UAE payroll law

UAE payroll

The UAE payroll is a promising place for conducting business. It has many popular locations for business owners. This is because it is a federation composed of seven Emirates and each one has its set of advantages. Many companies look to establish their presence in Dubai, Abu Dhabi, or any of the country’s approximately more than 40 Trade zones. Although the business setup is relatively easy, maintaining compliance is a complicated task for companies.

This is particularly complex when it comes to an Emirates payroll. There are several requirements businesses have to comply with to maintain their operations of risk. Moreover, there are other aspects of compliance that you have to take into consideration.

So, instead of trying to solve these issues on your own, you can get the support of one of the payroll outsourcing companies in the UAE. It could be the perfect solution since partnering with a third party gives you access to local talent well-versed in the local law regarding payroll processing.

Moreover, with a processing company, you can get assistance navigating the complex regulations for your business. You can comply with local requirements and decrease the risk for your business. This way, you can relieve your administrative burden and focus on your core activities.


Employer taxes in the UAE

Taxation rules are one of the main incentives for foreign investors. The Emirates UAE offers attractive reasons for establishing a business because it does not have mandatory employer taxes.

There is no corporate income tax for almost all types of businesses, except for those that belong to specific industries, like foreign banks or the oil and gas sector. Thus, by having no employer taxes, it attracts foreign investment.

However, as an employer, it is advisable to still accrue 8.3% of your worker’s compensation. This is because is for the Gratuity or End of Service Benefit. Considering the taxes is a crucial part of your payroll processing.

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Payroll options for businesses in the UAE

The UAE offers a variety of options for the legal structure of a business. Similarly, it has also many options for running the payroll of your business:

  • Remote payroll: This is an option for international companies. If you are planning to set up a subsidiary in the UAE, the parent company can run the payroll remotely. You just have to add your UAE employees. Nevertheless, this is a risk because you will have to follow the employment compliance laws of each location where you have your employees. Thus, it may lead to errors and non-compliance.
  • Internal payroll: In the case of setting up a large subsidiary in the UAE, you have the option to run your payroll with your in-house team. It is the most expensive option because you will have to invest resources in assembling an HR department and hiring payroll specialists, as well as purchasing software and equipment.
  • Outsourced payroll: local payroll outsourcing companies can be another option for your business. With a payroll outsourcing service, you will not have to worry about anything since the agency is responsible for ensuring accurate and timely payroll as well as compliance with local law. The payroll outsourcing cost is less than the other options


Setting up payroll in the UAE

There are several options for setting up your payroll in the UAE. You could incorporate a subsidiary company in the UAE if you want to run your payroll by yourself, either remotely or internally.

You will have to determine the type of entity you want to incorporate. This will depend on the nature of your business. However, you will have to set up your subsidiary and complete the process before starting to run your payroll. Consequently, you need to open a corporate account in an in-country bank and register your employees in the Wage Protection System (WPS).

Another option could be to opt for one of the payroll outsources companies in Dubai. You will remain in operational control of your employees, but they will be on the agency’s payroll. Payroll outsourcing services can be a cost-effective option and it can even take less time than incorporating a subsidiary.

Termination terms

Termination of an employee in the UAE requires the employer to pay some type of severance. However, this depends on the duration of work of the employee:

  • Less than 1 year: employees that have worked for your company for less than a year do not have to receive the End of Service Benefit.
  • 1 to 5 years: employees that have worked for your company for more than a year but less than 5, should receive End of Service Benefit based on the following calculation: 21 days of the base salary multiplied by the number of years worked.
  • More than 5 years: employees that have worked for more than 5 years should receive End of Service Benefit as follows: 21 days base salary multiplied by the first 5 years, plus 30 days of basic salary for the remaining years worked.

Entitlement and termination terms can be confusing for many companies. With payroll outsourcing in the UAE, you can delegate this type of complicated task.

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Outsourcing your payroll in the UAE

Getting the talent your business deserves is only the first step to succeeding in the UAE. You also need to know how to process their payments accurately and on time to avoid complaints. Therefore, a payroll outsourcing company can be your best ally.

With a payroll processing company, you can delegate the hiring and processing to a third party. Companies can save time and resources by opting for payroll outsourcing in Dubai.


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