In the United Arab Emirates, payroll compliance plays a significant role in the functionality of all established companies. There are legal requirements that need to be met with regards to companies’ payroll, taxes and social security which if not met can lead to legal repercussions.

In this article, we will highlight the details of the laws and regulations that govern payroll in the UAE and how to maintain compliance.

Federal Decree-Law No. 33 of 2021: Regulation of Employment Relationship

The Federal Decree-Law No. 33 of 2021 was passed on 27th of September 2021 as a legal framework that governs employment relations in the UAE. One of the main objectives of the law is to allow a viable and stable labor market in the UAE and improve the effectiveness of the country’s labor market to attract and maintain future skills and talents. This law applies to all establishments and employers across the private sector of UAE and workers excluding the federally and locally governed organizations’ employees, armed force personnel, police, security, and domestic workers. 

Key Provisions of Federal Decree-Law No. 33 of 2021

• Employment Contract: For work relations to be established, the employer is required by the law to enter into a written or oral contract of employment with the worker based on the pattern of work that the worker is going to undertake. The contract shall be made in two copies; the employer shall be provided with one copy of the contract while the worker shall retain the other copy of the contract.
• Working Hours: Workers are entitled to maximum normal working hours which will be 8 hours a day or average 48 hours in a week.
• Equality and Non-discrimination: The law also provides that an employer cannot discriminate against an employee on the grounds of race, color, sex, religion, national or social origin, or disability with regards to employment, retention of the employment, and the rights pertaining to that employment. Employers have been prohibited from discriminating the workers where the workers are doing similar job. 
• Minimum Wage: Their is no minimum wage established under UAE labor law however, Cabinet may pass a resolution to set the minimum wage for workers or any category of workers. 
• Probationary Period: The employer may appoint the worker under a probationary period and this is not meant to exceed six months. The employer may also dismiss the worker during this period after writing a letter to the employee informing him/her of the intended dismissal at least 14 days before the intended termination of his/her services. 
• Overtime: The employer may require the worker to work beyond the normal working hours but this should not exceed two hours. The worker may not be advised to work for more than that period, other than in the conditions and rules set by the Implementing Regulation. 

Table 1: Key Leave Entitlements under Federal Decree-Law No. 33 of 2021

Payroll Compliance Requirements

To adhere to the law, there are several payroll compliance that companies in the UAE have to fulfill so that they do not face any legal action. These requirements include:

• Accurate and Timely Payroll Processing: Employers have to guarantee that they are able to pay the employees’ wages, salaries, allowances as well as deductions correctly and in time. 
• Compliance with UAE Labor Laws: It is essential for the companies to adhere with the existing UAE labor laws that include the Federal Decree-Law No. 33 of 2021 and other related laws and regulations. 
• Tax Compliance: Business entities have to follow UAE tax regulations on the computation and remittance of social security contributions, as well as filing of specified tax returns. 
• Record Keeping: Employers are required by law to keep all records of employee details, including their salaries, wages, allowances, deductions, and leave balances. 
• Audit and Inspection: The organizations have to be ready to pass the potential audits and inspections by the competent authorities, such as the Ministry of Human Resources and Emiratisation and the Federal Tax Authority. 

Comprehensive Payroll Solutions

To achieve compliance in payroll, companies in the UAE need to outsource payroll services through payroll service providers who offer payroll services to ensure compliance with taxes and laws. These solutions can help companies:

Minimise the time taken in paying employees and guarantee that these payments are correct and made on time. 

• Be aware of the relevant changes in the labor laws and regulations. 
• Minimize tax evasion and preclude different penalties and legal complications. 
• Record the employee information in an efficient manner and ensure that it is up to date. 
• Consider audits and inspections of your company and facilities by the respective authorities. 

FAQs

1.What is the prevailing minimum wage in the UAE? 

Their is no minimum wage established under UAE labor law however, Cabinet may pass a resolution to set the minimum wage for workers or any category of workers. 

1.What steps should firms take to maintain payroll compliance in UAE? 

The best way for companies to remain compliant on their payroll is by outsourcing their payroll services in the UAE to integrated payroll companies, which offer full payroll processing services as well as local taxation and compliance services. 

1.What documents do corporations need to keep in order to ensure compliance with the UAE payroll laws? 

It is the legal requirement for the employers to keep up to date records of all the employees in their organization in relation to; salaries, wages, allowances, deductions, and entitlement to leave. 

In conclusion, payroll compliance in the UAE is essential for firms which is necessary for avoiding the legal consequences and building a good business image. By seeking payroll services of Payroll service providers in UAE companies operating in UAE can  avoid complications that might arise in a business’s payroll processes and can help them retain satisfied employees.