Commission-Only Jobs: What the UAE Law Says About Contracts, Salaries, Gratuity and Employee Benefits

A growing number of employers in the UAE, particularly in sales, real estate, insurance, financial services and business development, are offering employees commission-only or performance-based remuneration packages instead of conventional fixed salaries. While such positions often promise significantly higher earning potential, they also raise important legal questions about employment contracts, statutory benefits, gratuity and salary protection.

Contrary to a common misconception, commission-based employment is recognised under UAE law. However, such arrangements must comply with the provisions of Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relations and its implementing regulations under Cabinet Resolution No. 1 of 2022. These laws set out the legal framework governing remuneration, employment contracts and employee entitlements, irrespective of whether an employee receives a fixed salary, commission or a combination of both.

Under the UAE Employment Law, employers and employees are free to agree on a remuneration structure that is linked entirely to performance or commission. In these arrangements, an employee's earnings are generally calculated as an agreed percentage of sales, revenue, business generated or other measurable performance indicators achieved through the employee's efforts.

Although such payment structures are legally recognised, every employment relationship remains subject to the approval requirements of the Ministry of Human Resources and Emiratisation (MoHRE) and, where disputes arise, the interpretation of the competent courts. Therefore, employers cannot simply rely on informal commission arrangements without ensuring that the terms comply with UAE employment legislation.

A commission-only arrangement does not eliminate the requirement for a formal employment contract. Every employee working under the Employment Law must have a written employment contract executed in the approved format. The law requires the contract to record the agreed model of employment and serves as the primary document governing the employment relationship.

The Employment Law also allows an employee to establish the existence of an employment relationship, wage and other contractual rights through legally recognised methods of proof should a dispute arise. Nevertheless, a properly drafted written contract remains the strongest safeguard for both employer and employee.

One of the most important aspects of a commission-based contract is the manner in which remuneration is described. UAE law defines "wage" broadly. It is not limited to a monthly salary alone but includes the basic wage together with allowances and benefits payable in cash or in kind. These may include housing, transportation, cost-of-living allowances, benefits in kind and, significantly, commissions calculated as a percentage of sales, profits or revenue generated by the employee.

This means that commission earned under an employment contract forms part of an employee's overall wage. However, the law distinguishes between "wage" and "basic wage". The basic wage refers only to the amount specifically stated in the employment contract in return for the employee's work and excludes allowances and other benefits.

This distinction becomes particularly important because several statutory entitlements, including end-of-service gratuity, are calculated on the basis of the employee's basic wage rather than the employee's total earnings.

The Employment Law further makes it mandatory for an employment contract to specify the amount or type of wage payable to the employee. Failure to clearly define remuneration may result in disputes, with the competent court determining the appropriate wage if litigation arises.

In addition to remuneration, the Executive Regulations require employment contracts to contain several essential particulars. These include the employer's details, employee's personal information, qualifications, occupation, date of joining, place of work, working hours, weekly rest days, probation period where applicable, duration of the contract, agreed wage together with benefits and allowances, annual leave entitlement, notice period, termination procedures and any additional information prescribed by the Ministry.

Where remuneration is entirely commission-based, the contract should clearly explain the commission structure. It should specify how commission will be calculated, the performance targets to be achieved, the percentage payable, the intervals at which commission becomes due, payment procedures and any conditions governing eligibility for commission. Clearly documenting these provisions significantly reduces the risk of future disputes.

One of the biggest concerns for employees considering commission-only employment relates to end-of-service gratuity. Under Article 51 of the Employment Law, foreign employees who complete one year or more of continuous service are entitled to gratuity calculated on the basis of their basic wage.

The law provides gratuity at the rate of 21 days' basic wage for each of the first five years of service and 30 days' basic wage for every year thereafter.

For this reason, many commission-based employment contracts still include a nominal monthly basic salary, even where the employee's primary income comes from commission. The stated basic salary then becomes the basis for calculating gratuity and other statutory benefits linked to basic wage.

Situations occasionally arise where an employment contract does not specify any basic salary at all. In such cases, the employment relationship may be treated as piecemeal work for the purpose of determining wage-related claims. The Employment Law provides that the employee's daily wage may then be calculated on the basis of the average earnings received for the actual days worked during the six months immediately preceding the claim.

This approach has also received judicial support in decisions of the Dubai Court of Cassation, reinforcing the importance of clearly defining remuneration in employment contracts.

Employees should therefore carefully examine whether their proposed contract specifies a basic wage in addition to the commission structure, as this may have a direct impact on gratuity calculations and other statutory entitlements.

Accepting a commission-only remuneration package does not prevent an employee from negotiating additional contractual benefits. Employers remain free to provide a wide range of allowances and employment benefits over and above commission payments.

These may include housing allowance, transportation allowance, annual air tickets, enhanced medical insurance, company vehicles, mobile phone allowances, education allowances for children, performance bonuses or other employment-related benefits. Once these benefits are incorporated into the employment contract, they become legally binding obligations upon the employer.

For many employees, these additional contractual benefits can substantially improve the overall value of a commission-based package, even where the fixed salary component is relatively modest.

Before accepting any commission-only offer, employees should review the employment contract thoroughly to ensure that every aspect of remuneration has been properly documented. The contract should clearly specify the commission structure, payment schedule, performance criteria, any applicable basic wage, statutory entitlements, allowances and additional contractual benefits. A well-drafted employment contract not only protects the employee's legal rights but also minimises the likelihood of disputes during the course of employment.

Commission-based employment can be financially rewarding under the UAE's legal framework, provided that the remuneration structure is transparent, properly documented and fully compliant with the country's employment laws. Understanding these legal requirements before signing an employment contract is essential for protecting both present earnings and future statutory benefits.

 
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