Executive Summary
This article explains how commission and/or bonus payments an employee receives from an employer are treated in the end-of-service compensation claim. Under the new labour law, Federal Decree-Law No. 33 of 2021, the calculation has changed, and end-of-service compensation is no longer increased because of bonus or commission payments.
The new UAE Federal labour law took effect on 2 February 2022, replacing the previous Federal Law No. 8 of 1980 and its revisions.
What Is the Definition of Bonus and Commission?
A bonus is an additional payment to salary or wages as a result of extraordinary work, or a sum added to a person's wages as a reward for good performance. A commission is a fee paid to an employee for conducting business or performing a service, or a payment based on the sales the employee generates.
Why Including or Excluding Bonuses and Commissions Matters
End-of-service compensation is one of the most important employee rights against an employer at the end of an employment contract, whether by resignation or termination, and it must be calculated based on the employee's basic wage. It is therefore essential to understand what counts as basic wage, and whether bonus and commission are part of it.
The Definition of Wage: Old Law vs. New Law
Federal Law No. 8 of 1980 on Labour Relations, as amended, defined wage broadly as whatever is given to the worker in return for service under an employment contract, in cash or in kind, including any grant conferred in recognition of honesty or efficiency, where such sums are customary or contractually agreed and treated by workers as part of the wage rather than a donation.
Federal Decree-Law No. 33 of 2021 defines wage as the basic wage plus cash allowances and benefits-in-kind allocated under the employment contract or the Decree-Law, which may include benefits-in-kind or their cash equivalent, allowances for effort or risk, cost-of-living allowances, or a percentage of sales or profits paid for what the worker markets, produces, or collects.
The Definition of Basic Wage
The old law defined basic wage as the pay provided for in the employment contract during its term, excluding any allowances. The new law defines Basic Wage as the wage stipulated in the employment contract, paid to the worker in consideration of their work on a monthly, weekly, daily, hourly, or piecework basis, excluding any other allowances or benefits-in-kind.
End-of-Service Is Calculated on the Basic Wage
Under the previous (now cancelled) law, end-of-service gratuity was computed based on the employee's last basic wage, excluding items such as housing, transport, travel, overtime, representation, cashier's, children's education, and recreation and social services allowances.
Because commission and bonus were not expressly classified as allowances under the old law, the previous practice at the Dubai Court of Cassation was to treat anything given to the employee for work performed — cash or in kind — as part of the basic salary unless it was categorised as an allowance, provided it was paid continuously enough that the employee reasonably regarded it as part of the salary, rather than a one-off, ad hoc payment. On that basis, bonus and commission could previously be included in the end-of-service calculation.
The Law Has Changed the Practice From 2022 Onward
Under the new labour law, the Basic Wage explicitly excludes any allowances or benefits-in-kind, while the broader wage concept covers those additional elements, including a percentage of sales or profits. Accordingly, courts will no longer include any bonus or commission in the end-of-service calculation — it will be based strictly on the basic salary stated in the contract.
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