A Dubai salesman asks whether a commission-only job offer is worth taking. Legal expert explains how such contracts work, gratuity calculations and negotiable perks.

Question: I have a full-time job as a salesman at a mainland company in Dubai. I have been approached by another company that is offering significantly better perks, but the role has a commission-only or performance-based pay structure, with no fixed monthly salary.

In such cases, how does the employment arrangement work? What would the contract look like? How are end-of-service benefits calculated if there is no basic salary? Can I still negotiate benefits such as housing allowance and other perks? I would like to understand how such contracts work in the UAE.

Answer: Pursuant to your queries, it is assumed that the provisions of the UAE’s federal employment laws and regulations are applicable in your case.

In the UAE, the remuneration payable to an employee is governed by an employment contract entered into between an employer and an employee, subject to the provisions of the Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations (the 'Employment Law') and Cabinet Resolution No. 1 of 2022 Concerning the Executive Regulations of the Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations (the 'Executive Regulations').

Accordingly, following are responses to your questions:

1. The Employment Arrangement

Employment contracts which are exclusively ‘commission-based’ or ‘performance-based’ are recognised in the UAE, as per the provisions of the Employment Law and the Executive Regulations.

In such arrangements, the employer and the employee agree that the employee shall be paid an amount (e.g. a commission/ an incentive) that is a certain percentage of the revenue generated for the employer, by the employee’s work and efforts.

It must however be noted that any such arrangements and employment contracts are eventually subject to the approval of the UAE’s Ministry of Human Resources and Emiratisation and the competent courts.

2. What would the contract look like?

For employment relations that are subject to the Employment Law, the employer and the employee are required to enter into an employment contract. In this regard, the provisions of Article 8(1) and Article 8(2) of the Employment Law, may be referred, which read as follows:

"Article (8)

Employment Contract

1. The employer shall enter into an employment contract with the employee, according to the agreed model of work. The employment contract shall be made in duplicate, copy to be given to the employer and the other to the employee, in accordance with the templates specified by the executive regulations of this decree-law.

2. The employee, or his representative, may prove the employment contract, the wage and any other rights he is entitled to under the provisions of this decree-law and its executive regulations and implementing resolutions by any means of proof.”

Under Article 1 of the Employment Law, the term 'wage' is defined as follows:

“The basic wage plus allowances, whether in cash or in kind, prescribed for the employee under the employment contract or this decree-law. These may include:

Any benefits in kind provided by the employer to the employee or their equivalent in cash, if they are prescribed as part of the wage in the employment contract or the establishment bylaws, or allowances given to the employee in return for any effort exerted, or hazards encountered in the course of performance of his work, or for any other reasons, or cost of living allowance, a percentage of sales or a percentage or profits paid in return for anything marketed, produced or collected by the employee.”

The same Article 1 of the Employment Law, defines 'basic wage' as follows:

"The wage stipulated in the employment contract and given to the employee in return for his work under the employment contract, whether on monthly, weekly, daily, hourly or piecemeal basis. The wage shall exclude any other allowances or benefits in kind."

It is notable, that commissions paid as a percentage of sales or profits are also considered to be part of ‘wage’ (i.e., an employee’s full salary).

By the provisions of Article 22(1) of the Employment Law, it is mandatory to determine the amount or type of ‘wage’ of an employee in his/her employment contract. If this is not done, then a competent court (hearing any dispute pursuant to such employment contract) may consider this to be an additional matter of dispute.

The said Article 22(1) of the Employment Law, reads as follows:

"The amount or type of wage shall be specified in the employment contract, and if it is not specified therein, the competent court shall determine it as an employment  dispute."

Further, Article 10(1) of the Executive Regulations provides what information an  employment contract should include. The provisions read as follows:

“The employment contract shall include, in principal, the employer’s name and address, the employee’s name, nationality, date of birth, and what is needed to prove his identity, his qualifications, occupation or professions, date of joining work, place of work, working hours, rest days, probation period if available, term of the contract, the wage as agreed upon including benefits and allowances, length of the deserved annual leave, notice period, procedures of terminating the employment contract and any other data determined by the ministry in accordance to what is required to regulate the relationship between both parties.”

When an employee is engaged on a commission-only or performance-based remuneration, the employment contract should clearly specify the agreed structure of the payment, including the manner in which commission is calculated, the performance criteria to be achieved, the intervals at which commission becomes payable, and any other applicable terms and conditions governing such payments.

3. How are end-of-service benefits calculated if there is no basic salary?

The gratuity or ‘severance pay’ of an employee at the end of his service is calculated as per the provisions of Article 51(2) of the Employment Law, which states:

"A foreign employee who has completed one year or more of continuous service shall be entitled to end-of-service gratuity upon the termination of his employment, calculated on the basis of the employee’s basic wage, as follows:

(a) A wage of (21) twenty-one days for each year of the first five years of service;

(b) A wage of (30) thirty days for each year exceeding such period."

As noted above, for commission-based jobs, employment contracts have a provision for payment of a nominal amount as the employee’s monthly basic salary. Accordingly, on the basis of such basic salary (as mentioned in the employment contract) the end of service and other entitlements (which are based on basic salary) would be calculated.

If no such amount is mentioned in the employment contract, then the employment would be categorised as piecemeal work-based employment. Accordingly, if the employee raises a claim for severance pay and no basic salary is mentioned in his/her employment contract, the employee’s daily basic salary would be calculated on the basis of average wage earned by the employee for the actual days worked during the six months prior to the claim.

This follows Article (23) of the Employment Law, which reads as follows:

“The daily wage of piecemeal paid employees shall be calculated on the basis of the average wage received by the employee for the actual days worked within six months preceding the request or action in relation to any matter relating to the wage.”

The fallback to Article (23) in case basic wage is not clearly defined in the employment contract has been supported by the Court of Cassation-Dubai Courts.

4. Can I still negotiate benefits such as housing allowance and other perks?

Notwithstanding the offer of employment being exclusively based on commission, you may still negotiate contractual benefits such as housing allowance, transportation allowance, annual air tickets, enhanced medical insurance, company vehicle, mobile allowance, education allowance, performance bonuses or any other benefits, with your prospective employer.

Once the agreed terms regarding such benefits are incorporated into your corresponding employment contract, all such terms will become contractually binding upon your employer.

In accordance with the aforementioned provisions of law, a commission-based or performance-based remuneration structure is permissible under the UAE Employment Law, provided that the terms relating to remuneration are clearly documented in the employment contract.

Before accepting such an offer, you should carefully review the employment contract to ensure that it clearly specifies the remuneration structure, the basis of commission payments, basic wage (if applicable), statutory entitlements, and all contractual benefits and allowances so as to avoid any ambiguity or disputes during the course of employment.