Business

UAE worker wants to know if a compensation package made up mostly of allowances is fair

There is nothing in UAE Labour Law that specifies the split between basic salary and allowances, so it is down to the discretion of the company.

Keren Bobker

February 24, 2017

I have been offered a new job with a med­ium-sized company but I have some concerns about how they have worded the final offer. I was originally told that the salary would be a total of Dh32,000 a month – about right for the role – but in the contract I was sent it refers to a basic salary of just Dh12,000, with the rest of it made up of various allowances such as for housing and transport. I am not comfortable with this and have questions. Is there anything in Labour Law that states how the total should be split? Is an employer able to reduce the allowances if they want so that my total income could reduce? I believe that the final gratuity is based in the basic salary, but can allowances be included? JM, Abu Dhabi

There is nothing in UAE Lab­our Law that specifies the split between basic salary and allowances, so it is down to the discretion of the company but it is expected to be reasonable and justifiable. The end of service gratuity is calculated on the final basic salary, so companies should not keep this artificially low to reduce their future liabilities. If they wish, any employer can pay a higher gratuity figure, but that is purely at their discretion. The general expectation is that the salary would not be less than 60 per cent of the total, but if it is less than 50 per cent the employee would have a strong claim for unfair treatment with the Labour Court if they chose to challenge that – but it is far better to agree an appropriate split at outset. An employer is not permitted to make changes to a contract of employment once it has been agreed and signed, nor to the salary or allowances payable, without the agreement of the employee.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with over 20 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE.

The advice provided in our columns does not constitute legal advice and is provided for information only.

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COMPANY PROFILE
Name: HyperSpace
 
Started: 2020
 
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
 
Based: Dubai, UAE
 
Sector: Entertainment 
 
Number of staff: 210 
 
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Brief scores:

Toss: Nepal, chose to field

UAE 153-6: Shaiman (59), Usman (30); Regmi 2-23

Nepal 132-7: Jora 53 not out; Zahoor 2-17

Result: UAE won by 21 runs

Series: UAE lead 1-0

How to play the stock market recovery in 2021?

If you are looking to build your long-term wealth in 2021 and beyond, the stock market is still the best place to do it as equities powered on despite the pandemic.

Investing in individual stocks is not for everyone and most private investors should stick to mutual funds and ETFs, but there are some thrilling opportunities for those who understand the risks.

Peter Garnry, head of equity strategy at Saxo Bank, says the 20 best-performing US and European stocks have delivered an average return year-to-date of 148 per cent, measured in local currency terms.

Online marketplace Etsy was the best performer with a return of 330.6 per cent, followed by communications software company Sinch (315.4 per cent), online supermarket HelloFresh (232.8 per cent) and fuel cells specialist NEL (191.7 per cent).

Mr Garnry says digital companies benefited from the lockdown, while green energy firms flew as efforts to combat climate change were ramped up, helped in part by the European Union’s green deal. 

Electric car company Tesla would be on the list if it had been part of the S&P 500 Index, but it only joined on December 21. “Tesla has become one of the most valuable companies in the world this year as demand for electric vehicles has grown dramatically,” Mr Garnry says.

By contrast, the 20 worst-performing European stocks fell 54 per cent on average, with European banks hit by the economic fallout from the pandemic, while cruise liners and airline stocks suffered due to travel restrictions.

As demand for energy fell, the oil and gas industry had a tough year, too.

Mr Garnry says the biggest story this year was the “absolute crunch” in so-called value stocks, companies that trade at low valuations compared to their earnings and growth potential.

He says they are “heavily tilted towards financials, miners, energy, utilities and industrials, which have all been hit hard by the Covid-19 pandemic”. “The last year saw these cheap stocks become cheaper and expensive stocks have become more expensive.” 

This has triggered excited talk about the “great value rotation” but Mr Garnry remains sceptical. “We need to see a breakout of interest rates combined with higher inflation before we join the crowd.”

Always remember that past performance is not a guarantee of future returns. Last year’s winners often turn out to be this year’s losers, and vice-versa.

Three ways to limit your social media use

Clinical psychologist, Dr Saliha Afridi at The Lighthouse Arabia suggests three easy things you can do every day to cut back on the time you spend online.

1. Put the social media app in a folder on the second or third screen of your phone so it has to remain a conscious decision to open, rather than something your fingers gravitate towards without consideration.

2. Schedule a time to use social media instead of consistently throughout the day. I recommend setting aside certain times of the day or week when you upload pictures or share information. 

3. Take a mental snapshot rather than a photo on your phone. Instead of sharing it with your social world, try to absorb the moment, connect with your feeling, experience the moment with all five of your senses. You will have a memory of that moment more vividly and for far longer than if you take a picture of it.

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