross Salary</strong></p><p>Many employees in the UAE are often unsure about how their <strong>gratuity</strong> (end-of-service benefit) is calculated. A common question is whether it’s based on <strong>basic salary alone</strong> or <strong>gross salary</strong> (basic plus allowances). Since gratuity is a key part of your final settlement, understanding the law is essential.</p><h3>Basic Salary vs Gross Salary</h3><p><strong>Basic Salary:</strong></p><p>The fixed amount stated in your employment contract.</p><p>It is your guaranteed minimum pay.</p><p><strong>Allowances:</strong></p><p>Additional payments, such as housing, transport, or performance incentives.</p><p><strong>Gross Salary (Total Wage):</strong></p><p>Includes both basic salary and allowances.</p><p>Example: Basic Dh8,000 + Housing Dh2,000 = Gross Dh10,000.</p><h3>What UAE Law Says</h3><p>According to <strong>Article 51 of the UAE Labour Law (Federal Decree-Law No. 33 of 2021)</strong>:</p><p>Gratuity is <strong>calculated on basic salary only</strong>.</p><p>Allowances <strong>are excluded</strong>.</p><p>Maximum gratuity is capped at <strong>two years’ total salary (gross)</strong>.</p><p>Rajiv Suri, senior associate at Alsuwaidi & Company, explains that while “wage” can include allowances in general, <strong>gratuity is specifically linked to the basic wage</strong>.</p><h3>General Gratuity Rules</h3><figure class="table"><table><thead><tr><th>Length of Service</th><th>Gratuity Entitlement</th></tr></thead><tbody><tr><td>Less than 1 year</td><td>None</td></tr><tr><td>1–5 years</td><td>21 days’ basic salary per year</td></tr><tr><td>Over 5 years</td><td>21 days’ basic salary for first 5 years + 30 days per year for additional years</td></tr><tr><td>Maximum limit</td><td>2 years’ gross salary</td></tr></tbody></table></figure><h3>Example Calculation</h3><p>Employee with <strong>30 years of service</strong>:</p><p>Basic salary: Dh9,000</p><p>Gross salary: Dh10,000</p><p><strong>Step 1:</strong> First 5 years → 9,000 × 21 ÷ 30 × 5 = Dh31,500<br><strong>Step 2:</strong> Remaining 25 years → 9,000 × 30 ÷ 30 × 25 = Dh225,000<br><strong>Total:</strong> Dh256,500</p><p><strong>Legal cap:</strong> 2 × 12 × 10,000 = Dh240,000 → <strong>maximum gratuity payable is Dh240,000</strong></p><h3>Why Basic Salary Matters</h3><p>Your basic salary affects:</p><p>Gratuity calculations</p><p>Overtime pay</p><p>Public holiday compensation</p><p>Job loss insurance (ILOE)</p><p>A lower basic salary combined with higher allowances can <strong>reduce your gratuity entitlement</strong>, so it’s important to check your contract carefully.</p><h3>How to Check Your Basic Salary</h3><p><strong>MOHRE App:</strong></p><p>Sign in with UAE Pass</p><p>Go to Dashboard → View Contract</p><p>Download PDF to see basic and gross salary</p><p><strong>UAE Pass App:</strong></p><p>Open Documents → Request a Document</p><p>Choose Professional → Labour Contract</p><p>Tap Request to view contract</p><h3>Key Takeaways</h3><p><strong>Gratuity is based on basic salary only</strong>, not gross salary.</p><p><strong>Allowances are excluded</strong>.</p><p>Maximum gratuity is <strong>capped at two years’ gross salary</strong>.</p><p>Your <strong>basic salary affects gratuity, overtime, and holiday compensation</strong>.</p><p>By knowing these rules, employees can better estimate their end-of-service benefits and avoid surprises when leaving a job.</p>