Signing a UAE job offer? Check this specific clause before you agree
Dubai: When you receive a job offer in the UAE’s private sector, the contract typically lists a total salary. However, this figure is often divided into several components — a basic salary and various allowances, such as housing or transport.
Understanding your basic salary — known as the basic wage under UAE Labour Law — is important, as many employment benefits are calculated based on this amount rather than your total pay.
What is a Basic Salary?
Under UAE Labour Law (Federal Decree-Law No. 33 of 2021), the basic wage — or basic salary — is the amount specified in your employment contract that you receive in return for your work.
It represents only one part of your overall salary package, with many employers also offering additional allowances such as housing, transport, or other incentives.
Your total salary therefore includes:
- Basic salary (basic wage)
- Allowances and benefits
Under UAE Labour Law, allowances may be provided to help cover living costs or may be performance-based, such as a percentage of sales or profits.
How to Find Your Basic Salary
If you work in the UAE’s private sector, your basic salary will be clearly stated in your employment contract. The contract usually includes a breakdown showing:
Components of Your Salary Breakdown
Your employment contract will typically list:
- Basic salary
- Housing allowance
- Transport allowance
- Any other benefits or incentives
If you do not have a copy of your contract:
- Check your company’s HR portal, if available.
- Download a digital version of your employment contract via the official MOHRE website or mobile app.
Four Benefits Tied to Your Basic Salary in the UAE
Your basic salary is a key figure in calculating several employment benefits, including:
1. End-of-service gratuity
Also known as severance pay, gratuity is the amount you receive when your employment ends, provided you have completed at least one year of continuous service.
Under Article 51 of the UAE Labour Law, gratuity for foreign full-time employees is calculated based on the basic wage:
End-of-service gratuity calculation
- First five years of service: 21 days’ basic pay for each year worked
- After five years: 30 days’ basic pay for each additional year
- Partial years: Any partial year worked is proportionally included in the calculation
This ensures that your basic salary directly determines your gratuity, making it a crucial figure in planning for long-term benefits.
2. ILOE (Job Loss Insurance) Payouts
The Involuntary Loss of Employment (ILOE) scheme offers financial support if you lose your job for reasons beyond your control and meet the eligibility criteria.
If your claim is approved, you may receive compensation equivalent to 60% of your basic salary for up to three months.
This highlights how your basic salary directly affects the amount you receive under ILOE, making it a key factor in income protection.
3. Overtime Pay
If your role qualifies for overtime, the extra payment is calculated based on your basic salary, not your total salary including allowances.
It’s important to note that not all employees are eligible for overtime, as eligibility depends on job category and contract terms.
4. Annual Leave Encashment
If you leave your job with unused annual leave, you may be entitled to payment for those days. Under Cabinet Resolution No. 1 of 2022, Article 19(2), this payment is calculated based on your basic wage.
Why Understanding Your Basic Salary Is Important
While your total salary shows your monthly income, your basic salary determines several key financial entitlements, including:
- End-of-service gratuity
- Overtime pay
- ILOE/job loss insurance payouts
- Annual leave encashment
Before signing an employment contract, it is crucial to review how much of your salary is allocated as basic pay versus allowances, as this can significantly affect your long-term benefits and final settlement when you leave a job.
