Situated in the Middle East, UAE is one of the world’s richest countries that has witnessed steady economic progress for the past few decades. Dubai, one of the 7 emirates in UAE and an important business hub in the region, has been gaining popularity as the global commercial capital. We can say it has rightly gained this reputation so, with aggressive legal reforms to boost foreign investment, including implementing long-term visas and introducing free trade zones for the benefit of business operations also run by foreign owners. The announcement of new long term visa laws will be yet another reason why Dubai will garner the attention of international investment. Ongoing and ambitious reforms in Dubai have made it easy for entrepreneurs and growing businesses and service providers to set up a business.
As always, payroll is an important element when one discusses business or employment opportunities in a country. In Dubai, payroll compliance can be complex owing to some regulations that are discussed below. Here are brief pointers that can help you:
1. General Information
There is no minimum wage stipulated in the UAE Labour Law, however, it broadly mentions that salaries must cover the basic needs of the employees. Generally, the salary is processed every month. Most of them work between Sunday and Thursday. Occasionally, some of them work from Saturday to Thursday. Someone with a UAE Employment Permit can live and work in UAE for up to 2 years, provided they have a job offer in hand. The permit can be renewed afterwards. Newly recruited employees must register with the Ministry of Labour at the time of employment.
The tax year in Dubai is between January 1 and December 31 of the particular year. The UAE has autonomous emirate and local governments, and there are currently no personal income taxes applicable in Dubai. All statutory reporting is done electronically.
3. Social Security Contribution
The General Pension and Social Security Authority (GPSSA) is responsible for administering Social Security in Dubai. An employer is required to register all the UAE national/GCC national employees with the GPSSA within a month of their joining through Form 1. Contributions should be made by both the employer and employee as under:
- For the UAE nationals, the employer’s contribution is 12.5% and the employee’s contribution is 5% towards the Pension Scheme
- For other Gulf Cooperation Council (GCC) nationals, the contribution is as per the social security law of the employee’s home country
- For the non-GCC nationals, no contribution is made to the Pension Scheme. Instead, gratuity is paid to them at the end of their employment, if they serve for one or more years of continuous service
Gratuity is also paid to other employees who are otherwise not covered by the National Pension Scheme. Gratuity payment varies depending upon the type of employment, namely; regular, unlimited term contract, and limited term contract.
4. Leave entitlement and payouts
Statutory leaves are governed by the UAE Labour Laws issued under Federal Law No. 8 of 1980. They include paid annual leave, sick leave, and maternity leave.
- Paid Annual Leave:
A worker is entitled to an annual leave of not less than:
- 2 days a month, where the worker’s period of service is more than six months but less than one year, or;
- 30 days a year, where the worker’s period of service is more than one year
When a worker's service is terminated, he is entitled to annual leave in respect of fractions of the last year.
When the employer requires the services of a worker on annual leave, and if such an annual leave is not carried forward, then the employer will pay such worker the normal wage and allowance in lieu of leave for actual days worked as under:
- If a worker is required to work on a holiday and is granted a substitute holiday, then s/he will be paid a wage that is 1.5 times his/her ordinary wage
- If a worker is required to work on a holiday and is not granted a substitute holiday, then the employer will pay an additional sum to the basic salary amounting to 150% with regards to the days of work
- Paid Sick Leave:
All employees who have completed the probation period (3 months or less, as agreed by the employer) are entitled to sick leave of 90 days a year. An employer will pay as under:
- 100% of wage for first 15 days
- 50% of wage for the next 30 days
- No wage for the subsequent period
- Maternity Leave: Employers provide a paid maternity leave of 45 days to their employees who have completed 1 year of continuous service. If the employee has not completed 1 year of service, the same is remunerated at 50% of the normal pay. Normal pay will cover basic and fixed allowances.
- Overtime: Overtime is governed by the UAE Labour Laws issued under Federal Law No. 8 of 1980. The normal working hours for the private sector is 8 hours per day or 48 hours per week. An employer has to pay 1.25 times of normal wage for overtime hours if work is performed on a normal day. For overtime work performed between 9 pm and 4 am or on Friday (where a rest day is not substituted), the employer is obligated to pay 1.5 times the employee’s normal wage. During Ramadan, the ordinary working hours are reduced by 2 hours.
Payroll in Dubai must be diligently processed with caution. One must factor in the nationality of the employees, and unlike other countries, there are 3 categories (UAE national, GCC national and expatriates) to be considered here. Statutory leaves and overtime calculations are yet other important factors influencing the calculation of salary slips. You can wisely choose a payroll partner that can manage this and always ensure on-time delivery of payroll.
Ramco's Global Payroll Services covering 45+ countries on a single platform using powerful automation, equipped with AI and Machine learning capabilities resolves such challenges. Backed by automation, Ramco's payroll solutions help facilitate effortless payroll processing for organizations that are keen on ensuring complete compliance with the relevant regulations.