Difference Between Salary and Basic Salary in Gratuity

The Qatar Labour Law provides a standard gratuity calculation formula. This formula includes basic salary as the foundation to calculate an employee’s gratuity. Some employees get confused between salary and basic salary as they don’t know the labour law rules.

What is Basic Salary?

The basic salary is the monthly wage amount not including any allowances or perks or bonus or incentives. The salary information is clearly mentioned in the employment contract and also in the salary slip of the employee.

The basic wage or basic salary is a fixed amount that paid by the employer to the employee on monthly basis.

What is Salary or Full Salary?

The salary is the total wage earned by the employee in one month. When you hear the word “Salary”, it means the total salary paid by the employer to the employee. The Salary or Full Salary includes basic salary and all the allowances, perks and incentives.

As per my knowledge and experience of working in Qatar, the Salary or Full Salary includes following particulars.

• Basic salary — the core, fixed pay wage component
• Housing allowance — a contribution towards the employee’s accommodation costs
• Transportation allowance — a contribution towards the employee’s travel expenses for work
• Food allowance — provided either in cash as Reimbursement of actual food expense
• Medical allowance — As per rules & regulation of Qatar Health Department and Labour Law
• Mobile/Communication Allowance — a fixed monthly sum for phone expenses
• Performance bonuses — Cash benefit paid monthly, quarterly or annually
• Sales commissions — Directly linked to measurable targets or revenue achieved by the employee
• Overtime payments — additional compensation for hours worked beyond the standard limit
• Other role-specific allowances — such as field allowances, night shift differentials, or hazard pay

Salary Consideration for Gratuity in Qatar

As per Labour Law Rules in Qatar, the employer must consider the employee’s basic salary to calculate the end-of-service gratuity. The basic salary means the basic pay amount excluding the allowances, incentives, perks and bonuses.

Kindly remember that your total salary includes your basic salary but the gratuity is calculated on basic salary and not the total salary amount. Let me explain it with an example:

For example: Your Total Salary is 5000 Riyals which includes the following:

• Basic Salary: 2500 Riyals
• Housing Allowance: 800 Riyals
• Transportation Allowance: 500 Riyals
• Food Allowance: 500 Riyals
• Mobile/Communication Allowance: 200 Riyals
• Other Allowances/Incentives: 500 Riyals

So, the total of above mentioned wages and allowances make your total salary. But when your work service period will end, the gratuity will be calculated based on your last basic salary i.e. 2500 Riyals as mentioned above.

As per Labour Law Qatar Rules, an employee is entitled to receive 21 days basic salary as gratuity for each completed year of service.

Suppose you have worked with your employer for 3 years and your last basic salary was 2500 Riyals. Now let me show you how to calculate gratuity in Qatar with its standard formula.

End-of-Service Gratuity = Last Basic Salary x 21 Days/30 Days x Number of Completed Years of Service

= 2500 Riyals x 21 Days/30 Days x 3 Years

= 2500 x 21/30 x 3

= 5250 Riyals

So, at the end of your 3 years of employment service, you will receive 5250 Riyals as the end-of-service gratuity from your employer.

In this way, the gratuity is computed on the basic salary and not on the total salary compensation.

Summary:

For calculation of gratuity in Qatar, it is important to gain knowledge about basic salary and total salary. As I explained above, the total salary includes basic salary plus various allowances but the gratuity is calculated based on the basic salary.

I have shared the gratuity calculation rules, its formula and an example to help you understand it better. In case you still have a query or doubt, you can ask it in the comment section.

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