Guide to Handling Payroll in the UAE

Effortlessly handling payroll and workforce compliance in the UAE with a reliable EOR service, ensuring accuracy and alignment with local labor laws.

Managing payroll in the UAE goes beyond simply paying salaries. Companies must manage gratuity payments, social security contributions, pensions, income tax (where applicable), and comply with UAE labor laws like Federal Decree-Law No. (33) of 2021. Each component requires precision and strict adherence to UAE’s labor regulations.

This guide offers a complete understanding of payroll processes in the UAE, covering salary calculations, end-of-service gratuity, contributions to pensions, taxes, and how an Employer of Record (EOR) in UAE like Globaine can simplify payroll management and ensure compliance.

What Are the Key Components of Payroll in the UAE?

To successfully manage payroll in the UAE, companies must address the following key areas:

  1. Salary Calculation
  2. Gratuity Payments
  3. Social Security Contributions
  4. Pension Contributions (for UAE & GCC Nationals)
  5. Employee Benefits (Annual Leave, Sick Leave, Maternity Leave, etc.)
  6. Payroll Outsourcing

Each of these elements comes with its own set of rules, processes, and deadlines, as outlined in detail below.

 

1. How Is Salary Calculated in the UAE?

Salary calculation in the UAE is governed by Federal Decree-Law No. (33) of 2021. Employees must be paid at least once per month, and companies are required to process payments through the Wages Protection System (WPS).

Key Steps to Calculate Salary:
  1. Determine Gross Salary: Include the base salary plus allowances (e.g., housing, transport, and other fixed allowances).
  2. Deductions: Apply deductions such as social security contributions and unpaid leaves.
  3. Net Salary Calculation: Gross Salary – Deductions = Net Salary.

💡 Pro Tip: Use payroll software or partner with an EOR in UAE to automate salary calculations and ensure WPS compliance.

 

2. What Are Gratuity Payments and How Are They Calculated in UAE?

Under Federal Decree-Law No. (33) of 2021, gratuity is a statutory entitlement for employees who complete at least one year of service. The calculation depends on the length of service and the nature of the contract (limited or unlimited).

Gratuity Calculation Formula
  1. First 5 years: 21 days of basic pay for each year of service.
  2. After 5 years: 30 days of basic pay for each additional year.
  1. Calculation Example: If an employee’s basic monthly salary is AED 10,000 and they’ve completed 6 years of service:
    • First 5 years: (10,000 / 30) x 21 = AED 7,000 per year x 5 = AED 35,000
    • Sixth year: (10,000 / 30) x 30 = AED 10,000
    • Total Gratuity = AED 35,000 + AED 10,000 = AED 45,000

💡 Pro Tip: Use payroll software to track service periods and automatically calculate end-of-service benefits (EOSB) to avoid miscalculations.

 

3. What Are the Pension Contribution Requirements for UAE & GCC Nationals?

Pension contributions are mandatory for UAE and GCC nationals under UAE Federal Decree-Law No. (33) of 2021 and Federal Law No. (7) of 1999 for pension and social security.

Contribution Breakdown (For UAE Nationals):
  • Employee Contribution: 5% of the gross salary
  • Employer Contribution: 12.5% of the gross salary (15% in Abu Dhabi)
  • Government Contribution: 2.5% of the gross salary

💡 Pro Tip: Calculate and remit contributions through the GPSSA system on time to avoid penalties and ensure compliance.

 

4. What Employee Benefits Must Be Provided Under UAE Labor Law?

According to Federal Decree-Law No. (33) of 2021, employers must provide the following benefits:

  1. Annual Leave: 30 calendar days per year after 1 year of service.
  2. Sick Leave: 90 days of sick leave per year (first 15 days full pay, next 30 days half pay, final 45 days unpaid).
  3. Maternity Leave: 45 days fully paid + 15 days at half pay.
  4. Paternity Leave: 5 working days within 6 months of child’s birth.
  5. Public Holidays: Paid leave on public holidays as announced by the UAE government.

💡 Pro Tip: Track and automate leave management with an EOR in UAE to stay compliant with Federal Decree-Law No. (33) of 2021.

 

5. Should You Outsource Your Payroll in the UAE?

Outsourcing payroll in the UAE offers several benefits, especially for international companies unfamiliar with UAE labor laws.

Benefits of Outsourcing Payroll to an EOR:
  • Compliance: Stay compliant with WPS, gratuity, pensions, and labor laws.
  • Accuracy: Minimize the risk of payroll errors.
  • Time-Saving: Reduce the administrative burden on your HR team.
  • Data Security: Ensure confidentiality of payroll information.

💡 Pro Tip: Partner with Globaine EOR UAE to manage your payroll operations, ensure accurate and timely salary payments, and maintain full compliance.

 

How Globaine EOR UAE Can Help

Globaine EOR UAE provides comprehensive Employer of Record (EOR) services in the UAE, ensuring smooth payroll management, compliance, and efficiency.

Here’s how Globaine helps:

  • Payroll Compliance: Ensure local compliance for end-of-service gratuity, social security, and pension contributions.
  • Payroll Calculation: Handle gross-to-net calculations, gratuity, and deductions.
  • Timely Payments: Ensure employees are paid on time, every time.
  • Pension Contributions: Handle pension filings and payments for UAE nationals.
  • Cost Transparency: No hidden fees, just clear, predictable costs.

💡 Get Expert Help: Contact Globaine EOR UAE to manage payroll in compliance with UAE’s labor laws.

 

Frequently Asked Questions (FAQs)

Employees must be paid at least once a month as per the UAE Wage Protection System (WPS).

End-of-service gratuity is calculated based on 21 days of basic pay for each of the first five years, and 30 days for each year thereafter.

No, social security contributions apply only to UAE and GCC nationals.

Employers can deduct up to 10% for advances and loans, and fines up to 5 days’ wages per month for disciplinary issues.

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