What is a Professional Employer Organization (PEO)?
A professional employer organization (PEO) is an outsourced human resources department that allows companies, even startups and small businesses, to deliver services that would not be available otherwise. Through processes and routines, a PEO may help you to create a more efficient and streamlined company.
A PEO leases employees to a company and shares some liabilities and responsibilities with them. If your company is hiring remote employees in a country, you can partner with a PEO that can take care of some aspects of HR such as hiring, onboarding, and paying your remote employees.
If your company is doing business in the UAE and plans on hiring remote employees there, a professional employer organization in the UAE may be the right payroll and HR solution for you. This partnership can help an organization by handling some functions such as:
- Hiring and recruiting
- Payroll and compensation
- UAE labor law compliance
- Administration of benefits
Hiring a PEO is a strategic and sensible move for small businesses that not only improves operations but also allows managers to focus on revenue growth and expanding the business. All of this is offered so you can expand worldwide without having to have an actual in-country physical presence.
Do you think a PEO in the UAE is ideal for your company? Contact a Skuad representative now to learn more about how our PEO services can help you get started conducting business in the UAE as soon as possible.
What are the benefits of using a PEO in the UAE?
There are many benefits of using a PEO in the United Arab Emirates, including:
- Payroll is processed.
- Compliance with labor laws is ensured.
- Taxes are withheld and paid.
- Some of your risks are mitigated.
- Competitive compensation packages are offered.
Partnering with a PEO not only eases some worries, but it also lets your business grow. You can hire the best worldwide talent available and have access to benefits that are usually reserved for larger organizations. You can have a good HR partner without having to hire an entire in-country human resources department.
Local legal support
There are laws and regulations involving recruiting and managing personnel. A PEO has access to legal experts and is familiar with local legislation. You can get the benefits of worldwide expansion without the costs, saving you money and time by not having to hire local lawyers.
A trusted compliance partner
Compliance is overseen by a PEO, saving your organization money and lowering some risks while enhancing process improvement and efficiency. A PEO can be your strategic partner and help your company scale and grow.
To see what Skuad can do, schedule a demo.
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What are the differences between an EOR and a PEO?
Compared with an employer of record in the UAE:
- A PEO is the co-employer along with the client organization.
- With an EOR, the client company is the legal employer.
- PEOs share HR responsibilities.
- An EOR handles most HR responsibilities such as hiring and onboarding.
- A PEO does not draft employee contracts.
- The client company drafts all legal contracts for employees with a PEO.
Hiring in the UAE with a PEO
When hiring in different countries, it’s important to understand the local culture. Certain religious holidays, as well as secular national holidays, will be observed. Some leave will be mandated by law to allow employees to take.
Quick facts about the UAE:
- UAE is an elective monarchy made up of seven emirates.
- An emirate is the jurisdiction governed by an emir.
- The capital is Abu Dhabi.
- The official language is Arabic.
- The official currency is the UAE dirham, or AED.
- About 3/5 of the population are Muslim, and there are sizable minorities of Hindu, Christian, and Buddhists.
Before hiring in the UAE, consider the following:
- UAE tax rate
- UAE corporate tax rate
- UAE income tax
- Labor laws
- UAE company registration
The corporate tax rate in the UAE
There are no personal income taxes in the UAE. The UAE corporate tax rate is a progressive tax rate of up to 55%, mostly required of oil companies. Many emirates offer tax exemptions for most companies, effectively making the tax rate for both personal incomes and most companies 0%.
Employment laws of the UAE
The work week in the UAE is Sunday to Thursday. The weekend is Friday and Saturday. According to labor legislation, Friday is a mandated off day. If an employee must work on a Friday, they need to be paid at 150% of their usual salary or otherwise receive an extra day off. Some companies have a six-day workweek. The maximum hours of the workweek is 48 hours, with no more than eight hours a day. During the month of Ramadan, local law may require employees to have their workday shortened by two hours.
For hours worked above the usual working hours, a maximum of two extra hours a day, overtime of 125% of the typical pay rate is due. Overtime hours worked between 10 p.m. and 4 a.m. must be paid at 150% normal pay.
The UAE has no minimum wage, but there are new laws that may change that. This highlights the importance of staying on top of compliance with labor laws.
Employees and employers must pay social security. The minimum income for social security payments is 1,000 AED, and the maximum is 50,000 AED. Employers pay 12.5% of the employee’s monthly earnings for social security. Employees pay 5% for social security.
Paid time off in the UAE
Employees receive up to 30 days of annual leave in addition to the paid national holidays. The length of annual leave is based on the length of employment with an organization:
- There is no leave entitlement for employees who have worked less than six months.
- Two days of leave per month of employment are due to employees who have worked six to 12 months.
- 30 days of leave are due to employees who have worked more than a year at the company
- Unused leave can carry over into the next year or is paid out in place of vacation
These are the public holidays in the UAE:
- New Year’s Day
- Eid Al Fitr
- Arafat day
- Eid Al Adha
- Islamic New Year
- The Prophet’s birthday
- Commemoration Day
- National Day
Employees with at least three months of service at a company are entitled to 90 days per year of sick leave. This is paid at full salary for the first 15 days, then half wages for the next 30 days, and then the remainder is unpaid.
Maternity leave of 45 days is granted to employees with at least one year at a company, paid at full wages. Maternity leave of 50% salary is paid to employees who have worked under a year at the company. An extension of 10 days can be granted with no wages paid, either continuous or non-continuous, if an illness has occurred. For 18 months following childbirth, nursing employees are entitled to two breaks for a total of 30 minutes per day for breastfeeding. Paternity leave is not mandated.
Termination in the UAE
Gratuity, also known as severance pay, is owed to employees after their employment with a company has ended. The amount of severance is based on the time of employment with the organization.
- 21 days’ worth of salary is owed to employees who worked between one and five years at the company.
- 30 days’ worth of salary is owed for every year which an employee worked over five years at the company.
Employees who resigned:
- 1/3 salary of 21 days is owed to employees who worked between one and three years.
- 2/3 salary of 21 days is owed to employees who worked between three and five years.
- The full salary of 21 days is owed to employees who worked over five years.
Contact Skuad today to find out how we can help your company hire UAE team members.
Payroll in the UAE is challenging. It’s easy when you use a PEO.
Payroll processing is tedious and time-consuming but it’s an important process in any company. Many components of salary structures need to be accounted for, which could be overwhelming if a company is doing its own payroll. Salary has several components including net and gross salary, allowances, deductions, bonuses, and payslips. Some components are taxable while others are nontaxable. Some elements are statutory such as some benefits, contributions, and severance pay.
Keeping up with compliance can be complex. For instance, the UAE has not had a minimum wage, but new laws may change that soon. It’s important to stay on top of these kinds of changes in labor legislation. Talk to our experts today to learn about how Skuad can manage payroll for you.
What a PEO in the UAE can and cannot do
A PEO cannot:
- Take complete control of your organization
- Act as the sole legal employer
- Be solely responsible for hiring and firing workers
A PEO can:
- Help with the hiring process
- Help with on-boarding new employee
- Help with compliance to reduce risks
- Help reduce costs involving employment
- Make sure payroll is properly processed
- Make sure taxes are withheld and remitted
Businesses big and small can find value in partnering with a PEO in the UAE.
Setting up a business in the UAE can be difficult and potentially costly without a partner in the country that can help you hire employees and keep compliant. Laws and regulations regarding hiring and paying employees can be complex. The solution is to partner with Skuad to save you money and time by starting PEO services in the UAE. Learn about Skuad’s pricing structure and how each package can be beneficial to your company on our pricing page.
Skuad offers options for growing your business in the UAE without having to form an entity there, which could be very expensive and out of your current budget. Compliance with local regulations is ensured by Skuad in over 160 countries all while protecting your data privacy with our secure systems. Collaboration with Skuad might be just what your business needs to grow and succeed.
If you’re ready to partner with Skuad to begin a PEO in the UAE, reach out to us today. Do you want to learn more? Schedule a demo to see how our platform works and to speak with one of our team members about how we can help your company with a PEO in the UAE.