Introduction to Payroll in United Arab Emirates
If your company is starting a new remote team in the United Arab Emirates, or UAE, there are some things you need to carefully consider. You need to know the local labor laws to ensure that your payments are compliant. You’ll also want to make sure your employees’ time sheets are accurate and that your payroll is timely. If you don’t have an in-country legal team to keep track of labor laws, this can be difficult.
Skuad, a payroll provider in United Arab Emirates, can help you with compliance and more, thanks to our in-country legal experts. We'll assist your company with:
- The UAE payroll process
- Payroll HR in UAE
- Employer contributions to social security
- Benefits and salaries
- Holiday and other kinds of leave
- Other payroll services in UAE
If you’re hiring remote employees in the UAE, get help from Skuad to stay compliant with tax legislation and labor laws.
Payroll Process in United Arab Emirates
The payroll process in UAE has three major phases: the pre-payroll phase, payroll calculations, and the post-payroll phase.
During this phase, you’ll set up your organization, collect payroll input, gather documentation from employees, communicate your policies, and prepare to compensate employees.
Setting up the organization
Set policies in place, such as leave policies, pay frequency, and attendance. Make sure all of your employees are on board.
Your company will be registered with the UAE government so you can collect taxes and provide statutory benefits.
There are seven emirates in UAE: the capital Abu Dhabi, Dubai, Ajman, Ras Al Khaimah, Fujairah, Umm Al Quwain and Sharjah. Specific requirements may differ from region to region or across the different emirates, so your employee policies may be different depending on where they are located.
Various leave is allowed for employees, which can include sick leave, personal time off, and holiday leave. Some leave is required to be provided by law. Let your workers know about your policies for leave.
Define and communicate policies for documenting hours worked such as regular hours, shift hours, and half days. Time sheets and Biometric devices can record hours your employees work, which will determine their paychecks.
You’ll need to understand all the payroll requirements for paying your remote employees. Make sure you pay and provide your employees with everything required by law.
Design diverse compensation structures including compensation, overtime, bonuses, or commissions. A payroll provider in UAE such as Skuad can help you with compensation structures and ensure compliance with UAE’s laws.
According to Article 56 of the law in UAE, pay frequency can be either monthly or bi-weekly depending on the type of contract. Whichever is the pay frequency, let your employees know the payday.
Record your workers’ information, such as their names, addresses, job titles, and departments.
Payroll Calculation Phase
The data from the pre-payroll phase is fed into the payroll system to calculate the employee paychecks. The result is the salary paid after withholding, taxes, and deductions.
The major part of the post-payroll phase is paying employee salaries. Once the payroll calculations are completed, you can send the bank advice to your bank to disperse the salaries.
Ensure all employees’ salary payments are recorded as part of maintaining your organization’s accounts. Payroll is an important and large expense, so the accounts must be accurate.
Payroll reporting and compliance
Statutory deductions are automatically deducted when payroll is processed. Employer contributions to social security are withdrawn and remitted to the government by the due date.
To take care of your payroll while maintaining compliance, get a Skuad demo to see how we can help you.
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Payroll Processing in United Arab Emirates
Payroll processing is compensating your employees with their salary for hours worked as well as the benefits that are due to them by law. If you’re looking to payroll outsource in the UAE, contact Skuad to see how we can make payroll processing easier for you.
Payroll Processing Company in United Arab Emirates
Skuad makes it easy to set up payroll in the UAE so you have time to get your company growing and succeeding. Contact us today to get started with us.
Payroll Management in United Arab Emirates
Compliance with statutory payroll, benefits, and labor laws and keeping accurate financial records is what good payroll management is all about. It means keeping track of hours worked so you can generate payslips and pay employees their gross and net earnings. A payroll company in UAE like Skuad can automate payroll to make sure timely and correct payments are sent to your remote workers.
Payroll Compliance in United Arab Emirates
Being compliant with labor laws and statutory benefits regulations such as leave entitlements, taxes, contributions to social security and other laws is an important part of payroll. If you partner with a payroll company in UAE like Skuad, you can be sure you'll comply with local laws.
Payroll Components in United Arab Emirates
Skuad, one of the most reputable payroll outsourcing companies in UAE, can assist you with the following components:
UAE has no national minimum wage, but new laws may change that and a minimum wage may be imposed. Bear in mind that as of May 2022, 1 United Arab Emirates dirham (AED) is US $0.27.
The working week in UAE is Sunday through Thursday, with the weekend being Friday and Saturday. According to labor laws, Friday is a mandated day off. If an employee must work on a Friday, they must be paid at 150% of their usual pay or they must receive an extra day off. Many companies have a 5 ½ or 6-day workweek. The maximum hours of the workweek are 48 hours, and eight hours per day. During Ramadan, local laws may require that employees get their work day reduced by two hours.
For hours worked above the normal working hours, a maximum of two additional hours per day, overtime of at least 125% of the typical salary is due. For overtime hours worked between 10 p.m. and 4 a.m., the pay should be 150% normal salary.
Employers and employees must pay for social security. The minimum income for social security contributions is 1,000 AED, and the maximum is 50,000 AED. Employers must pay 12.5% of employees’ monthly pay for social security. Employees must pay 5% for social security.
Employees who have worked at least three months at a company are entitled to 90 days per year of sick leave. Full wages are paid for the first 15 days of sick leave, half wages for the next 30 days, and no wages are paid for remaining time off. For employees whose illness is directly caused by misconduct, no wages are paid.
Employer-provided health insurance is mandated in two emirates: Abu Dhabi and Dubai. In these emirates, health insurance must be provided for the employee, the employee’s spouse, and the employee’s dependents. Although it is not mandatory, it is common to provide health coverage in the other emirates.
Maternity leave of 45 days with full pay is granted to employees who have worked at least one year at a company. Maternity leave of half salary is paid to women who have worked less than a year. This leave can be extended another 10 days at maximum with no wages paid, either continuous or non-continuous if an illness has occurred with a provided doctor’s note. For 18 months following delivery, nursing employees are entitled to two breaks totaling 30 minutes per day. There is no mandated paternity leave.
There are eight public holidays in a year in UAE for which employees must be given time off with full pay.
Employees should receive 30 days of annual leave in addition to the paid holidays. The length of vacation is based on the length of service with a company:
- No annual leave entitlement for employees who have worked less than six months
- Two days per month of service for employees who have worked six to 12 months
- 30 days of vacation for employees who have worked more than a year
- Unused vacation time carries over into the next year or is paid out in place of vacation
Public holidays in UAE:
- New Year’s Day
- Eid Al Fitr
- Arafat day
- Eid Al Adha
- Islamic New Year
- The Prophet’s birthday
- Commemoration Day
- National Day
Some Islamic holidays differ in date based on various phases of the Moon. The Hajj is the pilgrimage to Mecca that Muslim people are expected to make once in their lives. Labor law requires that employees be given a one-time leave of 30 days without pay to make the pilgrimage.
Payroll Taxes in UAE
Taxes are a large portion of payroll costs in UAE. The UAE corporate tax rate is a progressive tax rate of up to 55%, most commonly required only of foreign oil companies. Across the UAE, many emirates offer tax holidays and tax exemptions for periods of 15 or 20 years for most companies, effectively making it tax-free.
There are no personal income taxes in UAE.
A severance pay, also known as a gratuity, is owed to employees after their service with a company is complete. The amount of the severance is based on the length of service with the company.
For terminated employees:
- The wages of 21 days are due to employees who have worked between one and five years.
- The wages of 30 days are due for every year an employee has worked beyond five years.
For employees who have resigned:
- 1/3 of the salary of 21 days is due to employees who worked between one and three years.
- 2/3 of the salary of 21 days is due to employees who worked between three and five years.
- The full salary of 21 days is due to employees who worked for more than five years.
Study leave of 10 days per year should be given to an employee who is enrolled in one of UAE’s certified educational institutions.
Five days of bereavement are granted to an employee whose spouse has died. Three days of bereavement are granted if an employee’s family member dies.
Using a payroll company in UAE can help you with payroll outsourcing services in UAE.
Paying remote employees their payroll and statutory benefits in United Arab Emirates can be easier with the proper system in place. If you’re ready to onboard a team member and pay them with easy and accurate payroll outsourcing in UAE, remain compliant with labor laws, and save money and time, reach out to Skuad and ask for a demo to see how we can help.