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21 February 2024

Gratuity based on basic salary only

By Mohammed Al Sadafy

The Dubai Court of Cassation clarified the rule on gratuity calculation while issuing a ruling on an individual case.

End-of-service gratuity of employees must be calculated on the basic salary earned, it said and added that only those whose work contracts mention commissions will have their grautity calculated on the basis of basic salary plus commissions.

This puts to rest confusion among the working class as it was earlier mentioned that gratuity would be calculated on gross salary.

Humaid bin Dimas, Undersecretary of Ministry of Labour, had also stated that the end-of-service gratuity for workers is calculated on their basic salary.

Bin Damas said there has been only one case wherein a worker received his gratuity on the gross monthly salary because the percentage of basic salary and allowances were not mentioned in his contract. Only in such cases where a definite basic salary is not mentioned in the work contract, employers are obliged to pay gratuity on the gross salary earned, he added.

In cases where employees work on commission basis, their gratuity is calculated taking into account their basic salary plus commission, ruled the court. It based the judgement on Federal Labour Law No 8 of 1980, which stipulates that the basic salary includes everything the worker receives in cash or kind for the work done. Commission also falls under the basic wage, the court added.

Advocate Atef Awad said: “The ruling by the Court of Cassation is considered as a legal principle. Though the court issued the ruling in one particluar case, it is a legal principle and must be applied to all similar cases. And if employees earning commissions are challenged, then they will have to provide proof of earning commissions in court."

Adv Awad said: "Employees must study their work contracts in detail with regards to basic salary and other allowances to avoid hassles later."