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Payroll mistakes may look harmless, or even simple fixes, but if left unchecked they can easily lead to distrust between employees and employers as well as put employers on the wrong side of government agencies responsible for labor and employment. 

Therefore, avoiding the most common payroll mistakes in the UAE should be a key objective of all organisations today. 

Some of the most common payroll mistakes that can lead to distrust and non-compliance include: 

  • Wrong calculation of employees’ pay
  • Delayed payments
  • Misclassifying employees
  • Errors in leave calculation
  • Errors in providing benefits, etc. 


Many of these mistakes are the result of human error, the usage of outdated and time-consuming manual payroll systems, and the inability to stay updated with new labour law regulations in the UAE. 

Whatever the reasons behind these mistakes, their potentially severe negative impacts means that employers must be aware of them and seek to put strategies into place to avoid them. 

In this article, we consider eight common payroll mistakes in the UAE and how employers can avoid them going forward. 

  1. Wrong calculation of employees’ pay

Payroll deductions

In the UAE, employers are required to pay workers the salary or wages they have agreed to in their employment contracts.

Though UAE labour law allows for deductions and does not impose any minimum wage, it limits the amount of employee deductions to 20% of their salary or wages. That is, for any pay period, any worker in the UAE must receive at least 80% of their gross pay as their net pay. 

Also, the employer must be ready to provide documentary confirmation or proof of such deductions, upon request by the Ministry of Human Resources and Emiratisation (MOHRE). 

Mistakes can occur in three different ways here: 

  • Miscalculation of gross pay: Human error can lead the payroll staff to record as gross pay an amount that is different from what is on the employee’s contract. This can occur without any malevolent intent on the part of the payroll staff. 
  • Miscalculation of deductions: Deductions can be overstated or understated, thus leading to an overestimation or underestimation of the worker’s net pay.
  • Too many deductions: Payroll staff may also forget that the government has limited the number of deductions applicable to a worker’s gross pay to 20%. This error will become visible to the MOHRE in the wage protection system (WPS) and will be treated as non-compliance. 

For all of these reasons, an employee might be paid an amount different from what they should receive. And this can lead to discontent on the part of the employee. Also, if the third reason above continues unchecked, it can lead to penalties imposed by the MOHRE. 


Regulations regarding overtime are contained in the Federal Decree-Law No. (33) of 2021 Regarding the Regulation of Labour Relations.

The key point here is that overtime pay will be equal to the normal remuneration for working hours plus additional 25% of that pay. And if the overtime was done between 10pm and 4am, then the additional compensation will be 50%.  

Consider Mr. A who is paid AED 500 per working hour during normal working hours. If he works overtime for 2 hours between 5pm and 7pm, he will be entitled to overtime wages of AED 1,250 (AED 500*2 + 25% of AED 1,000). If he works between 10pm and 12am instead, he will be entitled to an overtime payment of AED 1,500. 

The mistakes that can occur here include: 

  • Wrong estimation of overtime hours: Clearly, payroll staff can make clerical errors when inputting the number of overtime hours a worker has put in. This can involve overstating or understating the actual employee hours. 
  • Wrong overtime rate: As we saw above, the period during which a worker did the overtime hours will affect the rate of compensation. Payroll staff can forget this distinction and compensate all overtime hours at 25%. 
  • Forgetting to add overtime pay to total gross pay: In some cases, payroll staff can even forget to add overtime payment to total gross pay, thereby inadvertently reducing the net pay of the worker. 
  1. Delayed payment

In the UAE, the payment of wages or salaries becomes due a day after the pay day employers have agreed with their workers. After 15 days from this due date, the payment becomes late and subject to varying degrees of penalties. 

An ignorance of this law can make payroll staff delay payment, to the detriment of the organisation they represent. 

Furthermore, any of the other mistakes we are considering can result in delayed payments, as payroll staff run helter-skelter to put things right. 

Delayed payment can also occur due to challenges arising from the WPS agent the UAE employer is using. The MOHRE requires that private sector employers in almost all UAE industries pay wages and salaries through the WPS system; an essential part of this system is the WPS agent that processes the transfer of money to employees. 

The WPS agent might face technical issues or make mistakes that can cause delay in the processing of payment.

It’s imperative to state that delayed payment can be costly even when it happens within 15 days of the pay day. Employees don’t like delayed payments because they have already created budgets around their payday. Any delay might put them in difficult positions. 

Consequently, employers who value their staff will do well to ensure that payment does not exceed the due date. And in cases where this delay is anticipated, it should be communicated early enough so that employees can adjust.   

  1. Misclassifying employees

The UAE recognises a wide variety of workers and working relationships. According to Federal Labour Law No 33, 2021, there are: 

  • Full time workers: These are workers that work for a particular company during the entire working day. These workers are typically paid a fixed wage or salary. 
  • Part time workers: These workers only work for a company for a part of the working day. Thus, they can do multiple jobs during the work day, though to a limit of the prescribed eight working hours. 

They are typically paid a per-hour rate instead of a fixed salary. 

  • Temporary workers (also known as independent contractors): Temporary workers have a contract to work for a number of months or years only. After the particular project in view has been completed, the contract is terminated. 

They can be paid a monthly salary or a lump sum at the end of the contract. 

  • Remote workers: These are typically full time workers who are allowed to work permanently from home or shuffle between working from home and coming to the office during the workweek. 
  • Flexible workers: The working hours or days of these workers changes across time. They might work between 9am to 12pm for some weeks or months and then 9am to 4pm in other weeks or months. They can also work from Monday to Wednesday for some time and then from Monday to Friday at other times. 

Their working hours and days depend on the workload. 

These workers are typically paid a per-hour rate, just like part-time workers. 

  • Job-sharing workers: These are workers that work on different tasks during the work day. They are often paid different remuneration for the different work tasks. 

Payroll errors can occur when payroll staff treats one type of worker like another. This can include paying a full time worker with a per-hour pay rate rather than a fixed salary or paying a flexible worker a fixed salary instead of a per-hour rate. 

Again, this is often a human error that is avoidable if companies stop using manual payroll processing.

  1. Errors in leave calculation 

According to the Federal Law No.33 of 2021, the following are the types of leave employees are entitled to:  annual leave, sick leave, maternity leave, parental leave, disability leave, compassionate leave, study leave, compensatory leave, Hajj leave. 

The law also has guidelines regarding leave calculation. The key thing to know here is whether a leave is paid, unpaid, or partially paid. 

The annual leave is the first paid leave. Full-time workers who have worked for over a year are entitled to 30 days paid leave while those who have worked for only six months can take 2 days leave per month until their first-year anniversary. 

Furthermore, annual leave must be paid before the leave commences. And the amount to be paid is the last net pay that the full-time worker received before the leave. 

Part-time workers can also take paid leave but that depends on what they have agreed to with the employer as stated in their employment contracts. 

Like annual leave, parental leave (for parents that just had a baby) and compassion leave (for those who just lost their spouse, parent, child, sibling, etc.) are fully paid

Sick leave, maternity leave, and disability leave are partially paid (paid for some days and unpaid for the rest). 

Hajj leave is the only one that is unpaid

The law is also silent regarding whether study leave will be paid, unpaid, or partially paid. This all depends on company policy. 

The following are some common payroll errors that can arise with leave calculation: 

  • Misclassification: Treating a paid leave as unpaid will lead to underpayment of workers, and vice versa.
  • Calculation errors: When it comes to partially paid leave, it is easy to make mistakes. For example, the first 45 days of a maternity leave is paid while the next 15 days are unpaid. Payroll staff may jumble the numbers together, leading to overpayment or underpayment. 
  • Omission: It’s also very possible to even forget that a worker is taking a leave and just ignore it altogether in the calculations of gross pay for a particular period.
  1. Errors in providing benefits

Health insurance is mandatory in Abu Dhabi and Dubai. Therefore, employers who work in Abu Dhabi and Dubai must make provisions for all employees who qualify. Interestingly, the Northern Emirates are also gearing up to introduce mandatory health insurance in 2023. 

The Dubai Health Insurance Law No. 11 of 2013 regulates health insurance in Dubai while Law No. (23) of 2005 Concerning Health Insurance in the Emirate of Abu Dhabi and the Implementing Regulation governs it in Abu Dhabi.

Both laws require that the premiums for health insurance must not be deducted from the employee’s gross pay. 

Similarly, in Dubai, employers must provide insurance with a minimum annual premium of AED 500-700. 

Failure to comply with these regulations will lead to penalties imposed by the Dubai Health Authority. One of these is a monthly penalty of AED 500-150,000 for refusal to provide minimum health insurance coverage. 

Some of the payroll mistakes that can occur in this regards include: 

  • Deducting health insurance from employees gross pay: This can result from ignorance of the relevant regulations. 
  • Excluding certain employees: The laws above consistently mention “all employees,” so excluding part-time workers, for example, may become a legal violation.  
  1. Inadequate records

For various reasons, the in-house payroll team may fail to keep adequate payroll records. For example, those who keep manual payroll records may find that some of the papers have been lost due to theft, fire, mishandling, among others. 

Even those who keep records on a laptop or desktop computer can lose them in a cyber attack. 

This failure to keep adequate payroll information and records can become costly when an employee or a government regulator opens a legal case against the company. With those records missing, it might be harder to defend themselves. 

Similarly, internal and external auditors might need to see those documents in the course of performing their duties. Their unavailability will impede their progress and affect their evaluation of the company.  

  1. Other WPS errors

In the UAE, there are other payroll mistakes relating to the WPS that can be costly for employers. 

First is the inputting of wrong information in the Salary Information File (SIF). This is the file that companies are mandated to upload to the WPS. It contains basic information like employee detail record, labour card number, bank account number, bank routing code, etc.

Human error can lead to various forms of clerical mistakes during data entry on the SIF. 

Second, the law requires that new hires are added to the WPS within 30 days of employment. Payroll staff can forget to do this, leading to potential penalties.  

Third, the law also requires that employers must pay workers with whom they did not agree a payday at least once a month. This rule can be easily overlooked but, as they say, ignorance of the law is not an excuse.

  1. Inadequate cash flow

Though cash flow is not directly a payroll issue, it is evident that employers cannot make payroll payments without having enough cash to pay payroll expenses. 

According to NetSuite, an enterprise software company, “payroll and benefit expenses usually put the most pressure on cash flow.” Therefore, keeping an eye on payroll can help achieve cash flow stability just as keeping an eye on cash flow can help avoid delayed or non-payment of employees. 

The mistake employers can make is failing to consider if they will have enough cash to pay their workers well before payday. 

Conducting cash flow evaluation in advance of payday is necessary because workers need to know as early as possible if their payments will be delayed or they won’t be paid at all. While delayed or non-payment is not a good thing, it can be well managed with an early notice. 

How to avoid these common payroll mistakes

From the above, we can identify three key causes of payroll mistakes in the UAE today: the continued use of manual payroll processing, human error, and a lack of familiarity with relevant laws. 

What then can employers do to avoid these problems? 

Replace manual payroll processing

All the errors of calculations we have identified can be resolved by using a payroll software that automates workflows, including employee categorization, benefits, leave, etc. 

Similarly, payroll software saves an important digital record on the cloud, which makes it very hard to lose this precious data. 

A payroll provider like NOW Money can also help with cash flow management. Since users can easily see the balance in their NOW Money account, they can know when they are getting short of the funds they need to make the next round of payment. This allows them to quickly seek the required finances or communicate their inability to the employees before payday comes around.   

Human error

Most of the human errors (clerical and computational) leading to payroll mistakes will be solved by processing payroll with a payroll software.

In fact, payroll software will reduce the number of staff required for payroll management, thereby cutting down on costs. Payroll software will also help save time by doing in seconds or minutes what humans will only do in hours.

The digital record keeping provided by payroll software also helps employers easily collect and analyse large payroll data to derive business insights. These insights can lead to rapid improvement in the payroll process.  

Lack of familiarity with laws

Many payroll staff make mistakes because of inadequate familiarity with WPS laws. With compliance being one of the key challenges of payroll, it is important to take steps to ensure better familiarity with relevant laws. 

This is where NOW Money provides additional benefits compared to other payroll software. Since NOW Money also serves as a WPS agent, its software is able to keep its users updated about developments in WPS laws, thus encouraging quick compliance. 

In essence, by using payroll software and working with a reliable WPS agent, employers in the UAE can avoid these common payroll mistakes and the resulting consequences. 

NOW Money is a company that provides a smart, flexible, and cost-effective payroll software in the UAE while doubling as a WPS agent. With them, you can ditch manual payroll processing, significantly reduce the impacts of human error, and ensure better compliance with relevant WPS laws.  



  • Payroll mistakes can cause employees to be dissatisfied with a business owner and generate problems with government regulators. 
  • Common payroll errors include wrong calculation of pay, wrong classification of employees, errors in leave calculation, and errors in providing benefits, among others. 
  • The three key causes of payroll mistakes are manual payroll systems, human error, and lack of familiarity with employee payroll laws. 
  • Employers in the UAE can solve these problems by using payroll software and working with a reliable WPS agent who keeps them updated with relevant WPS laws.
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