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Minimum wage in the UAE

The UAE’s Payroll

Statutory benefits in the UAE

Supplementary employee benefits in the UAE

Seamless and compliant payroll and benefits in the UAE

Payroll in the UAE

Managing payroll in the UAE involves more than just processing salaries; it also requires compliance with labour laws, adherence to social security contributions for UAE nationals, and ensuring payments align with local customs and expectations

While the UAE does not impose income tax on employees, employers hiring UAE nationals must comply with social security regulations. Contributions amount to 20% of an employee’s gross salary, shared between the employer, employee, and the government. In Abu Dhabi, this rate increases to 26%, with higher employer contributions. Additionally, employees working in Free Zones must follow the specific payroll regulations of their respective zones.

Because of these complexities, many companies choose to outsource payroll in the UAE. Partnering with payroll providers like CXC allows businesses to efficiently manage salary processing, benefits administration, and compliance requirements.

This way, businesses can streamline their operations and focus on growth while ensuring employees are compensated accurately and on time.

Minimum wage in the UAE

Ensuring fair compensation is crucial for businesses operating in the UAE. While there is no universal minimum wage, specific salary thresholds apply based on an employee’s qualifications. Employers must stay informed about wage regulations to remain compliant and attract top talent.

Minimum wage in the UAE

Unlike many countries, the UAE does not have a blanket minimum wage for expats or local workers. However, the country’s Labour Law stipulates salary guidelines based on educational qualifications:

University graduates: AED 12,000 ($3,267) per month.
Skilled technicians: AED 7,000 ($1,905) per month.
Skilled labourers (with a secondary school certificate): AED 5,000 ($1,361) per month.

These salary benchmarks primarily apply to employees sponsored under mainland UAE work visas. Free zones may have different regulations, so employers should check specific guidelines applicable to their business jurisdiction.

While an official minimum wage in UAE per hour is not defined, employers must ensure salaries align with industry standards and the cost of living. Offering competitive pay helps retain skilled workers and maintain compliance with local labour laws.

Wage Protection System in the UAE

To safeguard employee rights and ensure timely salary payments, the UAE government has implemented the Wage Protection System (WPS). This electronic salary transfer system, managed by the Ministry of Human Resources and Emiratisation (MOHRE), enhances wage transparency and minimises disputes.

The system requires employers to process salary payments through authorised financial institutions, which then report the transactions to the government.

The WPS covers all businesses registered with MOHRE and helps enforce payroll compliance in the UAE by preventing delayed or missing salary payments. Non-compliance can result in penalties, including fines, restrictions on new work permits, and legal action.

Key features of the WPS:

Mandatory electronic salary transfers: Employers must process payments through WPS-approved financial institutions, ensuring employees receive their wages on time.
Regulated salary deductions: The system limits allowable salary deductions, protecting workers from excessive reductions for loans, fines, or other penalties.
Dispute resolution mechanism: In case of salary disputes, the WPS provides a structured process for resolving conflicts efficiently and fairly.
Compliance monitoring: The system tracks salary payments and notifies authorities of any delays or irregularities, helping to enforce UAE minimum wage laws.

Employers must register their company and employees with the WPS, submit salary details to MOHRE, and adhere to payment schedules. Non-compliance can result in penalties, including fines or restrictions on new work permits.

The UAE’s Payroll

Efficiently managing payroll in the UAE is essential for businesses to ensure compliance with local labour laws and maintain employee satisfaction. Employers must be aware of payroll cycles, taxation, benefits, and common practices regarding bonuses.

Payroll cycle in the UAE

In the UAE, the payroll cycle is typically monthly, with salaries paid on the last working day of each month. Employers must adhere to this schedule, ensuring timely salary payments to maintain compliance with the UAE’s Wage Protection System (WPS), which monitors wage disbursements to employees.

Payroll taxes in the UAE

One of the key advantages of operating in the UAE is that there is no personal income tax for employees. However, social security contributions apply to UAE nationals and some Gulf Cooperation Council (GCC) nationals working in the UAE.

For UAE nationals: Social security contributions amount to 20% of the employee’s gross salary, distributed as follows:
- 5% paid by the employee.
- 12.5% paid by the employer.
- 2.5% contributed by the government.
For Abu Dhabi-based employees: A higher contribution rate of 26% applies, with the employer contributing 15%, the government contributing 6%, and the employee’s share remaining at 5%.
For GCC nationals: Contributions are calculated according to the regulations of their home country.
Employers are responsible for withholding and remitting these contributions to the relevant authorities to remain compliant.

Payroll benefits in the UAE

Employee benefits are a crucial aspect of payroll calculations in UAE, impacting both compliance and retention. Key benefits include:

End-of-service gratuity: Employees who complete at least one year of service are entitled to gratuity payments, calculated based on their tenure and final salary.
Annual leave and public holidays: Employees are entitled to paid annual leave and official public holidays as per UAE Labour Law.
Health insurance: Mandatory in several Emirates, including Dubai and Abu Dhabi, employers must provide health coverage to employees.
Other allowances: Many companies offer additional benefits such as housing, transportation, and education allowances, depending on the employment contract.

13-month salary in the UAE

Unlike some countries, there is no mandatory 13th-month salary payment in the UAE. Any bonuses or additional payments are at the discretion of the employer and depend on company policy or contractual agreements.

Handling your UAE business’ payroll requires a clear understanding of payment schedules, taxation policies, and employee benefits. Employers must comply with social security regulations for UAE and GCC nationals. Staying informed about payroll obligations helps businesses ensure smooth operations and employee satisfaction.

Statutory benefits in the UAE

Providing statutory benefits is a key responsibility for employers in the UAE, ensuring compliance with labour laws and offering financial security to employees. Understanding social security contributions, pension schemes, and health insurance requirements helps businesses operate smoothly while safeguarding employee rights.

Social security contributions in the UAE

For UAE nationals, social security contributions are set at 20% of the employee’s gross salary, distributed as follows:

5% paid by the employee.
12.5% paid by the employer.
2.5% contributed by the government.

In Abu Dhabi, a higher contribution rate of 26% applies:

15% paid by the employer.
6% contributed by the government.
5% paid by the employee.

For GCC nationals working in the UAE, contributions are determined by their home country’s regulations. Employers are responsible for withholding and remitting these contributions to the relevant authorities.

Social security benefits in the UAE

Employees covered under UAE benefits regulations receive several advantages, including:

End-of-service gratuity: Employees who have completed at least one year of service are entitled to a gratuity payment upon termination, calculated based on tenure and final salary.
Pension schemes in the UAE: UAE nationals benefit from the UAE pension fund, which provides retirement income based on their social security contributions.
Paid leave: Employees are entitled to annual leave, sick leave, and maternity or paternity leave as per UAE Labour Law.

Health insurance in the UAE

Employers must comply with health insurance regulations, which vary by Emirate:

Abu Dhabi: Employers are required to provide medical insurance to employees and their family members residing in the UAE.
Dubai: Employers must provide medical insurance for their employees, but coverage for dependents is not mandatory.

Non-compliance with health insurance regulations can result in fines or restrictions on obtaining visas. Additionally, expatriates cannot work in the UAE without a valid medical insurance policy.

UAE pension fund

In October 2023, the UAE Cabinet introduced an optional pension scheme to replace the end-of-service indemnities (EOSI) system for private sector and free zone employees. This initiative aligns with a broader trend of pension scheme reforms across the GCC.

As of November 2023, employers who opt into the new system must make monthly contributions to an investment-based savings scheme. Upon retirement, employees receive their accrued savings, and investment returns instead of a lump sum gratuity.

For UAE nationals, pension eligibility is based on service duration and age:

Standard retirement: Employees can receive a pension at 60 years old, provided they have completed 15 years of insured service.
Early retirement: Male employees may qualify at 55 years old, provided they have completed 20 years of insured service.

Employers should assess their obligations under both the traditional gratuity system and the new pension scheme to determine the best approach for their workforce.

Supplementary employee benefits in the UAE

In addition to the mandatory employee benefits in the UAE, many employers offer supplementary benefits to attract and retain top talent.

Supplementary employee benefits help businesses stay competitive and foster a motivated workforce. From private health insurance to transportation allowances and ESOPs, employers have various options to enhance their compensation packages. While these perks are not required under the UAE’s employee benefits law, they can significantly impact job satisfaction and employee retention.

Additional health insurance in the UAE

While health insurance is mandatory for employees in Abu Dhabi and Dubai, some employers go beyond the legal requirements by offering private health insurance across the UAE. This may include:

Family health insurance: Covering dependents to ensure comprehensive healthcare for employees’ families.
Extended medical benefits: Including dental, vision, and specialist consultations.
Wellness perks: Such as gym memberships, mental health support, and nutrition counselling.
Premium insurance plans: Offering wider coverage, reduced co-payments, and access to international healthcare providers.

Providing enhanced health benefits can help businesses stand out in competitive job markets while ensuring employees feel valued and cared for.

Other employee benefits in the UAE

Many employers choose to offer additional perks beyond the mandatory employee benefits in the UAE to improve work-life balance and job satisfaction. These may include:

Flexible working hours
A flexible work policy allows employees to adjust their schedules, work remotely, or adopt hybrid models. This helps employees maintain a work-life balance, boosting morale and reducing burnout.

Extra holidays and leave
Offering extra holidays beyond the legally required annual leave can increase employee motivation and loyalty. Additional paid leave for personal milestones, birthdays, or mental health days is a growing trend among UAE employers.

Transportation allowance in the UAE
Many businesses also provide a transportation allowance in the UAE to assist employees with commuting costs. This may include:

Monthly transport stipends.
Company-provided vehicles.
Fuel or public transport subsidies.

Employee training and development
Workshops, professional development courses, and sponsorship for certifications can enhance employees’ skills, making them more engaged and productive. Supporting career growth also strengthens employee retention.

Employee stock ownership plans (ESOPs)
Some employers provide ESOPs as a long-term incentive, allowing employees to own company shares and benefit from its success. This aligns employees’ interests with business performance.

Employee death benefits in the UAE
In unfortunate circumstances, some companies offer employee death benefits in the UAE as well, such as:

Life insurance policies that provide financial support to the employee’s family.
Compensation packages for dependents to ease financial burdens.
End-of-service benefits paid to the legal heirs of the deceased employee.

These benefits offer security and peace of mind to employees, knowing their families are financially protected.

Seamless and compliant payroll and benefits in the UAE

Managing payroll and benefits is not just about legal compliance—it is also about meeting employee expectations. Every country has its own workplace norms, and if your compensation packages are not aligned with those standards, retaining talent can be a challenge.

At CXC, we take the complexity out of payroll and employee benefits in the UAE. From tax withholdings to bonuses, we handle these details so you can focus on growing your business.

Want to learn more? Explore our EoR solutions / Speak to our team today.

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