Payroll is one of those tasks that only gets noticed when it goes wrong. In the UAE, getting it wrong can mean more than unhappy staff: errors in salary payments can lead to penalties and restrictions on your company’s ability to issue new work permits.
The Wage Protection System
Most mainland employers registered with the Ministry of Human Resources and Emiratisation must pay salaries through the Wage Protection System (WPS). Salaries are paid through an approved bank or exchange house, and a salary information file (SIF) is submitted with each payment run so the ministry can check that employees are paid in full and on time.
Some free zones operate their own systems or requirements, so it is worth checking what applies to you.
Common problems
- Late payments. Salaries paid after the due date can be flagged by the system.
- Mismatches between the salary in the employment contract and the amount paid through WPS.
- Unpaid leave and deductions that are not documented properly.
- Employees missing from the file after joining or leaving mid-month.
End-of-service gratuity
Most employees are entitled to an end-of-service gratuity when they leave, based on their basic salary and length of service. Employers should calculate and accrue this every month in their accounts, rather than treating it as a surprise cost when someone resigns. Accurate gratuity provisions also matter for audits and for valuing the business.
A new labour law ahead
A new federal labour law, Federal Decree-Law No. 33 of 2021, has been issued and is due to take effect in February 2022. It brings changes to employment contracts, leave entitlements and other areas. Employers should review their contracts and policies before then, and update payroll calculations where entitlements change.
Good payroll practice
- Keep a single, up-to-date record of each employee’s salary components.
- Reconcile payroll to the general ledger every month.
- Calculate leave and gratuity provisions consistently.
- Keep WPS files and bank confirmations together for each pay run.
If payroll is taking up more time than it should, we can run it for you each month, including WPS files and gratuity calculations.
This article is general information based on the rules as we understand them at the date of publication. It is not advice on your circumstances. Laws and practice change, so please speak to us before acting on it.
