Updated on 25 July 2024
Payroll is considered the lifeblood of a happy workforce, and at the same time, it is also known to be a potential source of headaches for HR and finance teams all across the world!
If you’re responsible for processing salaries in your company, you’re probably already familiar with the importance of getting it right – every single time. One missed decimal point or a forgotten allowance can create a domino effect of frustration and discontent.
But fear not, let’s look at a breakdown of what you need to know about processing salaries in the UAE, along with some handy tips to avoid those dreaded payroll hiccups.
Demystifying Payroll in the UAE
So, what exactly does salary processing in the UAE entail? Here’s a quick rundown:
🔴 Calculating gross salary: This involves factoring in the base salary, any allowances (housing, transport, etc.), and bonuses.
🔴 Tax deductions: The UAE has a non-income tax system, but employees contribute to a mandatory social security scheme. You’ll need to ensure that the correct social security contributions are deducted, and to whom this may be applicable.
🔴 End-of-service gratuity (EOSG): This is a lump sum payment that employees are entitled to, when their contract comes to an end. You’ll need to calculate and accrue this amount for each employee based on their remuneration and length of service.
🔴 Net pay calculation: Once deductions are made, you arrive at the employee’s net pay, which is the amount they receive in their bank account.
🔴 Salary payments: This involves transferring the net pay to employees’ bank accounts, adhering to deadlines and any specific payment instructions.
Understanding the Labour Laws: Your Payroll Compass
The UAE Ministry of Human Resources and Emiratisation (MoHRE) sets out clear regulations regarding payroll practices. It’s crucial to be familiar with these laws to avoid any legal or compliance issues:
🔵 Wage payment: Salaries must be paid by the agreed-upon date, usually within one month of the end of the work period or the period that has been specified and agreed on in the employment contract. Late payments can incur penalties.
🔵 Payslips: Employees are entitled to receive payslips that show a clear breakdown of their gross salary, deductions, and net pay.
🔵 Leave entitlements: Annual leave, sick leave, and other paid leave must be factored into payroll calculations.
🔵 Termination procedures: MoHRE regulations outline specific requirements for calculating and paying EOSG upon termination.
Avoiding Payroll Hiccups: Your Recipe for Success
Now that we’ve touched upon the basics, let’s dive into some practical tips to keep your payroll cycles running smoothly:
➡️ Invest in a reliable payroll system: Manual calculations are a recipe for disaster. A robust payroll software can automate calculations, ensure accuracy, and make the entire process better and faster.
➡️ Maintain clear and accurate employee data: Double-check employee details like bank accounts, salary components, and allowances to avoid incorrect payments.
➡️ Stay updated on labour law changes: Labour regulations are likely to keep changing, so make sure to stay informed by following the official MoHRE channels and seeking professional guidance when needed.
➡️ Embrace automation: Use the features that come with your payroll platform to enable automatic deductions, leave calculations, and payslip generation.
➡️ Regularly reconcile payroll data: Cross-check all payroll-related data with accounting records to ensure accuracy and identify any discrepancies.
➡️ Communicate clearly with employees: Keep your team informed about pay schedules, deductions, and any changes to your payroll processes.
By following these tips and staying on top of the legalities, you can minimise the risk of payroll hiccups and ensure a smooth, stress-free experience for yourself and your employees. Remember, a happy and well-paid workforce is a productive one!
👉🏼 Looking to get in touch with a MOHRE-approved payroll card provider for corporate payroll solutions, or a payroll outsourcing company? Reach out to us for any information related to salary processing, employee management, payroll cards, or WPS payroll in UAE.
