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.
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.
According to the ministry, if the
basic salary is not clearly stated in the employment contract, gratuity should
be calculated on the basis of the last salary paid to the employee, as quoted
by Dubai-based Arabic daily newspaper Emarat Al Youm.
Bin Dimas said: “When an employee signs an
employment contract, he implicitly accepts the amount fixed in the contract as
the basis for calculating end-of-service gratuity.”
Employees of private companies requested the
Ministry of Labour to pass a law calling for calculating end of service
gratuity on the basis of total salary because employers often keep basic
salary low to take unfair advantage of the law while paying gratuity.
Bin Dimas said “the UAE’s Federal Labour Law
mentions both basic salary and allowance but does not indicate their proportion
to each other.
He added that the MoL asks employers to update
employee contracts.
He added that the employment contract is signed with
the mutual consent of the employer and employee.
The employee knows before signing the contract
details of his salary and end-of-service benefits.
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."
