Payroll Services in Dubai

The UAE’s Wage Protection System (WPS) is an electronic salary transfer system that allows companies to pay their employees’ salaries via banks and exchange offices that are approved and authorised by the UAE Central Bank. The system was developed by the Central Bank of the UAE, allowing the Ministry of Labour to create a database that records wage payments in the private sector to guarantee timely and full payment of salaries as per the agreed amounts in the employee’s contract. The WPS covers all mainland entities in the UAE, along with specific freezone entities.

The End of Service Gratuity (EOSG) is a statutory benefit mandated by the UAE Federal Decree Law No. 33 of 2021. This ensures that all expatriate employees in the UAE public and private sectors are rewarded for their years of service and serves as a crucial financial provision for employees upon the termination of their employment, whether due to resignation or termination of contract.

Generally in the UAE, EOSG is applicable to all expatriate employees working within the private sector. UAE or GCC Nationals are not entitled to EOSG because they have a separate pensions and social security scheme in the UAE under the General Pension and Social Security Authority (GPSSA).

An exception operates for GCC nationals that work for entities based in the Dubai International Financial Centre (DIFC), who are entitled to a supplementary end-of-service scheme called DEWS (DIFC Employee Workplace Savings) in accordance with the DIFC Employment Law Article 65.

This supplement is provided if their pension contribution under the GPSSA is less than they would receive under the DEWS scheme. It ensures parity with non-GCC employees and is applicable when contributions fall below the DEWS threshold, subject to a minimum of AED1,000. DEWS is also applicable to expatriate employees working in the public sector.

The calculation of EOSG in the UAE is dependent on an employee’s years of service and their basic salary. By law, EOSG calculations only consider the last withdrawn basic salary of the employee, and do not include other benefits such as allowances, bonuses, commissions or more. It is at the discretion of each employer to choose to include these other elements in their calculations for the final settlement amount. Below is the detailed breakdown of how EOSG is calculated:

• If an employee has worked for less than one year, they are not eligible for any EOSG pay.
• If an employee has worked for more than one year, but less than five years, their gratuity is calculated at 21 days of basic salary for each year of service.
• If an employee has worked for more than five years, their gratuity is calculated at 21 days of basic salary for each year of service for the first five years, and 30 days of basic salary for each year of service that follows.

The EOSG amount payable must not exceed the equivalent of two years’ salary for the employee.

This would depend on whether your entity is registered in the mainland UAE or in a Freezone. Generally, it is best practice to have an account with a UAE bank that will be contracted as a WPS agent and through which all salary transfers can be made. Employers can also elect to pay their employees through a MOHRE-approved exchange house, but this requires additional bureaucracy. For businesses that do not have a WPS mandate – certain freezone entities such as Dubai Airport Freezone (DAFZA) – there are no restrictions on the methods of transfer provided that the process is agreed and clearly outlined in the employment contract.

Employers in the UAE are permitted to run their own payroll, but the burden of adhering to the legalities and regulations can be prohibitively difficult and expensive, especially for start-ups and small and medium-sized enterprises (SMEs) that lack the internal infrastructure. You will need to understand all the different regulations governing the payment of expatriate and GCC employees, the WPS requirements including Salary Information Files (SIF), as well as the EOSG calculations. As the UAE workplace evolves, so labour, payroll and pensions regulations are subject to regular changes and updates. The benefit of outsourcing this service to Sovereign PPG is that, as specialist payroll providers, we have expert knowledge and remain fully up to date with local regulations. We will not only ensure that your employees get paid on time but will ensure that your business remains compliant and avoids any penalties or fines.