UAE worker wants to know if a compensation package made up mostly of allowances is fair

I have been offered a new job with a med­ium-sized company but I have some concerns about how they have worded the final offer. I was originally told that the salary would be a total of Dh32,000 a month – about right for the role – but in the contract I was sent it refers to a basic salary of just Dh12,000, with the rest of it made up of various allowances such as for housing and transport. I am not comfortable with this and have questions. Is there anything in Labour Law that states how the total should be split? Is an employer able to reduce the allowances if they want so that my total income could reduce? I believe that the final gratuity is based in the basic salary, but can allowances be included? JM, Abu Dhabi

There is nothing in UAE Lab­our Law that specifies the split between basic salary and allowances, so it is down to the discretion of the company but it is expected to be reasonable and justifiable. The end of service gratuity is calculated on the final basic salary, so companies should not keep this artificially low to reduce their future liabilities. If they wish, any employer can pay a higher gratuity figure, but that is purely at their discretion. The general expectation is that the salary would not be less than 60 per cent of the total, but if it is less than 50 per cent the employee would have a strong claim for unfair treatment with the Labour Court if they chose to challenge that – but it is far better to agree an appropriate split at outset. An employer is not permitted to make changes to a contract of employment once it has been agreed and signed, nor to the salary or allowances payable, without the agreement of the employee.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with over 20 years’ experience. Contact her at [e-mail]. Follow her on Twitter at @FinancialUAE.

The advice provided in our columns does not constitute legal advice and is provided for information only.

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