Working in the UAE: From gratuity to job loss insurance payout, here are all the things your basic salary affects
Do you know how much your basic salary is? Here’s why it is important.
Dubai: If you are working in the UAE, do you know how much your basic salary is? While your overall salary is easy to remember, knowing your basic salary, referred to as the basic wage in the UAE Labour Law, is also extremely important. This is because a lot of your benefits as an employee in the private sector are calculated on your basic salary.
What is basic salary?
According to the UAE Labour Law – Federal Decree-Law No. 33 of 2021 – your basic wage or basic salary is the salary stipulated in your employment contract, which is “paid in consideration of your work under the employment contract”.
The basic salary is just part of your overall salary, as many employment contracts may provide additional allowances for housing, transport or other incentives. Your total salary includes the basic wage as well as these allowances, which - according to the Labour Law - are provided to meet the cost of living, or as a percentage of sales, or a percentage of the profits paid for your work, as applicable.
How do I find out how much my basic salary is?
If you are already working in the UAE’s private sector, you would need to refer to your employment contract, where you will see a breakdown of your salary, showing your basic salary as well as additional allowances. If you do not have a copy of your employment contract at hand, you can get a copy online, too. To find out how, click here.
Now that you know how much your basic salary is, here are some of the employee benefits that it will be used to calculate:
1. Gratuity/severance pay
Gratuity or severance pay refers to the amount of money you receive at the end of your service at a company, provided that you have completed one or more years of continuous service.
As per Article 51 of the UAE Labour Law, a foreign full-time worker is entitled to a severance pay calculated on the basis of basic wage. The calculation for severance pay is as follows:
• 21 working days’ wage for each of the first five years of service.
• 30 working days’ wage for each subsequent year of service.
The calculation will also factor in any fractions of the year that you may have worked. For example, if you have worked for two years and three months, the three months of service will also be calculated on a pro rata basis. You can take a detailed look at how gratuity should be calculated as per the UAE Labour Law in our detailed guide here.
2. Job loss insurance payout
The newly implemented scheme – Involuntary Loss of Employment (ILOE), also referred to as job loss or unemployment insurance, provides eligible workers with a safety net in case they lose their jobs. If you are eligible, you will receive 60 per cent of your basic salary for three months, if you lose your job due to reasons beyond your control.
However, there are some criteria that you need to fulfil to be eligible to receive the pay out, including being subscribed to the scheme for at least one year. To know more about the scheme, click here.
3. Compensation for working on a public holiday
If you find yourself working on a public holiday, you are entitled to a leave-in-lieu or a financial compensation as per Article 28 (2) of the UAE Labour Law. It states: “If work conditions require that the worker works during any of the public holidays, the employer shall compensate him with another day off for each day on which he or she works during the holiday, or pay him or her the wage for that day according to the wage established for the normal working days, plus an increase of not less than 50 per cent of the basic wage for that day.”
4. Overtime pay
Similarly, if you need to stay back at the office because of extra work, you might be eligible to receive overtime pay. It is important to note that not all employees are eligible to an overtime pay, but if you are, the payout will be calculated as per the basic salary and not overall salary.
This is stipulated in Article 19 of the UAE Labour Law, where clauses 2, 3 and 4 provide specific calculations for overtime pay.
2. If the work circumstances require that the worker be employed for hours exceeding the ordinary working hours, such extended time shall be deemed overtime for which the Worker shall be paid his basic wage for his normal hours of work plus a supplement of at least 25 per cent of that wage.
3. If the work circumstances require that the worker be employed for extra hours between 10pm and 4am, the worker shall be paid his basic wage for his normal hours of work plus a supplement of at least 50 per cent of that wage. The workers working based on shifts shall be excluded from this clause.
4. If the work circumstances require that the worker be employed on the rest day specified in the employment contract, or the internal work regulations, he shall be compensated with a substitute rest day, or be paid his basic wage for his normal hours of work plus a supplement of at least 50 per cent of that wage.
5. Encashment of annual leave at the time of leaving your job
If you leave your job, you are entitled to encash any unused annual leave as per Article 19 (2) of Cabinet Resolution No. 1 of 2022, which states: “If the worker’s service ends, he or she shall be paid a cash allowance for the balance of his or her legally due annual leave, according to the basic wage.”