A salesman currently employed in a mainland company in Dubai has inquired about the legal implications of accepting a new job offer that is structured entirely on a commission-only basis. The query seeks clarity on how such employment arrangements function under UAE law, the specific requirements for the employment contract, and how end-of-service benefits are calculated when a traditional basic salary is absent.
Pursuant to UAE federal employment laws, specifically 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’), these arrangements are subject to strict regulatory oversight. It must be noted that any such employment contracts are eventually subject to the approval of the UAE’s Ministry of Human Resources and Emiratisation and the competent courts.
Employment contracts that are exclusively commission-based or performance-based are recognized in the UAE. In such arrangements, the employer and the employee agree that the employee shall be paid an amount, such as a commission or incentive, that is a percentage of the sales or profits generated. While this structure is permissible, the fundamental requirement remains that the employer and employee must enter into a formal employment contract according to the agreed model of work.
Under Article 1 of the Employment Law, the term ‘wage’ is defined as the basic wage plus allowances, whether in cash or in kind, prescribed for the employee under the employment contract. This includes any benefits in kind provided by the employer or their equivalent in cash if they are stipulated as part of the wage. The same article defines ‘basic wage’ as the wage stipulated in the employment contract and given to the employee in return for his work, whether on a daily, weekly, monthly, or piece-work basis.
It is notable that commissions paid as a percentage of sales or profits are considered part of the employee’s full wage. By the provisions of Article 22(1) of the Employment Law, it is mandatory to determine the amount or type of wage in the employment contract. The law states that the amount or type of wage shall be specified in the contract, and if it is not specified, the competent court shall determine it based on the nature of the work and the prevailing market standards.
Article 10(1) of the Executive Regulations further mandates that the employment contract must include the employer’s name and address, the employee’s name, nationality, date of birth, and the agreed-upon wage. When an employee is engaged on a commission-only or performance-based remuneration, the contract must clearly specify the agreed-upon commission structure, the frequency of payments, and any performance metrics that trigger such compensation.
Regarding end-of-service benefits, the gratuity or ‘severance pay’ of an employee is calculated as per the provisions of Article 51(2) of the Employment Law. This article states that a foreign employee who has completed one year or more of continuous service shall be entitled to an end-of-service gratuity upon the termination of their employment. The calculation is based on a wage of 21 days for each year of the first five years of service, and 30 days for each year exceeding that period.
In practice, for commission-based roles, employment contracts often include a provision for a nominal amount designated as the employee’s monthly basic wage to ensure compliance with statutory requirements. If no such amount is mentioned in the employment contract, the employment may be categorized as piecemeal work-based employment. In such instances, Article 23 of the Employment Law applies, which states that the daily wage of piecemeal-paid employees shall be calculated based on the average wage received by the employee for the actual days worked during the six months preceding the termination of the contract.
The fallback to Article 23 in cases where the basic wage is not clearly defined in the employment contract has been supported by the Court of Cassation-Dubai Courts. This ensures that even in commission-only roles, the employee is protected by a mechanism that allows for the calculation of their legal entitlements, including gratuity, based on their actual earnings over a defined period.
The employee or their representative has the right to prove the existence of the employment contract, the wage, and any other rights they are entitled to under the provisions of the law. This legal protection is vital for those entering into performance-based agreements, as it prevents employers from circumventing their obligations to provide end-of-service benefits or other statutory rights.
Prospective employees should ensure that any commission-only offer is formalized through the Ministry of Human Resources and Emiratisation. Relying on verbal agreements or informal arrangements is discouraged, as these may not provide the necessary legal recourse in the event of a dispute regarding unpaid commissions or the calculation of end-of-service benefits.
Readers who require further clarification or have specific legal concerns regarding their employment contracts may e-mail their questions to news@.com or send them to Legal View,, PO Box 11243, Dubai. It is always advisable to consult with a legal professional to review the specific terms of any employment contract before signing, especially when the compensation structure deviates from a standard fixed-salary model.
Accordingly, following are responses to your questions
In this regard, the provisions of Article 8(1) and Article 8(2) of the Employment Law, may be referred, which read as follows
Can I still negotiate benefits such as housing allowance and other perks?
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.”
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.
Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates.
He is qualified to practise law in Dubai, the United Kingdom and India.
Full details of his firm on: www.amalawyers.com.
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