UAE | Employment

Companies 'need to show more gratuity'

Malcolm Thomson, a British media consultant will only get gratuity on 30 per cent of his salary when he retires, as end of service benefits are calculated only on the basic salary.

  • By Wafa Issa, Staff Reporter
  • Published: 00:14 June 22, 2008
  • Gulf News

  • The common practice in the UAE is that the basic salary makes up some 60 per cent of the total salary.
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Dubai: Malcolm Thomson, a British media consultant will only get gratuity on 30 per cent of his salary when he retires, as end of service benefits are calculated only on the basic salary.

Thomson's basic salary makes up only 30 per cent of his total remuneration package. The professional, who is nearing retirement, attributes this gap to the company's desire to reduce its liability towards employees when the end of service benefits are due.

"Gratuity should be calculated on the actual salary paid, and not just on the basic salary especially when there is a huge gap between the two," said Thomson.

The concept of the basic salary was introduced in the 1980s on the assumption that expatriates would need allowances such as housing and transport but over time with inflation the employers began to increase the allowances part only, according to Vijay Gandhi, General Manager - Reward Information Services at Hay group, a human resources consultancy company.

The common practice in the UAE is that the basic salary makes up some 60 per cent of the total salary. But in recent years the figure has changed to some 55-45 per cent, according to research done by Hay group.

"Companies rather increase the different allowances to reduce their liability towards the employees when the end of service benefit is due," said Gandhi.

Many companies are taking advantage of loopholes in the law to push down their costs on behalf of their staff, according to many employees. "If there are loopholes in the law they will be used by companies," said Thomson.

Steve Mathew, an Indian conference organiser, who has had three jobs since he came to Dubai five years ago, said a low basic salary with the aim to reduce costs is a common practice among companies here in the region.

"A correction of these practices needs to be done through the issuing of rules monitoring companies," said Mathew.

Shavakat Mamajonov, a Tajik sales executive, said that many private companies are taking advantage of people who need a job and dictating their conditions in the absence of rules.

Although there is an article in the labour law which stipulates that "the minimum rate of remuneration and cost-of-living allowances" should be fixed by a federal decision based on the Ministry of Labour's recommendations, but so far no decision has been issued in this regard.

Obaid Al Zahmi, assistant undersecretary at the Ministry of Labour, said the ministry does not have any rules to regulate the payment structure in companies.

"We are not concerned with the amount and break down of the salary as both the employer and employee have agreed to it in the employment contract. Our role is to ensure that the contract is honoured," said Al Zahmi.

Faruk Bhagani, Managing Director in a small company, said although a low basic salary is a standard practice and its primary reason is to reduce costs of end of service benefits, employees in the country enjoy other benefits.

Do you think gratuity on full salary should be made applicable for employees who have worked for more than five years? Will this engender more stability and loyalty in the workforce? Why? Tell us at letter2editor@gulfnews.com or fill in the form bellow to send your comments.


Your comments


From the employee's point of view, calculation on total salary is a good move. But from the employer's point of view, its not feasible. It would be great if the Basic salary is kept at a fixed percentage, so that as the allowance goes up, the basic salary is also raised on the fixed %. So that's a win win situation.
X
Dubai,UAE
Posted: June 22, 2008, 14:06

YES 101 PERCENT, AS AN EXPATRIATE AFTER A LONG SERVICE IN THE GULF OUR ONLY HOPE IS THE GRATUITY EVERY COMPANY SHOULD PAY THE GRATUITY BASED ON TOTAL SALARY RATHER THAN BASIC
Ajith
Abu Dhabi,UAE
Posted: June 22, 2008, 13:29

I wish to reiterate here that the employee should be given the gratuity on the full salary he gets from the company, as otherwise the number of years he served/lost in his lifetime do not keep him satisfied looking at the increased cost of living.
VISWANATHAN
Dubai,UAE
Posted: June 22, 2008, 13:05

Yes, of course it will have a positive impact on both, the employee as well as the employer. And I agree there should be a system (government responsbility) to monitor the basic vs. allowances split in salary. After all, gratuity is all what you get - no EPF, ETF etc.
K.T.
Dubai,UAE
Posted: June 22, 2008, 12:33

YES, the gratuity on full salary should be made applicable for employees who have worked for more than five years. Because, now a days the cost of living so high; most of salaried people are not able to save any penny. In this case Graduity is the only FAVOUR which will help them in home country at the end of their job.
Chander
Dubai,UAE
Posted: June 22, 2008, 10:07

Gratuity on full salary is a better way of payment to an employee who has worked for a company till the end of the Contract, which is 3 years. Nowadays, an expatriate is not able to save a penny with the cost of living here. Price of everything goes up... but something that remains the same is the salary. No matter how much personal time and effort an employee puts in his company, he does not get motivated in any way by way of an increase.
Greta
Sharjah,UAE
Posted: June 22, 2008, 10:06

It is a commonly adopted practice by organisations to increase Other Allowances in an individual's salary. The basic salary does not get a 'Big Pus-up'. It is a tactic adopted to reduce the organisation's pay-load / commitment.
Jeny
SHJ,UAE
Posted: June 22, 2008, 09:17

Yes,I think that it is fair to calculate the gratuity on full salary instead of just the basic salary.It will incourage employees to work longer in a certain company.
Jane
Dubai,UAE
Posted: June 22, 2008, 08:55

Yes,The only benefit we expatriates have. As of now we cannot have any savings as we used to do before. End of service will give us some secured life for our rest of years
Vanita
Dubai,UAE
Posted: June 22, 2008, 08:43

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