A sales agent gets a job offer with a condition that they would be working on commission only. A lot of people would agree to that, since commission-based jobs have high earning potential if they make good sales. The question we are trying to understand here is whether this arrangement is legal in the UAE and how gratuity and other benefits are calculated. Can the employee negotiate allowances and protections?

Distinction between “basic wage” and “wage”

Basic wage is defined under Federal Decree-Law No. (33) of 2021 Regulating Labour Relations, and it refers to the amount paid in return for work and excludes allowances and benefits in kind. Whereas wage includes, in a broader spectrum, basic salary, housing allowance, transportation allowance, commission on sales, profit-sharing, cost-of-living allowances, and benefits in kind. Although commission is part of an employee’s overall wage, gratuity is calculated only on the basic wage.

Is a commission-only arrangement legally recognised?

Although Federal Decree-Law No. 33 of 2021 does not expressly refer to “commission-only employment”, Article 1 recognises commissions and profit-sharing as components of an employee’s wage, while Articles 8 and 22 require the agreed remuneration structure to be incorporated into the employment contract. The employment contract must specify the amount or type of wage.

What should employees check before signing a commission-based contract?

The employees should make sure that the contract specifies the:

  1. The commission percentage.
  2. Sales targets.
  3. Payment dates.
  4. Whether commission is paid monthly or quarterly.
  5. Whether cancelled sales affect commission.
  6. Any minimum guaranteed salary.
  7. Conditions for withholding commission.
  8. Benefits and allowances.

End-of-Service Gratuity

Employees completing one year of service are entitled to gratuity. Article 51 of the Labour Law explains in detail gratuity and how it is calculated, stating that:

  1. Twenty-one days’ basic wage for each of the first five years.
  2. Thirty days’ basic wage thereafter.

In the absence of a basic wage and where there is only a commission-based contract, it might cause confusion since Article 51 requires gratuity to be based on the basic wage.

Commission-only employees still retain statutory protections

Many people assume that commission-based workers lose employment protections. Even though they do not have a basic salary, they remain entitled to:

  1. Annual leave.
  2. Sick leave.
  3. Maternity and parental leave.
  4. Notice periods.
  5. Protection against unlawful deductions.
  6. Protection against arbitrary dismissal.
  7. Health insurance obligations (depending on the emirate).

There might be a lot of risks associated with commission-only employment, such as irregular income, delayed commission payments, reduced gratuity, etc. When you get a job offer which provides only commission without a basic salary, make sure you read the employment contract carefully. It would be better if you insist on having the commission formula set out in writing and check whether a basic salary exists. An understanding of how gratuity is calculated beforehand is also important.

We at Ayesha Al Dhaheri Advocates and Legal Consultants, we regularly advise employers and employees on a wide range of labour and employment matters.