Q: Our management has decided to change the salary structure where we used to pay 60% of Gross Salary as Basic Salary. Is it legal to take this step? A: There is no proportion for salary now. There are judgments (precedents) that say the basic salary proposition shall not be lower than 60%…

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Can the company change the proportion of basic salary to gross salary?

Dear Madam,

Our management has decided to change the salary structure where we used to pay 60% of Gross Salary as Basic Salary.

Now the management wants to change the basic salary of employees to 40% and the remaining amount to be included as other allowance.

There will not be any decrease in the salary but there will be a change in the basic salary percentage, is this allowed in the UAE (Our company is in Dubai, a mainland company, sole establishment)?

Is it legal to take this step?

If yes, then under which article can the change take place?

Do we need to settle gratuity based on the current basic salary and revise the contract or we can just change the basic as we are not reducing the gross salary?

Please advise.

Rajasree Ravivarma

Hussain Lootah & Associates

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21 Feb 2022, 06:42

Hi A,

As of now, there is no proportion for salary now. There are judgments (precedents) that say the basic salary proposition shall not be lower than 60%>.

21 Feb 2022, 06:44

No need to settle the gratuity as of now.

22 Feb 2022, 12:18

Thanks for your response, Madam.

If you clarify me on the below as well it will be very helpful.

If we are not settling the gratuity now when preparing EOSB after several years, will the gratuity calculation be based on the new salary or we will need to calculate the gratuity twice?

1. First with old basic (60%) till the date of salary revision and
2. Then from revised salary date till the end of service

Please advise

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