Payroll and Benefits Guide United Arab Emirates

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee income tax

Federal Corporate Income Tax (CIT) has been introduced and will apply for fiscal years starting on or after 1 June 2023 as follows:

• 0% tax rate on income up to AED 375,000 (c. US$ 102,000)
• 9% tax rate on profits of income above AED 375,000
• 15% tax rate applied on large multinationals that generate consolidated global revenues above EUR 750m (c. AED 3.15 bn)

General

There is no minimum salary stipulated in the UAE Labour Law, however it broadly mentions that salaries must cover basic needs of the employees.  All employers registered with Ministry of Human Resources and Emiratisation (MoHRE) must subscribe to the ‘Wages Protection System (WPS)’ and pay the wages to their employees through it, as per the due dates.

Under this system, salaries of employees will be transferred to their accounts in banks or financial institutions, which are authorised by Central Bank of the UAE to provide the service.

Payroll Cycle

The payroll cycle in UAE is generally monthly, with payment made on the last working day.

13th Salary

There is no requirement for a 13th-month salary payment in the United Arab Emirates.

General

8 hours per day, up to 48 hours per week, Monday to Friday (during Ramadan, working hours are reduced by 2 hours daily). 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.

As of 2022, Friday is no longer specified as being the weekly rest day for employees, and most companies in the public and private sector have moved to a Monday to Friday working week. Employees who wish to attend Friday congregational prayers should be given the flexibility to work from remotely, or to 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.

Overtime

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 nighttime overtime, between the hours of 9 pm and 4 am, overtime is calculated at 150.00% of the regular salary rate; with 125.00% 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.

Working Week

Monday–Friday

Paid Time Off

Workers are entitled to a minimum of 30 calendar days paid leave each year, following completion of 1-year service. For employment over 6 months but less than 1 year the worker accrues 2 days per month. The employer is required to pay the employee’s salary before the commencement of annual leave.

Annual leave should be used within the allotted year, unless a carryover policy has been set by the company.

Public Holidays

The local government decides each year if holidays falling on the weekend are lost or moved to a working day in lieu.

Religious holidays are determined by the lunar cycle and will show as “Tentative” until they are confirmed nearer the date of the holiday.

Sick Days

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% of the regular salary rate of pay. This reduces to 50% for the next 30 days, and any subsequent sickness in one year is unpaid (90 days total per year).

Maternity Leave

All female employees are entitled to maternity leave of 60 days. The first 45 days are paid at 100% of the regular salary rate, reducing to 50% of the regular salary rate for the remaining 15 days. The employee can take maternity leave before and after the due date.

Employees are also entitled to take up to an additional 45 days (consecutive or intermittent) of unpaid leave due to a medical condition related to pregnancy or delivery upon producing a professional medical certificate.

It is not permitted terminate employment due to pregnancy or absence due to maternity leave.

Paternity Leave

There is no additional paternity leave in UAE.

Parental Leave

Termination Process

Either party to the employment contract may terminate the contract for any legitimate
reason, provided that the other party is notified in writing and with the correct notice given. Legitimate reasons includes performance or behavioral issues, redundancy, bankruptcy and insolvency, and failure of the worker to renew a work permit.

Notice Period

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 month’s notice
• 5+ years of employment- 90 days’ notice

During the probation period only 14 days must be given; if a worker resigns during probation to move to a new company in the UAE they must give 30 days’ notice, however, if a foreign worker is leaving the UAE then they just need to give 14 days’ notice.

Severance Pay

A worker is entitled a severance pay after completing a full year of service.

The severance pay is 21 days’ wage for each year of the first 5 years of service and 30 days’ wage for each year exceeding such period. The severance pay for the time worked above a full year will be paid prorated. Severance pay for foreign employees is capped at two years’ wage. The severance pay will be calculated based on the last basic wage the employee was entitled to.

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 labor law, employees will still be entitled to their full EOSG (provided that they have at least one year of service with the employer) where they resign from employment. This is also relevant to employees terminated for gross misconduct.

Probation Period

Probation period may not exceed 6 months.
During probation, any party desiring to terminate employment during probation give at least 14 days’ notice, and where an employee is joining another UAE-based company, at least 30 days’ notice. Additionally, employers have the right to demand payment from the new employer for the costs incurred in hiring the employee.

General

• 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

VISA

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.

To work 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.

General

The standard rate is 5%.