What payroll calculations you need to know to stay compliant with the UAE Federal Decree Law No.33 OF 2021 – Regulation of Labour Relations
Basic salary is the contracted amount you have agreed to pay an employee – before any allowances, expenses or other benefits.
- Basic salary: this is the basic remuneration (wage) agreed in the employee contract.
- Gross salary: this is the basic wage + allowances and benefits.
- Net salary: this is the amount paid after deductions are taken from the gross salary.
There is no requirement for basic salary to be a certain percentage of the gross salary.
Key calculation: The law restricts all deductions to 50% of the gross salary (wage).
There is no national minimum wage in the UAE.
However, it is required that wages should cover the cost of living. For a single person, the cost of living in Dubai is estimated between AED 3,000 to AED 5,000
There is no personal income tax in the UAE so tax deductions are not applicable.
Social Security Calculations apply only for UAE and other GCC national employees.
It covers basic social security plus housing allowance and is calculated on a minimum salary of AED 1,000 and a maximum salary of AED 50,000.
Key calculation: Social Security contributions are calculated at 20% of gross salary.
5% is payable by the employee, 12.5% payable by the employer and 2.5% payable by the government. In the Emirate of Abu Dhabi a higher rate of 26% applies:
5% payable by the employee, 15% by the employer and 6% by the government.
Unemployment Insurance Scheme
Effective 1st January 2023, the unemployment insurance scheme applies to Emirati and foreign workers. The scheme provides financial support to qualifying individuals in both the public and private sector should they become unemployed.
Those earning AED 16,000 or less as a basic salary per month will pay a monthly subscription fee of AED 5.
Those earning more than AED 16,000 AED will pay a monthly subscription fee of AED 10.
The following groups are excluded from the scheme:
- Domestic workers
- Temporary contract
- Under 18s
- Working retirees already receiving a pension
Key calculation: Currently – the obligation for the deduction falls on the employee, not on the employer.
Overtime pay is the amount that must be added to an employee’s pay when they work over their normal working hours, on a weekend day (specified in the contract) or on a public holiday.
No more than two hours of overtime are allowed in one day for workers, with a maximum of 144 hours worked every 3 weeks.
If employees are required to work overtime between 10pm and 4am, they are entitled to an overtime wage at 150% of basic wage, and 125% for any other time. However, overtime rates do not apply to employees working on a shift basis.
Key calculation: Overtime is calculated at 125% of basic pay.
Overtime on a weekend, between the hours of 10pm and 4am, or on a public holiday is calculated at 150% basic pay.
Employees are entitled to official days off with full pay on public holidays. If an employee is required to work during any public holiday they must get another day off for each public holiday worked, or receive pay at 1.5 times normal rate (150% basic pay).
Key calculation: If workers were asked to work on a day off, they must receive a one-day leave or an overtime wage equivalent to the regular day pay with a 50% increase (150% basic pay).
Paid 30-day Annual Leave
Employees are entitled to 30 days of paid annual leave for each year worked.
Employees who have worked less than one year but more than 6 months are entitled to 2 days paid leave for each month.
Part-time workers are entitled to paid annual leave according to their actual working hours defined in the employment contract.
Key calculation: Full time employees
|6 months||12 days paid annual leave at 100% basic pay|
|7 months||14 days paid annual leave at 100% basic pay|
|8 months||16 days paid annual leave at 100% basic pay|
|9 months||18 days paid annual leave at 100% basic pay|
|10 months||20 days paid annual leave at 100% basic pay|
|11 months||22 days paid annual leave at 100% basic pay|
|1 year||30 days paid annual leave at 100% basic pay|
Women working in the Private Sector are entitled to maternity leave of 60 days. After the paid maternity leave, female workers may take an additional 45 days of unpaid leave if she or the child is sick.
Women are also entitled to paid maternity leave in the event of a stillbirth or a child dying after birth, if the delivery took place 6 months or more into pregnancy.
Mothers of babies with disabilities are entitled to an additional 30 days of paid leave and 30 days of unpaid leave (in addition to maternity leave).
Key calculation: The first 45 days of maternity leave are to be paid at full wage (100% basic pay). The next 15 days are to be paid at half pay (50% basic pay).
There is no paternity leave in the private sector in the UAE.
Parental leave applies to both the mother and the father. Both are entitled to 5 days paid leave in the six months following the birth. For the mother, parental leave is in addition to maternity leave.
Key calculation: Parental leave is calculated at 5 days of full pay, and must be taken within 6 months of the date of child birth.
Employees who have completed their probation are entitled to up to 90 days sick leave, of which 45 days are paid and 45 are unpaid.
Key calculation: Employees are entitled to the first 15 days of sick leave at full pay (100%) basic pay, and the next 30 days of sick leave at half pay (50% basic pay).
Employees are entitled to a period of 3 to 5 days paid leave depending on their relationship with the deceased.
Key calculation: In the case of death of a husband or wife 5 days full pay (100% basic pay) In the case of death of a parent, child, sibling, grandchild or grandparent, 3 days full pay (100% basic pay).
An employee with more than two years’ service can take 10 days paid leave each year to participate in exams.
The workers must be studying in an educational institution in the United Arab Emirates.
Key calculation: 10 days at full pay (100% basic pay).
The national worker is entitled to end of service benefits in accordance with the legislation regulating the pensions and social securities in the State.
Full-time foreign workers who have completed one year or more of continuous service are entitled to end-of-service benefits calculated at 21 days for each of the first 5 years of service and 30 days for each additional year. Partial years should be prorated.
Unpaid days of absence shouldn’t be included in the overall calculation.
Where commissions or bonuses are part of basic salary, then they must be included in the calculation of end-of-service gratuity provided they are part of the last salary the employee received. On the other hand, if they are part of gross salary rather than basic salary, they shouldn’t be used for such calculation.
Key calculation: Service up to 5 years’ is calculated at 21 days’ basic wage (100% pay) for each year. Service from 6 years’ is calculated at 30 days’ basic wage (100% pay) for each year. The amount should not exceed 2 years’ gross salary.
DIFC Employee Workplace Savings Scheme (DEWS)
In the Dubai International Financial Centre (DIFC), the DIFC Employee Workplace Savings Scheme (DEWS) has replaced the End of Service Gratuity.
Employers now are required to make monthly contributions to DEWS or an alternative regulated Qualifying Scheme, as opposed to paying a lump sum ‘gratuity payment’.
There is no required employee contribution for DEWS, but employees can voluntarily contribute a fixed percentage of their wages.
Key calculation: For employees under 5 years’ service, the employer contribution is calculated at 5.83% of basic salary.
For employees with more than 5 years’ service, the employer contribution is calculated at 8.33% of the employee’s basic salary.