As an employer in the UAE, it is crucial to familiarise yourself with the latest salary processing regulations to ensure compliance with the law and maintain smooth operations.
Here below, you’ll find the key aspects of UAE’s salary processing regulations, helping you navigate the complexities and streamline your payroll management effectively.
Understanding the legal framework
The primary legislation governing salary processing and the labour rights of employees in the private sector in the UAE is the Federal Law No. 8 of 1980 (also known as the Labour Law), which outlines various provisions related to wages, payment dates, deductions, leaves, and more. It also defines the obligations of employees working within the UAE.
Ministerial Resolution No. 598 of 2022 regarding the Wages Protection System also has provisions for a comprehensive set of labour laws and regulations that have been implemented to protect the rights of employees and to ensure fair compensation for everyone.
Apart from the legal obligations, there can also be industry-specific regulations or workplace-related policies that businesses adhere to, depending on the sector in which they operate.
Components of a salary
When processing salaries for employees in the UAE, it is essential to understand the various components that make up the total compensation package.
There is no minimum salary specified in the UAE Labour Law, however it broadly mentions that salaries must cover basic needs of the employees.
The various components typically include the basic salary, allowances (such as housing, transportation, and education), bonuses, commissions, and other benefits as per the employment contract. Each component may have specific rules and tax implications, and accurate calculations are crucial to avoid any discrepancies or legal issues.
Deductions and withholdings
The UAE Labour Law permits specific deductions from employees’ salaries, such as social security contributions, income tax (if applicable), insurance premiums, and any court-ordered payments.
However, it is crucial to be aware of the permissible limits and seek legal advice to ensure compliance with the local regulations. Transparent communication with your employees regarding deductions is essential to avoid misunderstandings and maintain a harmonious working environment.
Ensuring timely salary payments
According to the UAE Labour Law, employers must pay their employees’ salaries within the stipulated time frame as agreed in the Employment Contract. Here are some important things to keep in mind regarding salary payments:
- Salaries should be disbursed on a monthly basis, especially if there is no time period specified in the employment contract. All employees must be paid at least once a month.
- Salaries should be paid within 15 days from the salary due date.
- According to the Ministerial Resolution No. (598) of 2022 concerning WPS issued on 25 November 2022, if a company fails to pay its employees within this 15-day period, will be considered late, and therefore, in default.
- Consequences of such a violation will start from the seventeenth day of the delay, namely, the Ministry can levy a fine of AED 1000 per employee.
- If your employees are not paid, or wages are delayed for any reason by over 60 days, then a fine of AED 5000 per worker will be levied, with a maximum fine of AED 50,000.
- In extreme cases, the Ministry can also stop granting the company any additional work permits for its employees.
- If salaries are not paid by the given deadline, the UAE regulatory authorities may impose travel bans on those who hold key management roles in the company, which may have an effect on the investors and stakeholders.
- It is also important for business owners and employers to note that at least 80% of your employees need to be paid at least 80% of their salary.
Employers must ensure sufficient funds are available to meet salary obligations at the earliest possible. Failure to comply with payment regulations can lead to penalties, legal disputes, and damage to the organisation’s reputation.
Record-keeping and compliance
Employers in the UAE are required to maintain accurate payroll records and documentation for a specified period, typically five years.
These records should include salary details, employee contracts, attendance records, and any supporting documents related to salary processing. Regular audits and internal reviews can help identify and rectify any discrepancies, ensuring compliance with regulations and minimising the risk of penalties or legal consequences.
Conclusion
Adhering to salary processing regulations in the UAE is crucial for employers to protect the interests of their employees and maintain a compliant and transparent work environment. By understanding the legal framework, determining salary components accurately, ensuring timely payments, and maintaining meticulous records, businesses can navigate the payroll landscape with confidence and avoid any potential pitfalls.
How we can help
In a world where everything is instant and at your fingertips, payroll is a game-changer for businesses of all sizes, especially the Finance and HR teams. A lot of organisations still pay their employees through the conventional banking system, however, global payroll is not just simple to set up, but also makes instant and accurate payments to multiple employees at once, thereby minimizing any errors and failures. Furthermore, our MasterCard-powered C3Pay salary card lets your employees spend their money wherever they want (merchant retail, online, any ATM worldwide) without having to worry about any kind of minimum bank balance.
For more information related to your employees’ financial rights, WPS-compliant salary processing or payroll services in UAE, feel free to reach out to us on info.ae@edenred.com
