Is gratuity calculated on basic salary, or with allowances?

Some employment contracts factor in housing, transport and other incentives

- BY ZAINAB HUSAIN

Many employees in the UAE are unsure how their gratuity is calculated. Does it include only the basic salary, or the gross wage with allowances? A Gulf News reader raised this question, and a UAE-based lawyer explained exactly how the law defines it.

The reader asked: “The UAE Labour Law states that ‘severance pay for a foreign worker shall not exceed in aggregate two years wage’. Could you kindly advise if the ‘wage’ mentioned above is computed on basic salary or is it gross salary (basic plus allowances)?”