In the event of a job offer paid exclusively by percentage of sales or on a results basis, without a fixed monthly salary, federal labor laws and relevant regulations apply in the United Arab Emirates (UAE).
Organization of Employment Relations
Employment contracts based solely on commission or performance-based payments are recognized in the UAE according to Labor Legislation and Executive Provisions. In such schemes, the employer and employee agree on a payment amount that constitutes a certain percentage of the income generated through the employee's work and efforts. It is important to note that all such agreements and contracts are subject to approval by the Ministry of Human Resources and Emiratisation of the UAE, as well as competent courts.
Structure of the Employment Contract
For employment relations governed by Labor Legislation, an employment contract must be concluded between the employer and the employee. According to Article 8(1) and Article 8(2) of the Labor Law, the contract must be drawn up in two copies—one for the employer and one for the employee, in accordance with the templates established by the executive provisions. The employee or their representative has the right to prove the terms of the employment contract, salary, and any other rights by any means of evidence.
The Labor Law defines 'salary' as the base rate plus allowances, whether monetary or in kind, stipulated by the contract or law. This may include in-kind benefits equivalent to money, allowances for effort or risk, and compensation for living expenses or a percentage of sales. Similarly, 'basic salary' is defined as the amount stipulated in the contract for the work, excluding any other allowances or benefits.
Commissions paid as a percentage of sales or profit are also considered part of the 'salary' (the employee's total pay). According to Article 22(1) of the Labor Law, it is mandatory to specify the amount or type of 'salary' in the contract; otherwise, a competent court may consider this an additional dispute.
Contract Content Requirements
Article 10(1) of the Executive Provisions stipulates that the employment contract must contain, among other things, the name and address of the employer, the name, nationality, date of birth, and identification documents of the employee, their qualifications, position, start date, place of work, working hours, days off, probationary period, contract duration, agreed salary including benefits and allowances, annual leave duration, notice period, procedures for termination of employment, and any other information determined by the ministry.
When employed on a commission or performance-based payment, the contract must clearly outline the payment structure, criteria for achieving results, intervals for commission payments, and any other conditions governing such payments.
Calculation of Severance Pay
Severance pay is calculated in accordance with Article 51(2) of the Labor Law. A foreign employee who has worked for one year or more of continuous service is entitled to compensation calculated based on their basic salary: twenty-one days for each year of the first five years of service and thirty days for each subsequent year.
For commission-based positions, the contract usually specifies a nominal basic monthly salary. Severance pay and other payments are calculated based on this base rate. If such an amount is not specified, the employment relationship is classified as piecework. In this case, if the employee claims compensation, the absence of a basic salary leads to the calculation of a daily basic rate based on the average salary for six months prior to filing the claim, according to Article 23 of the Labor Law. This approach was upheld by the Dubai Court of Cassation.
Possibility of Negotiating Benefits
Even if the job offer is based solely on commission, the employee can discuss additional contractual benefits with the potential employer, such as housing and transportation allowances, air tickets, extended medical insurance, company car, mobile allowance, or performance bonuses. Once these conditions are included in the employment contract, they become legally binding on the employer.
Thus, a commission-based payment structure is permissible in the UAE provided that all conditions are clearly documented in the employment contract. Before accepting an offer, it is essential to carefully review the contract to ensure that the remuneration structure, the basis for calculating commissions, the basic salary (if applicable), established rights, and all contractual benefits are clearly stated, thereby avoiding disputes.
