Payroll and Benefits Guide United Arab Emirates
Last updated: Mar 14, 2022
Employer Payroll Contributions
|12.50%||Total Employment Cost|
|12.50%||Social Security (basic social security plus housing allowance, based on monthly minimum of 1,000 AED and maximum of 50,000 AED) There is an additional 2.5% contribution made by the Government making the total contribution for social security of 20%. A higher rate of 26% is applied in the Emirate of Abu Dhabi, where the contribution of the employer is 15%, the Government’s contribution is 6%, and the employee’s contribution is 5%.|
Employee Payroll Contributions
|5.00%||Total Employee Cost|
|5.00%||Social Security (basic social security plus housing allowance, based on monthly minimum of 1,000 AED and maximum of 50,000 AED) (These contributions are for Emiratis only, no contributions for expats)|
No personal income tax
For expatriates, there is no mandatory minimum wage.
For UAE nationals, the minimum wage is determined by the level of education:
- No high school certificate- 3,000 AED
- High school certificate- 4,000 AED
- College degree or higher- 5,000 AED
The Ministry of Human Resources and Emiratisation (“MOHRE”) announced that new legislation will replace Federal Law No. 8 of 1980 (“Current Labour Law”) as of 2 February 2022. (referred to herein as the New Labour Law)
MINIMUM WAGE (PER MONTH)
The payroll cycle in UAE is generally monthly, with payment made on the last working day.
There is no requirement for a 13th-month salary payment in the United Arab Emirates.
The UAE authorities have announced that for public sector employees, the working week will be reduced to four and a half days, with the weekend running from Friday afternoon to Sunday. The authorities have also confirmed that all schools and universities will operate from Monday to Friday on a four and a half-day working day basis.
In addition, the New Labor Law effective from 2 February 2022 no longer specifies Friday as being the weekly rest day for employees and therefore, private sector employers will have the flexibility to effect changes to work patterns as needed.
Considering this private sector employers may align their respective weekly work schedules to those within the public sector from 1 January 2022. With the increased flexibility introduced under this New Labor Law, (which acknowledges flexible worker roles), employers may shift towards a full five-day Monday to Friday working week with scope for employees who wish to attend Friday congregational prayers, work from home, remotely, or be provided with an extended break to attend prayers.
Usual business hours are from 08:00 to 13:00, resuming after the temperatures have begun to cool from 16:00 and continuing until 19:00. During Ramadan, the working day may be shorter, and Free Zones may also have different working hours.
All work above the standard weekly working hours is to be paid as overtime and is regulated by employment contract/collective agreements. In general, there are two rates of overtime due when overtime is worked. For night-time overtime, between the hours of 9 pm and 4 am, overtime is calculated at 125.00% of the regular salary rate; with 150.00% for any other time.
For work on Fridays, the employee is entitled to an additional paid day off and overtime pay at the rate of 150% of the regular pay.
Paid Time Off
Paid leave in UAE is set in the employment contract as a minimum of 30 days paid leave a year, following completion of 1-year service. This leave is in addition to any public holidays.
The employer is required to pay the employee’s salary before the commencement of annual leave.
Following the introduction of the New Labour Law, employees can be required to utilize all annual leave in the applicable annual leave year and employers are now able to have a policy limiting carry-over of leave at their discretion.
There are 15 public holidays in 2022.
All employees who have completed three months of service are entitled to paid sick leave up to a maximum of 90 days per year and must provide a medical certificate within 48 hours of the first day of sickness.
For the first 15 days of sickness, the employee is entitled to 100.00% of the regular salary rate of pay. This reduces to 50.00% for the next 30 days, and any subsequent sickness in one year is unpaid.
All female employees are eligible for maternity leave.
Employees who have completed one year of service are entitled to 60 days paid at 100% of the regular salary rate of pay for the first 45 days, reducing to 50.00% of the regular salary rate of pay for the remaining 15 days. Maternity pay is no longer reduced to 50% for employees who have not completed one year of service.
The employee can take maternity leave before and after the due date.
Employees are also entitled to take up to 45 days (consecutive or intermittent) of unpaid leave due to a medical condition related to pregnancy or delivery upon producing a professional medical certificate.
The New 2022 Labour Law confirms that employers may not terminate, or threaten to terminate, a female employee’s employment because she is pregnant or on maternity leave.
PAID MATERNITY LEAVE (DAYS)
There is no additional Paternity leave in UAE.
There is no additional parental leave in UAE. For private-sector employees, both parents are entitled to 5 days of paid leave. The employees can take leave until the child reaches the age of 6 months.
The Executive Regulations have introduced a condition around parental leave so that the employee will have to provide evidence of the birth of his/her child in order to be entitled to take such leave.
- 5 days in the event of the death of an employee’s spouse;
- 3 days in the event of the death of an employee’s mother, father, son, brother, sister, grandson, or grandparent.
For employees affiliated/studying with an approved UAE education instruction, they will be entitled to 10 days of study leave once they have completed 2 years of service.
The termination process is standard in UAE and based on labour law requirements unless an employer can provide sufficient cause for dismissal without notice (due to misconduct, etc.)
Notice of termination must be in writing and sent to the relevant governmental authorities.
According to UAE Labor law, a minimum of 30 days mandatory notice period is required. The amount of notice period for employees who work under the DIFC employment law is determined by length of employment.
This can be as notice days to be worked or paid in lieu, as below:
- 1-5 months of employment – 2 weeks’ notice
- Up to 5 years of employment- 1 months’ notice
- 5+ years of employment- 90 days’ notice
A worker is entitled a severance pay after completing a full year of service.
The severance pay is as follows:
- 21 days wage for each year of the first 5 years of service
- 30 days’ wage for each year exceeding such period.
Severance pay for the time worked above a full year will be paid prorated.
The severance pay will be calculated based on the last basic wage the employee was entitled to. The severance pay for foreign employees is capped at two years’ wage. If the reason for termination is not recognized by UAE law, the employee may be entitled to additional compensation of 3 months’ pay. With changes implemented in the New Labour Law, employees will still be entitled to their full EOSG (provided that they have at least one year of service with the employer) when they resign from employment. This is also relevant to employees terminated for gross misconduct.
Probation period may not exceed 6 months. During probation, the employer may terminate the employment with a notice period of 14 days. If a foreign worker wishes to terminate the employment contract during the probation period and leave the state, he should give 14 days’ notice. Notice periods can be substituted by equivalent wages.
- Health Insurance for the employee’s spouse and dependents
- Meal vouchers
- Gym/wellness allowance
- Transportation/commuting allowance
- Private health insurance
- Bonus – around 10% of salary per month
- Additional leave – maximum 40 days (10 more days in addition to the statutory entitlement)
- Family health care allowance
- Child education allowance
- Cell phone allowance
Any foreigners coming to work in UAE will need to be registered with the UAE immigration authorities. All foreigners must have secured a job offer from a company operating in the UAE, and some require specific qualifications that the ministry of foreign affairs may require.
For working in Dubai, a UAE Employment Permit/work permit is required. In general, these are valid for up to two years for anyone offered a job in the UAE and provides the right to live and work in the UAE for the duration of the visa, which is renewable after two years.
The standard rate is 5%.
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Questions & Answers
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Payroll and Benefits Guide
in United Arab Emirates
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
Public Holidays Calendar
|Sunday||Jan-1||New Year's Day|
|Friday||Jul-21||Islamic New Year|
|Sunday||Dec-3||National Day Holiday||Day Off in Lieu|
Is overtime pay based on the employee’s basic salary, or the gross salary that includes housing allowance, transportation allowance, etc.?
All overtime bonuses must be based on the gross salary of the employee.
Can an employer dismiss an employee who exceeds their annual leave?
Hi Salma, An employer can dismiss an employer if they have exceeded their leave by 7 or more days.
Super, Can we get PayItems that is more important and special information to be captured as a part of personnel information specially for Dubai payroll
Hi, can you please clarify what you are looking for?
Our management has decided to change the salary structure where we use to pay 60% of Gross Salary as Basic Salary. Now the management want to change the basic salary of employee to 40% and remaining amount to be included as other allowance. There will not be any salary decrease but there will be change in the basic salary percentage is it allowed. (This company is in UAE – Dubai, mainland company)
Is it legal to take this step if yes then under which article can the change take place.
Unfortunately, we’re not able to offer legal advice with regard to your issue. Please seek legal advice in this matter
For salespeople that also get a commission, does the employer pay the 12.5% social tax on the commission too?
12.5% is only paid for by local workers, not expat workers – which worker type are they referring to? Expat workers do not pay taxes.
What if I want to request cancelation of visa to my employer is their anything I pay and if I pay how much I pay
Typically it is the employer who cancels your work visa and pays for it. The cost is usually between 100 and 200 AED.
How much shall be the basic salary from the package in Dubai mainland?
For expatriates, there is no mandatory minimum wage. For UAE nationals, the minimum wage is determined by their level of education.
If my visa is cancelled how many months do I have until it expires
Visa cancellation typically takes 1 to 2 days. When a visa is canceled, a tourist has a grace period of 10 days, and a resident has a grace period of 30 days.
As per the new Labour law from Feb 2022, is the vacation salary paid only on Basic Salary including housing or Gross salary ?
Under the new labor law, employees will be entitled to full payment of annual leave if they take annual leave during the working period. Employees who resigned or were terminated will be paid for annual leave on their basic salary.
What is the average travel allowance for Sales staff in the UAE?
Companies have complete discretion as to whether they will offer travel allowance and how much they will offer. Companies can give fixed amounts for these expenses for travel.