Basic Salary vs Gross Salary in the UAE
Your UAE pay package is usually split into a basic salary plus allowances. Knowing the difference matters: end of service gratuity is calculated on basic salary only, so the split directly affects your payout. Here is how it works.
Last reviewed: 19 June 2026
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The difference at a glance
- Basic salary — the core contractual wage before any allowances. Used for gratuity.
- Gross salary — basic salary plus all allowances; the total you are paid each month. Not used for gratuity.
- Net salary — what reaches your account after any deductions; not used for gratuity either.
Common allowances
Allowances are amounts paid on top of basic salary, often to cover specific costs:
- Housing allowance — toward accommodation; often the largest allowance.
- Transport allowance — toward commuting or a car.
- Other allowances — mobile, education, flight or general allowances.
All of these are excluded from the gratuity calculation, no matter how large they are.
Why gratuity uses basic salary
UAE labour law bases end of service gratuity on the basic wage. Allowances are treated as benefits or reimbursements rather than core pay, so they do not enter the formula. This is why two employees on the same total package can receive very different gratuity if their basic-to-allowance split differs.
Side-by-side comparison
| Component | Counts toward gratuity? | Notes |
|---|---|---|
| Basic salary | Yes | The only figure used in the formula |
| Housing allowance | No | Excluded even if large |
| Transport allowance | No | Excluded |
| Other allowances | No | Excluded |
| Overtime / bonuses | No | Not part of basic wage |
Worked examples
Two employees each earn a gross salary of AED 20,000 and complete 5 years of service, but their basic salaries differ:
Employee A
Employee B
Same total package, AED 14,000 difference in gratuity — driven entirely by the basic salary figure.
Use your basic salary to estimate
Enter the basic figure from your contract for an accurate estimate.
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Official sources & further reading
Confirm details with the UAE Government portal (u.ae) and MOHRE. On this site, see the gratuity guide, the final settlement guide, and the UAE Labour Law overview.