UAE gratuity is calculated on your basic salary only. Housing, transport and every other allowance are left out. For many employees that single fact explains why the figure HR produces is so much lower than they expected.
What the law means by basic salary
The Labour Law uses two different terms, and the difference is the whole story:
- Basic wage is the pay stated in your employment contract for your work, not counting any allowances or benefits in kind.
- Wage is the basic wage plus the cash allowances and benefits in kind you receive, such as housing and transport.
Article 51 says gratuity is calculated on the basic wage. So the question is never "what do I earn?" but "what does my contract call basic?"
A typical package, taken apart
| Part of the package | Monthly amount | Counts for gratuity? |
|---|---|---|
| Basic salary | AED 6,000 | Yes |
| Housing allowance | AED 2,500 | No |
| Transport allowance | AED 1,000 | No |
| Other allowances | AED 500 | No |
| Total | AED 10,000 | Gratuity is worked out on AED 6,000 |
Same package, very different gratuity
Three colleagues each take home AED 10,000 a month and each leave after five years. Their contracts split the package differently.
| Basic salary on the contract | Share of package | Gratuity after 5 years |
|---|---|---|
| AED 4,000 | 40% | AED 14,000 |
| AED 6,000 | 60% | AED 21,000 |
| AED 8,000 | 80% | AED 28,000 |
The first colleague receives half of what the third does, for the same pay and the same service. Nothing unlawful has happened. The contracts are simply different.
Is there a minimum share that must be basic?
The Labour Law does not set a minimum percentage of your package that has to be basic salary. Employers are free to agree the split with you, and many set the basic at around half to two thirds of the total.
That makes the offer stage the moment that matters. A higher basic costs the employer more at the end of your service, so it is rarely offered unprompted. If you are comparing two offers with the same total, the one with the higher basic is worth more.
Where to find your basic salary
- Your registered employment contract. The contract filed with MOHRE lists the basic salary and each allowance on separate lines. You can open it in the MOHRE app. See our guide to MOHRE enquiry services.
- Your payslip. It should show the basic line separately from allowances.
- Your offer letter. Useful as a record of what was agreed, but if it differs from the registered contract, raise it now. Do not leave it for the day you resign.
Pay rises: make sure they reach the basic
Gratuity uses your last basic salary for the whole of your service. That cuts both ways.
If a rise is added to your basic, it lifts the gratuity for every year you have already worked. If the same rise is paid as a new allowance, it adds nothing to your gratuity at all. When you are given an increment, ask how it is being split and whether your registered contract will be updated to match.
What about bonuses, commission and overtime?
They are not part of the basic wage unless your contract says so, and they are normally left out of the calculation. An annual bonus, sales commission, overtime and one-off payments do not increase your gratuity.
Which payments use basic and which use the full salary
| Payment | Worked out on |
|---|---|
| End of service gratuity | Basic salary |
| Unused annual leave paid when you leave | Basic salary |
| Overtime | Basic salary |
| Salary for the days worked in your final month | Full salary |
How these fit together on one statement is covered in our guide to the final settlement.
If the basic figure looks wrong
- Compare your documentsPut the offer letter, the registered contract and a recent payslip side by side.
- Ask HR in writingAsk which basic salary is on record and which will be used for your end of service.
- Fix it while you are employedA correction to your contract is far easier to agree before you resign than after.
- Run both numbersPut each basic figure into the gratuity calculator so you know how much is at stake.
Frequently asked questions
Is gratuity calculated on basic salary or gross salary in the UAE?
On basic salary only. Gross or total salary includes allowances, which are not counted.
Is housing allowance included in gratuity?
No. Housing, transport and other allowances are excluded from the calculation.
What percentage of my salary should be basic?
The law does not fix a percentage. It is whatever your contract states, so check it and negotiate it when you accept an offer.
Does a salary increase raise my gratuity?
Only if it increases your basic salary. A rise paid as an allowance does not change your gratuity.
Which basic salary is used if it changed over the years?
The last one. Gratuity for all your years of service is calculated on your final basic salary.