Working in the UAE: Why your basic salary matters more than you think, and five benefits it affects

Dubai: You’ve heard the term before, but do you know exactly why your basic salary matters so much when working in the UAE?

While the overall salary package you receive can play a big role in determining whether you accept or reject an offer, it is important to not overlook how much of that salary is going to be allocated to the ‘basic salary’. This is because many subsequent employee benefits, like your end-of-service dues depend not on your overall salary, but your basic wage or salary.

Legally referred to as ‘basic wage’, but more commonly known as ‘basic salary’, the UAE’s Labour Law – Federal Decree-Law No. 33 of 2021 – defines it as the salary stipulated in your employment contract, which is “paid in consideration of your work under the employment contract”.

In your recruitment offer letter, you typically receive details of the position you are being offered, the basic terms of the contract as well as a breakdown of your salary.

The breakdown would include your basic salary, along with other allowances like housing, transport etc.

According to the Labour Law, these allowances 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.

If you’ve already started working, and did not pay attention to the salary breakdown at the time of joining, you can still find out the details of your basic salary by downloading your labour contract through the website of the Ministry of Human Resources and Emiratisation (MOHRE).

These are the steps you need to follow:

The contract will have a section which will provide the salary details, including your overall salary, as well as the breakdown of basic salary and additional benefits.

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

You are entitled to receive a gratuity or end-of-service benefits at the end of your service at a private sector establishment, provided that you have completed one year of continuous service.

The gratuity is calculated based on your basic salary and not your overall salary, with workers getting 21 days of basic wage for the first five years of service and then 30 days of basic wage for each subsequent year of service.

For a detailed breakdown of how your gratuity is calculated, check out our guide here.

2. Job loss insurance payout

Your unemployment insurance payout, officially referred to as the Involuntary Loss of Employment (ILOE) payout, also depends on your basic salary.

The two categories for ILOE insurance policies consider the basic salaries of workers, with those earning up to AED 10,000 in basic salary coming under Category 1, and those earning a basic salary of more than AED 10,000 coming under Category 2.

Workers under Category 1 can subscribe to the mandatory insurance scheme for a premium of AED 60 per year, while the premium for Category 2 workers is AED 120 per year.

Regardless of which category you fall under, in case you lose your job due to reasons beyong your control, you will receive a payout of 60 per cent of your basic salary for three months after losing your job, if you remain unemployed.

However, there are certain requirements you need to fulfil to be eligible for the job loss insurance payout, which you can find out about in more detail here.

3. Compensation for working on a public holiday

Workers who are required to fill in during public holidays are entitled to a compensation in one of two ways, as per Article 28 (2) of the UAE Labour Law:

Find out more about your rights when asked to work during a public holiday, here.

4. Overtime pay

Similarly, if you are asked to work overtime by your manager or employer, you are once again entitled to receive compensation, which is calculated as per your basic pay.

Article 19 of the UAE Labour Law stipulates that workers receive their basic wage for the day along with 25-50 per cent of their basic wage, depending on the circumstances.

However, there is a maximum limit to the number of hours you may be asked to work overtime. Find out more in our detailed guide here.

5. Payment for unused annual leaves

If you are about to leave your job and have an annual leave allocation which you haven’t used, you can get paid for those days, as per Article 19 of Cabinet Resolution No. 1 of 2022.

The Article states that the worker will be paid a cash allowance for the balance of the annual leaves legally due to him or her, as per their basic salary.