UAE Payroll Outsourcing, Payroll Software and Employer Of Record (EOR) services.
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UAE Payroll and Employer of Record: Employment Contracts
- In the UAE, an employment entrance visa is also known as a pink visa. The employer must apply for visa quota approval on behalf of the employee to begin the process of acquiring this permission. This authorization will be sought from the Ministry of Labor (MOL).
- Following that, the employer will file an employment contract with the MOL. This contract must be signed by the prospective employee.
- Before awarding an employment entrance visa, the Ministry must approve the work permit application. After receiving clearance and obtaining a visa, the employee will have two months to visit the UAE.
- When an employee enters the UAE on a pink visa, he or she has 60 days to secure a resident visa and a formal work permit. Work permits in the UAE must be sponsored by an entity that is locally licensed and established in the UAE, which is one of the distinctive concerns. This criterion may make the procedure more difficult for organizations in the early phases of worldwide expansion. If your firm does not already have a presence in the UAE, you can collaborate with a worldwide PEO as the Employer of Record in the UAE.
- Some employees may prefer to bring family members to the UAE with them. After receiving their own resident visa, employees can sponsor family members’ visas.
PAID TIME OFF
Annual Vacation
Minimum of 30 days paid leave each year after one year of employment. Employees might be obliged to use all of their yearly leave in the corresponding leave year, and employers can now adopt a policy restricting leave carry-over at their discretion.
Sick
Employees who have worked for three months are eligible for up to a maximum of 90 days per year. A medical certificate must be presented within 48 hours.
Employees will be entitled to 100% of their usual wage for the first 15 days of illness and 50% for the next 30 days. Any additional sick days in the year will be unpaid.
Maternity
Maternity leave can be taken prior to and after the due date of employee. Employees with one year of employment are entitled to 60 days paid at 100% of the normal salary rate of pay for the first 45 days, with the following 15 days paid at 50% of the regular salary rate of pay.
Employees are also allowed to take 45 days of unpaid absence due to a condition connected to pregnancy or delivery. A professional medical certificate must be provided.
Paternity
N/A
Family
In the UAE, private-sector parents/employees are entitled to 5 days of paid leave until the child reaches the age of six months.
National Holidays
There are seven holidays in all, totaling 14 days.
Other Paid Time Off
Compassionate leave :
- 5 days in the case of an employee’s spouse’s death;
- 3 days if an employee’s mother, father, son, brother, sister, grandson, or grandmother dies.
Study Break :
- Employees that are linked with/studying with an approved UAE education instruction will be eligible to 10 days of study leave after two years of employment.
STATUTORY EMPLOYEE BENEFITS
Unemployment
Starting 1 January 2023, all employees must be registered with an unemployment insurance scheme. Employers are not required to contribute to the scheme.
Employees earning less than AED 16,000 – minimum of AED 5 per month
Employees earning more than AED 16,000 – minimum of AED 10 per month
If an employee has paid contributions for at least 12 months on termination of employment, they will receive assistance for a period of three months from the date of termination equal to 60% of their monthly income.
Assistance is capped at AED 10,000 for those earning less than AED 16,000 and AED 20,000 for those earning more than AED 16,000 per month.
Workers Compensation
N/A
Social Security
Social security contributions are applicable in the UAE only for UAE and GCC nationals. If UAE/ GCC nationals are employed, then both the employer and the employee will be required to make social security contributions to the General Pension and Social Security Authority (GPSSA). A payment of 12.5 percent by the employer (15 percent if the employer is a public entity) and 5 percent by the employee are due for UAE nationals to the GPSSA.
The employers of an expatriate or an expatriate employee are not required to make any social security contributions in the UAE.
Retirement
According to Article 16 of the federal pension legislation, an employee is entitled to a pension if and only if the following conditions are met:
- He/she has served for at least 20 years and is at least 50 years old.
- After 20 years of service, the pension amount rises by 2% for each year worked until the employee has completed 35 years of service.
- When an employee has served 35 years, they are eligible for a pension equivalent to his wage.
- When an employee has more than 35 years of service, he will be eligible for a pension equal to three wages for each year.
In the UAE, there are no pension programs for expatriate employees; nevertheless, they are eligible for end-of-service gratuity, which is computed based on the number of years of service.
When an employee has more than 35 years of service, the employee will be eligible for a pension equal to three wages for each year.
If the employee is not qualified for a pension, the employee is entitled to an end-of-service gratuity.
To be eligible for an end-of-service gratuity, the employee must have served for at least one year. The qualifying term for gratuity in the event of voluntary resignation is 19 years and 11 months. An additional working day for an insured is computed as a whole month, and the insured is deemed to have completed the qualifying time for the pension, which is (20) years of service.
Health
Every employer in Abu Dhabi is required to provide medical insurance to employees and dependents, and the burden of the fourth child must be borne by the employee. Employers in Dubai are also required by law to provide medical insurance to their employees.
Employers are not required by law to offer medical insurance to their employees in the northern section of the UAE, which includes Ajman, Ras Al-Khaimah, Sharjah, Fujairah, and Umm Al-Quwain.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
N/A
Retirement
Private retirement/pension funds are available as options in the UAE.
Health
Private healthcare is available in the UAE.
Insurance
Private life insurance is available in the UAE.
PERSONAL INCOME TAX
Tax Year
N/A
Tax Tables
N/A
Taxation Method
N/A
Double Taxation
The UAE has a network of tax treaties, with over 115 now signed and in force, and many more in the works.
The validity of the respective tax treaties in the counter jurisdiction, however, depends on the interpretation of the respective tax authorities if they consider the UAE to be a no-tax or low-tax country.
Residence Requirements
A valid residency visa for those who aren’t UAE nationals.
Some with a highly skilled work visa may be eligible for permanent residency
Payroll Calendars
In the UAE, the payroll cycle is normally monthly, with payment given on the final working day.
Rebates & Tax Credits
N/A
Health Insurance
Every employer in Abu Dhabi is required to provide medical insurance to employees and dependents, and the burden of the fourth child must be borne by the employee. Employers in Dubai are also required by law to provide medical insurance to their employees.
Employers are not required by law to offer medical insurance to their employees in the northern section of the UAE, which includes Ajman, Ras Al-Khaimah, Sharjah, Fujairah, and Umm Al-Quwain.
Unemployment
Starting 1 January 2023, all employees must be registered with an unemployment insurance scheme. Employers are not required to contribute to the scheme.
Employees earning less than AED 16,000 – minimum of AED 5 per month
Employees earning more than AED 16,000 – minimum of AED 10 per month
If an employee has paid contributions for at least 12 months on termination of employment, they will receive assistance for a period of three months from the date of termination equal to 60% of their monthly income.
Assistance is capped at AED 10,000 for those earning less than AED 16,000 and AED 20,000 for those earning more than AED 16,000 per month.
Social Security
Social security contributions are applicable in the UAE only for UAE and GCC nationals. If UAE/ GCC nationals are employed, then both the employer and the employee will be required to make social security contributions to the General Pension and Social Security Authority (GPSSA). A payment of 12.5 percent by the employer (15 percent if the employer is a public entity) and 5 percent by the employee are due for UAE nationals to the GPSSA.
The employers of an expatriate or an expatriate employee are not required to make any social security contributions in the UAE.
PAYROLL ELEMENTS
Income
In the UAE, there is no personal income tax.
Bonuses
In the UAE, there is no necessity for a 13th-month wage payment.
Allowances
The employer is not required by law to provide allowances. Accommodation and transportation allowances, on the other hand, are usually included in the compensation. Furthermore, particularly in the case of highly skilled personnel, the company may pay expenditures for relocation, dependents’ residency visas, yearly flights, private health insurance, pension funds, and/or children’s schools. An allowance can be paid once, monthly, or yearly, depending on its nature and the parties’ agreement.
Benefits in Kind
Some companies may provide benefits in kind.
Investment Income
N/A
Retirement Funding
According to Article 16 of the federal pension legislation, an employee is entitled to a pension if and only if the following conditions are met:
- He/she has served for at least 20 years and is at least 50 years old.
- After 20 years of service, the pension amount rises by 2% for each year worked until the employee has completed 35 years of service.
- When an employee has served 35 years, he/she is eligible for a pension equivalent to his wage.
- When an employee has more than 35 years of service, they will be eligible for a pension equal to three wages for each year.
In the UAE, there are no pension programs for expatriate employees; nevertheless, they are eligible for end-of-service gratuity, which is based on the number of employment years.
When an employee has more than 35 years of service, he/she will be eligible for a pension equal to three wages for each year.
If the employee is not qualified for a pension, he or she is entitled to an end-of-service gratuity.
To be eligible for an end-of-service gratuity, the employee must have served for at least one year. The qualifying term for gratuity in the event of voluntary resignation is 19 years and 11 months. An additional working day for an insured is computed as a whole month, and the insured is deemed to have completed the qualifying time for the pension, which is (20) years of service.
Health Insurance
Every employer in Abu Dhabi is required to provide medical insurance to employees and dependents, and the burden of the fourth child must be borne by the employee. Employers in Dubai are also required by law to provide medical insurance to their employees.
Employers are not required by law to offer medical insurance to their employees in the northern section of the UAE, which includes Ajman, Ras Al-Khaimah, Sharjah, Fujairah, and Umm Al-Quwain.
Risk Insurance
According to Ministerial Decision No. 318 of 2022, establishments are required to either pay a bank guarantee equal to AED 3,000 for each employee or obtain an insurance policy in accordance with MOHRE’s instructions.
Dubai Insurance Company has introduced the Workers Protection Program (WPP Insurance) in order to satisfy this insurance need. The WPP Insurance was created to act as a safety net in cases where an employee is not paid their salary, is not given their end-of-service gratuity, suffers a workplace injury, where the cost of repatriation is not covered, or where the cost of returning a deceased employee’s remains to their country of origin needs to be covered.
Taxable Income
The UAE has no personal income tax.
Allowable Deductions
Any deductions is prohibited except in the following circumstances :
- Repayment of loans or cash advances made to employees in excess of what is owed to them, as long as the amount deducted in this situation does not exceed 10% of the employee’s monthly salary.
- Contributions that employees must make from their pay to social security and insurance plans under the law.
- Contributions to any social project or in support of any other benefits or services that the employer provides and that have been authorized by the UAE Ministry of Labor.
- Fines levied against the employee for any violations he may have committed.
- Any debt that is collected in accordance with a court order, as long as the deduction made in connection with that execution does not go beyond 25% of the employee’s pay. After paying any alimony required by law up to one-quarter of the employee’s compensation, the maximum deduction in cases where there are many debts or creditors must not exceed half the employee’s salary, which is to be shared pro rata among the creditors.
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
Local employees must contribute 5% of their wages or salaries to pension social security, while employers must contribute 12.5%. Employees in the UAE must be paid within two weeks after the conclusion of the pay month.
Unemployment
Starting 1 January 2023, all employees must be registered with an unemployment insurance scheme. Employers are not required to contribute to the scheme.
Employees earning less than AED 16,000 – minimum of AED 5 per month
Employees earning more than AED 16,000 – minimum of AED 10 per month
If an employee has paid contributions for at least 12 months on termination of employment, they will receive assistance for a period of three months from the date of termination equal to 60% of their monthly income.
Assistance is capped at AED 10,000 for those earning less than AED 16,000 and AED 20,000 for those earning more than AED 16,000 per month.
Social Security
Social security contributions are applicable in the UAE only for UAE and GCC nationals. If UAE/ GCC nationals are employed, then both the employer and the employee will be required to make social security contributions to the General Pension and Social Security Authority (GPSSA). A payment of 12.5 percent by the employer (15 percent if the employer is a public entity) and 5 percent by the employee are due for UAE nationals to the GPSSA.
The employers of an expatriate or an expatriate employee are not required to make any social security contributions in the UAE.
Workers Compensation
N/A
ADMINISTRATION
Income
N/A
Payroll Taxes
Local employees must contribute 5% of their wages or salaries to pension social security, while employers must contribute 12.5%. Employees in the UAE must be paid within two weeks after the conclusion of the pay month.
Unemployment
Starting 1 January 2023, all employees must be registered with an unemployment insurance scheme. Employers are not required to contribute to the scheme.
Employees earning less than AED 16,000 – minimum of AED 5 per month
Employees earning more than AED 16,000 – minimum of AED 10 per month
If an employee has paid contributions for at least 12 months on termination of employment, they will receive assistance for a period of three months from the date of termination equal to 60% of their monthly income.
Assistance is capped at AED 10,000 for those earning less than AED 16,000 and AED 20,000 for those earning more than AED 16,000 per month.
Social Security
Social security contributions are applicable in the UAE only for UAE and GCC nationals. If UAE/ GCC nationals are employed, then both the employer and the employee will be required to make social security contributions to the General Pension and Social Security Authority (GPSSA). A payment of 12.5% by the employer ( 15% if the employer is a public entity ) and 5 percent by the employee are due for UAE nationals to the GPSSA.
The employers of an expatriate or an expatriate employee are not required to make any social security contributions in the UAE.
Workers Compensation
N/A
Statutory Benefits
UAE has national social security and it is mandatory for companies to provide employees with health insurance.
Employee Benefits
Certain benefits are mandatory to offer employees in the UAE. These are: 14 public holidays, 30 days of paid leave, 60 days of paid maternity leave.
LEGISLATION
The legislation forbids forced labor and discrimination based on gender, race, color, sex, religion, national or social origin, or handicap. Additionally, it outlines the obligations of employers toward their workforce. Regardless of whether they are UAE residents or visitors, the rule is applicable to all employees working in the UAE.
