Employment & HR
How UAE salary packages are structured — and why
A low basic and large allowances is the standard structure, and it exists because gratuity is calculated on basic pay alone. It also quietly caps what your staff can do with their visas.
The entitlement
What the law gives, regardless of contract.
A typical UAE salary package splits into basic salary and allowances — commonly housing, transport and sometimes education or utilities. The split is not cosmetic. End-of-service gratuity is calculated on basic salary only, so a package weighted towards allowances produces a materially lower gratuity liability for the same total cost. A basic salary of forty to sixty per cent of the total is the common range, and it exists because employers designed it that way.
What is less discussed is the effect on the employee. Several thresholds that matter enormously are assessed on salary in ways that can read the basic figure rather than the total: family sponsorship, the AED 15,000 monthly condition for the five-year Green Visa, and the ILOE unemployment insurance categories, which key explicitly off basic salary. An employee on AED 22,000 total with AED 8,000 basic may be well above a threshold on one reading and clearly below it on another. For employers this is worth knowing because it is a cheap thing to get right at offer stage and an awkward one to fix afterwards.
The numbers
- Gratuity
- Calculated on basic salary only
- Typical basic
- 40–60% of total package
- ILOE category
- Keyed to basic salary, with AED 16,000 as the boundary
- Green Visa
- AED 15,000 monthly — check how it is read
- Family sponsorship
- AED 4,000, or AED 3,000 with accommodation
- Transfer pricing
- Owner-manager salary must be arm's length
What it costs
Proportions indicative — they shift with visa count, premises and activity.
In practice
How this is actually administered.
- Decide the basic proportion deliberatelyIt sets the gratuity accrual for the whole employment, and it is very hard to reduce later without consent.
- Check thresholds before finalising an offerGreen Visa, family sponsorship and ILOE all read salary, and some of them read basic.
- State the figures unambiguously on the certificateAmbiguity is resolved by whoever is reading it, which is rarely to the employee's advantage.
- Accrue gratuity monthly in the accountsIt is a real liability building from day one and companies routinely fail to provide for it.
- For owner-managers, price the salary at arm's lengthA shareholder-director's salary is a connected-person transaction under corporate tax.
Related
Questions
Basic salary only. Allowances are excluded, which is why packages are structured with a low basic.
Commonly forty to sixty per cent of the total. There is no fixed statutory ratio, but an unusually low basic invites scrutiny.
It can. The ILOE category keys off basic salary, and salary thresholds for the Green Visa and family sponsorship may be read against basic rather than total.
Not unilaterally. It requires consent, and an unfavourable variation is treated as such if the matter reaches MOHRE.
One question
How many people are on the payroll?
Then the order matters. Establishment card, then quota, then work permit, then entry permit, then medical, Emirates ID and contract registration. Skipping ahead to a signed offer letter before the quota exists is the usual way a start date slips by six weeks.
The first hire, in orderOr just ask usThis is the size where informal arrangements start costing money — salaries paid partly outside WPS, leave that was never tracked, gratuity nobody has accrued for. None of it is hard to fix now and all of it is expensive to fix at a MOHRE hearing.
What you are accruing without knowingOr just ask usThen Emiratisation quotas, WPS timing, ILOE subscriptions and health insurance renewals are running on separate calendars, and the penalty for each is levied per employee. Consolidating those dates is usually worth more than any single piece of advice.
What gets inspectedOr just ask us