Basic. Only basic. Housing allowance, transport allowance, phone allowance, commissions structured as allowances – none of it counts toward your end of service gratuity. This single fact changes what a “good package” means in the UAE, and it is worth understanding before you sign anything.
What the law says
Article 51 of Federal Decree-Law No. 33 of 2021 calculates gratuity on the basic wage – the amount your contract defines as basic salary, excluding all allowances and benefits. The same basic-only rule applies to leave encashment at end of service and to overtime rates. Your gross salary matters for monthly living and for pending-salary days in a final settlement – but not for gratuity.
The two-offers example
Offer A: AED 18,000 gross with AED 12,000 basic. Offer B: AED 18,000 gross with AED 6,000 basic. Identical bank credits every month. After 8 years, Offer A’s gratuity is AED 78,000; Offer B’s is AED 39,000. Same package on paper, AED 39,000 apart at exit – plus smaller leave encashment and overtime along the way. Run both splits through the gratuity calculator before you negotiate.
Is there a minimum basic salary ratio?
The federal labour law does not fix a minimum basic-to-gross ratio for private sector employees, which is why splits vary so widely. Common UAE practice ranges from 50% to 70% basic, but nothing stops an employer offering less. What you can do: negotiate the split explicitly, and treat a low basic as a real cost of the offer, not a technicality.
Watch-outs on your payslip
Check that your employer reports the same basic salary to MOHRE (via the registered contract) that appears in your offer letter – the MOHRE contract figure is what counts in a dispute. If a raise arrives “as allowance”, your gratuity base has not moved. And if your employer proposes restructuring your package to lower the basic mid-employment, that reduction needs your written consent and directly cuts your future gratuity.
Information only, not legal advice. Verified 6 July 2026.