The distinction between basic salary, allowances, and commission carries direct legal consequences particularly in the calculation of end-of-service, benefit (gratuity) and other statutory entitlements.

A common practice seen is when an employer may legally fix a very low or even “zero” basic salary while compensating the employee primarily through commissions, incentives or other variable components. This question requires careful examination of statutory definitions, judicial interpretation, and administrative practice.

Statutory Definition of Basic Wage

Under Federal Decree-Law No. 33 of 2021, the “basic wage” is defined as:

“The wage stipulated in the employment contract, paid to the worker in consideration of his work under the employment contract and which does not include any allowances or benefits in kind.”

The law:

  1.  Does not prescribe a mandatory percentage for basic salary
  2.  Does not require a specific ratio between basic salary and allowances
  3.  Does not expressly prohibit fixing a minimal basic salary.
The Role of the Employment Contract

The employment contract remains the primary governing document between employer and employee. By signing it, the employee agrees to:

  1.  The division between basic salary and allowances;
  2.  The treatment of commission and bonus;
  3.  The structure used for calculating statutory entitlements.

Strict scrutiny is necessary when signing a labor contract as it ensures that:

  1.  The salary structure is clearly defined
  2.  Percentage of commission is expressly addressed
  3.  Any amendments are documented in writing.
Legal Risk and Practical Implications

Concerns typically arise where a contract reflects:

  1.  A minimal or nominal basic salary
  2.  The majority of income classified as commission.
Where no basic salary is specified.

The calculation of end-of-service benefit becomes particularly critical. In such situations where commission constitutes the primary source of remuneration and is paid consistently, labour authorities may look beyond the contractual label and examine the employee’s actual earning pattern. If commission forms a regular and substantial component of the employee’s compensation for work performed, it may be treated as part of the wage for the purpose of calculating statutory entitlements, including gratuity.

In such cases, the arrangement may be closely scrutinized if a dispute arises and UAE courts generally apply the principle of  substance over form. If payments are made consistently and regularly in return for work performed, they may be treated as wage for legal purposes regardless of the contractual label attached to them.

Accordingly, while a “zero basic salary” model is not explicitly declared unlawful, but it carries significant legal risk. Courts and labour authorities may examine the actual earning pattern of the employee rather than rely solely on contractual terminology.

Conclusion

UAE Labour Law allows flexibility in salary structuring. However, that flexibility must be exercised carefully.A minimal or zero basic salary is not automatically unlawful but it exposes both parties to potential dispute.

Ultimately, salary structuring is not merely a financial arrangement but  it is a legal framework that determines long-term rights and obligations. Precision in drafting and transparency in payroll practice remain the strongest safeguards against future litigation.

At Ayesha Aldhaheri Advocates & Legal Consultants, we have successfully handled numerous labour cases across a wide spectrum of employment disputes, including termination claims, gratuity disputes, unpaid salaries, commission claims, contractual disagreements, and regulatory compliance matters and complaints based on competition clause under UAE Labour Law. Whether you are an employer seeking to structure contracts correctly or an employee protecting your statutory rights, timely legal advice is essential. For professional assistance and strategic representation, our team remains ready to support you.