Is gratuity calculated on the total salary or just the basic salary?
Gratuity is calculated based only on the employee's last drawn basic salary. Allowances such as housing, transport, or other benefits are not included in the gratuity calculation.
Gratuity calculation in the UAE is specifically based on basic salary only:
What's Included
- Basic salary (last drawn amount)
- Fixed monthly allowances (if specified in contract as part of basic)
What's Excluded
- Housing allowance
- Transport allowance
- Mobile/communication allowance
- Medical insurance
- Performance bonuses
- Overtime payments
- Commission earnings
- Any variable or discretionary payments
Calculation Base
- Uses the last drawn basic salary amount
- Monthly basic salary divided by 30 for daily rate
- Daily rate multiplied by service days per calculation rules
Important Notes
- Contract should clearly define basic salary component
- Salary changes during service don't affect calculation
- Only the final basic salary amount is used
