Does UAE Gratuity Include Housing Allowance?
Gratuity is calculated on basic salary only — what that means for your payout · 6 min read ·
The short answer
No. UAE gratuity is calculated on basic salary only. Housing allowance, transport allowance, medical allowance, and other benefits are excluded from the calculation.
Article 51 of Federal Decree-Law No. 33 of 2021 specifies that end-of-service gratuity is based on the “last basic wage.” Only the base pay component of your salary package counts — everything else is excluded.
Basic salary — included in gratuity calculation
Basic salary is the fixed, core component of your pay before any additions. For gratuity purposes, basic salary is what your employment contract specifically labels as “basic salary” or “basic wage.”
Included ✓
- Basic salary — the fixed base pay in your contract
- Consolidated salary — if your contract has no separate basic/allowance split, the full amount may be treated as basic
Excluded ✗
- Housing / accommodation allowance
- Transport / car allowance
- Food / meal allowance
- Phone / communication allowance
- Medical / health allowance
- Education / schooling allowance
- Commission and bonuses
- Overtime pay
- Cost of living allowance (COLA)
The impact on your gratuity payout
In the UAE, many employers structure salaries with a relatively low basic salary and higher allowances. This directly reduces the gratuity payout because only the basic salary counts. Consider this example:
| Salary component | Employee A | Employee B |
|---|---|---|
| Basic salary | AED 5,000 | AED 10,000 |
| Housing allowance | AED 4,000 | AED 0 |
| Transport allowance | AED 1,000 | AED 0 |
| Total monthly pay | AED 10,000 | AED 10,000 |
| Gratuity after 5 years | AED 17,500 | AED 35,000 |
Gratuity calculation on basic salary only
Scenario: AED 8,000 basic salary, 6 years of continuous service, resignation
Note: Housing, transport, and other allowances play no role in this calculation. Only the AED 8,000 basic salary is used.
What if your contract doesn't split out a basic salary?
Some UAE employment contracts — particularly for senior roles or expat packages — list a single consolidated salary figure with no breakdown into basic and allowances. In this case, MOHRE guidance and courts have generally treated the full consolidated salary as the basic salary for gratuity calculation purposes.
However, this can be contested if the employer argues that allowances were implicit. If your contract is silent on the basic/allowance split, get written clarification from HR before leaving — or request that a split is formally documented in a contract amendment.
Can employers manipulate basic salary to reduce gratuity?
Yes — and it is common. Some employers deliberately keep basic salary low (sometimes as little as 30–40% of total pay) and inflate allowances. This is technically legal as long as basic salary meets the UAE minimum wage requirements for the role.
However, if an employer artificially restructures your salary near the end of your employment specifically to reduce gratuity, you may have grounds to challenge this. Courts have ruled in favour of employees where salary restructuring was clearly designed to reduce end-of-service entitlement.
- Keep copies of all historical payslips and your original contract
- If your basic salary was suddenly reduced close to your departure, document it
- File a MOHRE complaint if you believe gratuity was underpaid — see our MOHRE complaint guide
How to identify your basic salary on a UAE payslip
Your UAE payslip should itemise each component separately. Look for a line labelled:
- Basic Salary or Basic Pay — this is what counts
- الراتب الأساسي — Arabic label for basic salary
Do not confuse basic salary with:
- Gross Salary — this is the total of basic plus all allowances
- Net Salary — after any deductions (though UAE has no income tax)
- WPS Transfer Amount — the total amount deposited via the Wages Protection System
If your payslip does not separately identify basic salary, ask your HR department for a written breakdown. Your employment contract should also state the basic salary component.
Frequently asked questions
My employer is calculating gratuity on my total salary. Is this correct?
It is actually beneficial to you — as long as it is in your favour. If your employer calculates gratuity on total salary (basic plus allowances), you receive more than the law requires. However, if they are calculating on a figure lower than your true basic salary, that is underpayment and you can file a MOHRE complaint.
Does commission count toward gratuity?
No. Commission, bonuses, performance pay, and variable compensation are excluded from gratuity calculations. Only fixed basic salary counts. Some employment contracts include a guaranteed minimum commission — if this is structured as a fixed monthly payment in your contract, consult a UAE labour lawyer about whether it could be argued as part of basic salary.
My basic salary changed during my employment. Which figure is used?
Gratuity is calculated on the last basic salary at the time of leaving. If you received salary increases over the years, your final, highest basic salary is used for the entire period of service — a favourable rule for long-serving employees.
هل تدخل بدل السكن في حساب مكافأة نهاية الخدمة؟
لا. مكافأة نهاية الخدمة في الإمارات تُحسب على الراتب الأساسي فقط وفقاً للمادة 51 من المرسوم بقانون اتحادي رقم 33 لسنة 2021. بدل السكن والمواصلات والبدلات الأخرى لا تُحتسب ضمن مكافأة نهاية الخدمة.
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