UAE Employee Allowances Guide: Types, Rules and Best Practices
Complete guide to UAE employee allowances including housing, transport, air ticket, education, and relocation allowances. Understand mandatory vs discretionary benefits.
Quick Summary: Complete guide to UAE employee allowances including housing, transport, air ticket, education, and relocation allowances. Understand mandatory vs discretionary benefits.
UAE employers offer various allowances as part of compensation packages. While most allowances are discretionary, the annual air ticket is mandatory under UAE labor law. This guide covers common allowance types, typical amounts, and best practices.
Important: Allowances do not count toward gratuity calculation—only basic salary is used for end-of-service benefits.
| Aspect | Details |
|---|---|
| Common Allowances | Housing, transport, education, air ticket |
| Mandatory Allowance | Annual air ticket (repatriation) |
| Tax Implication | None (no income tax in UAE) |
| Gratuity Impact | Only basic salary counts |
| Contract Requirement | Must be documented |
Types of Allowances
Overview
| Allowance Type | Commonality | Typical Range |
|---|---|---|
| Housing | Very common | 25-40% of package |
| Transport | Very common | 5-15% of package |
| Air ticket | Mandatory | Per contract |
| Education | Senior roles | Per child/year |
| Phone/Communication | Common | Fixed amount |
| Utility | Less common | Fixed amount |
| Furniture | Senior/new expats | One-time/annual |
| Relocation | New hires | One-time |
Housing Allowance
Types of Housing Benefits
| Type | Description |
|---|---|
| Cash allowance | Fixed monthly amount |
| Company accommodation | Employer provides housing |
| Rent reimbursement | Actual rent paid |
| Housing loan | Interest-free loan |
Typical Monthly Amounts
| Level | Monthly (AED) |
|---|---|
| Entry level | 2,000-4,000 |
| Junior | 3,000-5,000 |
| Mid-level | 5,000-8,000 |
| Senior | 8,000-15,000 |
| Executive | 15,000-30,000+ |
Company Accommodation
| Aspect | Details |
|---|---|
| Valuation | Included in total package |
| Standards | Must meet habitability standards |
| On termination | Return within notice period |
| Gratuity | Value may not count |
Transport Allowance
Types
| Type | Description |
|---|---|
| Fixed allowance | Monthly cash amount |
| Company car | Vehicle provided |
| Car allowance | For personal vehicle |
| Driver | Senior executives |
| Metro/bus pass | For junior staff |
Typical Monthly Amounts
| Level | Monthly (AED) |
|---|---|
| Entry level | 500-1,000 |
| Junior | 800-1,500 |
| Mid-level | 1,500-3,000 |
| Senior | 3,000-5,000 |
| Executive | Company car |
Company Car Policy
| Element | Details |
|---|---|
| Eligibility | Usually senior roles |
| Type of car | Based on grade |
| Fuel | Often included |
| Insurance | Employer covers |
| On exit | Return vehicle |
Annual Air Ticket Allowance
Legal Requirement
Per UAE Labor Law, the annual air ticket is mandatory:
- Minimum: One economy class return ticket per year
- To: Employee's home country
- Timing: Upon completion of each year
Common Practices
| Practice | Details |
|---|---|
| Annual ticket | Actual booking or cash |
| Cash equivalent | Fixed amount instead |
| Family coverage | Often included for senior staff |
| Accumulation | Some allow carry forward |
Typical Amounts by Destination
| Destination | Approximate (AED) |
|---|---|
| India/Pakistan/Philippines | 1,500-2,500 |
| Other Asia | 2,500-4,000 |
| Europe | 3,500-5,000 |
| Americas | 5,000-8,000 |
| Flat rate (common) | 3,000-5,000 |
Note: On termination, employees are entitled to pro-rata air ticket for partial year service.
Education Allowance
Who Typically Gets It
| Typically Offered To | Reason |
|---|---|
| Senior managers | Attraction/retention |
| Expat packages | Complete relocation |
| Scarce skills | Competitive packages |
Coverage Options
| Type | Description |
|---|---|
| Per child | Fixed amount per child |
| Actual reimbursement | Real school fees |
| Cap per child | Maximum limit |
| Annual amount | Fixed total |
Typical Amounts Per Child
| Level | Per Child/Year (AED) |
|---|---|
| Standard | 20,000-40,000 |
| Senior | 40,000-70,000 |
| Executive | 70,000-120,000 |
Other Allowances
Phone/Communication Allowance
| Level | Monthly (AED) |
|---|---|
| Entry level | 100-200 |
| Junior | 200-300 |
| Mid-level | 300-500 |
| Senior | 500-1,000 or company phone |
Utility Allowance
| Accommodation Type | Monthly (AED) |
|---|---|
| Studio/1BR | 500-1,000 |
| 2BR | 1,000-1,500 |
| 3BR+ | 1,500-2,500 |
| Villa | 2,000-4,000 |
Furniture Allowance
| Type | Amount (AED) |
|---|---|
| One-time (basic) | 5,000-10,000 |
| One-time (senior) | 15,000-30,000 |
| Annual | 5,000-10,000 |
Relocation Allowance
What It Covers
| Component | Coverage |
|---|---|
| Flight tickets | Employee + family |
| Shipping | Personal effects |
| Temporary accommodation | Hotel/serviced apartment |
| Visa costs | Initial setup |
| Miscellaneous | Settling in |
Typical Packages by Level
| Level | Total (AED) |
|---|---|
| Junior | 5,000-15,000 |
| Mid-level | 15,000-30,000 |
| Senior | 30,000-75,000 |
| Executive | 75,000-200,000+ |
Recovery Clause: Most relocation packages include a clawback clause if employee resigns within 12-24 months.
Allowances and Gratuity
Important Distinction
| Component | Counts for Gratuity? |
|---|---|
| Basic salary | Yes |
| Housing allowance | No |
| Transport allowance | No |
| Any allowance | No |
Why This Matters
Example with same AED 20,000 total salary:
| Structure | Basic | Total | 5-Year Gratuity |
|---|---|---|---|
| High allowance | 8,000 | 20,000 | 28,000 |
| Low allowance | 12,000 | 20,000 | 42,000 |
The difference of AED 14,000 in gratuity is significant. Employees should negotiate for higher basic salary percentage when possible.
Frequently Asked Questions
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NeuralHR Team
VerifiedUAE HR Compliance Experts
Our team of HR professionals and legal experts specializes in UAE labor law compliance, with extensive experience helping businesses navigate MOHRE regulations, Emiratisation requirements, and workforce management in the UAE and GCC region.
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