How to run payroll in United Arab Emirates

In the United Arab Emirates, most employers pay employees monthly, typically on the 25th of each month or the last working day. Here's the complete payroll cycle.

Payment frequency and dates

UAE labor law requires monthly salary payments for most employees. You must pay salaries by the end of each calendar month, though most companies choose the 25th to allow processing time.

Weekly or bi-weekly payments are permitted but rarely used except for daily wage workers in construction or hospitality. If you pay weekly, wages must be settled within seven days of the work period ending.

End-of-service gratuity

The UAE doesn't have a traditional 13th-month payment, but end-of-service gratuity serves a similar function. This mandatory payment is calculated based on length of service and final basic salary.

For employees with unlimited contracts:

• 21 days' salary for each year of the first five years
• 30 days' salary for each additional year beyond five years

For limited contracts, employees receive full gratuity after completing their contract term, or pro-rated amounts for early termination under specific circumstances.

The gratuity calculation uses basic salary only, excluding allowances and benefits. Payment is due within 14 days of employment termination.

Holiday and vacation pay

Annual leave in the UAE is 30 calendar days after completing one year of service (22 working days). Employees earn 2.5 days per month during their first year.

Vacation pay equals the employee's basic salary plus housing allowance during leave periods. You can't reduce salary during approved annual leave.

Unused leave can be carried forward to the following year with employer approval, or paid out at termination based on basic salary rates.

Payment methods

Bank transfers are mandatory for all salary payments in the UAE. The Wage Protection System (WPS) requires electronic salary transfers through approved banks and exchange houses.

You must register with the Ministry of Human Resources and Emiratisation's WPS before making any salary payments. Cash payments are prohibited except for daily wage workers earning less than AED 2,000 monthly.

International companies can use UAE dirhams or maintain foreign currency accounts with Central Bank approval. However, employee contracts must specify the payment currency, and you must honor exchange rate protections if applicable.

Payslip requirements

Every employee must receive a detailed payslip within 48 hours of salary payment. Payslips must include:

• Employee name and Emirates ID number
• Basic salary breakdown
• Allowances (housing, transport, other)
• Overtime calculations
• Deductions (if any)
• Net salary amount
• Payment date

Arabic or English payslips are acceptable, though Arabic is preferred for UAE national employees. Electronic delivery is permitted if employees provide written consent, but you must offer paper alternatives upon request.

One of the biggest surprises for companies expanding to the UAE? There's no personal income tax to withhold from employee salaries. While this sounds simple, it creates unique compliance considerations that catch many employers off guard.

Income tax brackets

The UAE maintains its position as one of the few countries worldwide with zero personal income tax on employment income.

This zero-rate structure applies to all employment income regardless of salary level, nationality, or residency status. However, this doesn't mean payroll is tax-free - other considerations apply.

Withholding requirements

With no personal income tax, employers have no withholding obligations for UAE employment income. You won't register for payroll tax systems or file monthly withholding returns.

However, you'll still need to maintain detailed payroll records for:

• End-of-service gratuity calculations
• WPS (Wages Protection System) compliance
• Labor law documentation requirements

The Ministry of Human Resources requires payroll records retention for seven years minimum.

Tax registration

No tax registration is required for standard UAE payroll operations. Unlike most countries, you won't obtain:

• Payroll tax registration numbers
• Income tax withholding accounts
• Monthly filing obligations

Your primary registration focus should be on labor law compliance through MOHRE (Ministry of Human Resources and Emiratisation) and WPS enrollment with approved banks.

Special tax considerations

Non-resident employees

UAE's territorial tax system means non-residents working in the UAE pay zero income tax on their UAE employment income. This applies even if they're tax residents of other countries.

However, employees may face tax obligations in their home countries. Many global mobility programs require tax equalization support for UAE assignments.

Tax treaty implications

The UAE maintains tax treaties with over 140 countries, primarily covering business profits and investment income rather than employment taxation.

Regional variations

All seven emirates maintain the zero personal income tax structure. No local income taxes apply in any emirate.

Common tax mistakes

Assuming tax complexity where none exists: Many companies over-engineer UAE payroll systems expecting tax calculations that don't exist.

Ignoring home country obligations: While UAE has no withholding requirements, employees may need documentation for foreign tax compliance. Penalty: Employee tax complications in home countries.

Missing corporate tax implications: Companies focus on zero personal tax but overlook their own 9% corporate tax obligations on profits exceeding د.إ3 million. Penalty: 20% penalty on unpaid corporate tax plus 3% monthly interest.

Employer contributions in United Arab Emirates add 17.5% to every salary. Budget for it.

The UAE keeps employer costs relatively low compared to other countries, but you'll still need to account for several mandatory contributions that protect your employees' future.

Contribution breakdown

Total employer cost example

For a د.إ60,000 annual salary (expat employee):

• Base salary: د.إ60,000
• End of Service Gratuity: د.إ5,000
• Health Insurance: د.إ2,400
• Work Injury Insurance: د.إ1,200
• Total employer cost: د.إ68,600
• Cost multiplier: 1.14 (employer pays 14% more than base salary)

For UAE nationals, add pension contributions of د.إ7,500 (employer) + د.إ3,000 (employee). This brings your total cost to د.إ76,100.

Contribution caps and ceilings

End of Service Gratuity has no cap. You'll pay 8.33% regardless of salary level. This can get expensive for senior executives.

UAE pension contributions cap at د.إ70,000 annual salary. High-earning nationals won't pay pension contributions on income above this threshold.

Health insurance costs vary significantly by emirate and coverage level. Dubai requires full coverage while other emirates offer more flexibility.

Registration requirements

You'll need to register with multiple agencies within 60 days of hiring your first employee. Don't worry though, it's straightforward once you know the steps.

Register with the Ministry of Human Resources for labor compliance. You'll also need your local health authority for insurance requirements and the UAE Pension Fund if employing nationals.

Payment deadlines

End of Service Gratuity accrues monthly but you'll pay it when employees leave. Set aside funds monthly to avoid cash flow surprises.

Health insurance premiums are typically due quarterly or annually, depending on your provider. UAE pension contributions are due by the 15th of the following month.

Work injury insurance premiums are usually paid annually when renewing your policy. Missing this deadline can halt new visa processing and renewals, so mark your calendar.

United Arab Emirates has 12 public holidays in 2026. Work on these days? Pay double.

Annual leave

Employees get 30 calendar days of annual leave after completing six months of service. Before that? They earn 2.5 days per month worked.

Vacation pay calculation is straightforward. Pay the employee's basic salary plus housing allowance during leave. Don't include other allowances or overtime.

You can't force employees to take leave during their probation period. After probation, they can take leave with your approval.

Carryover rules let employees carry forward unused leave to the next year, but only with employer agreement. No legal requirement to allow carryover.

Termination payout is mandatory. Calculate unused leave at basic salary plus housing allowance rate. Pay this with final settlement.

Sick leave

Employees get up to 90 days of sick leave per year with specific pay rates:

• First 15 days: Full pay
• Next 30 days: Half pay
• Remaining 45 days: No pay

Medical certification is required from day one. Accept certificates from UAE-licensed doctors or approved medical centers.

The employer pays everything - there's no social insurance system covering sick pay. Budget accordingly when calculating employment costs.

Sick leave resets each calendar year. Unused days don't carry forward or get paid out.

Parental leave

Maternity leave gives 60 calendar days at full pay. Employees can take this before or after birth, but must use within six months of delivery.

The employer pays full salary during maternity leave - basic salary plus housing allowance. Start planning coverage and budget impact early.

Paternity leave isn't legally required, but many employers offer 3-5 days as company policy.

New mothers can request unpaid leave up to 100 additional days if they provide medical certification. You're not required to approve this, but consider it for retention.

Public holidays 2026

*Islamic holidays follow the lunar calendar. Exact dates confirmed closer to time by UAE government.

Holiday pay rules are strict. Work on public holidays? Pay double the normal daily wage. This applies to basic salary plus housing allowance.

If the holiday falls on a weekend, employees get the next working day off. Plan your payroll calendar around these extended weekends.

Mandatory benefits affecting payroll

End of service gratuity is your biggest ongoing liability. Calculate 21 days of basic salary for each year of service (first five years), then 30 days per year after that.

Set aside roughly 8-10% of basic salary monthly to cover gratuity obligations. This isn't a payroll deduction - it's an employer provision.

UAE nationals require additional benefits including pension contributions and Emiratisation incentives. These can add 15-20% to total employment costs.

Work permit and visa costs average AED 5,000-8,000 annually per expat employee. Factor this into your total compensation planning.

Health insurance is mandatory but costs vary widely (AED 1,500-15,000 per employee annually). Choose plans that meet Dubai Health Authority or other emirate requirements.

Employment contracts in United Arab Emirates must include salary breakdowns, probation periods, and termination clauses or they're legally invalid.

The UAE's employment rules changed significantly in 2026 with stricter compliance monitoring and higher penalties for non-compliance. Here's what you need to know to stay compliant.

Monthly filing requirements

The Wage Protection System (WPS) is your primary monthly obligation. You must upload salary certificates by the 28th of each month through the MOHRE portal.

Late submissions cost you AED 2,000 for the first day, then AED 500 for each additional day. After 15 days, MOHRE can freeze your work permit applications entirely.

Social insurance contributions go to the General Pension and Social Security Authority (GPSSA) for UAE nationals only. File and pay by the 15th of the following month. Late payments incur 1% monthly interest on the outstanding amount.

Annual reporting

End of Service Gratuity calculations must be documented annually, even if no employees leave. Maintain detailed records showing accrued amounts for each employee as of December 31st.

UAE nationals require Form 1 certificates showing their annual social insurance contributions. Issue these by January 31st following the tax year.

MOHRE conducts random labor compliance audits on approximately 15% of companies annually. They check contract compliance, salary payments, and working hours documentation.

Employee documentation

Employment contracts must be in Arabic and English, signed by both parties, and registered with MOHRE within 30 days of the employee's start date.

Payslips must include basic salary, allowances, overtime, deductions, and net pay in both Arabic and English. Employees must receive them within 7 days of payment.

Keep all employment records for 7 years after contract termination. This includes contracts, payslips, leave records, and disciplinary actions.

Penalties and violations

Regulatory bodies

Ministry of Human Resources and Emiratisation (MOHRE) oversees employment contracts, work permits, and wage protection. Access their services at mohre.gov.ae.

General Pension and Social Security Authority (GPSSA) handles social insurance for UAE nationals. File contributions through their online portal at gpssa.gov.ae.

Federal Authority for Identity, Citizenship, Customs and Port Security (ICP) manages residence visas and Emirates ID requirements. Visit icp.gov.ae for visa-related compliance.

Each emirate also has local Department of Economic Development offices that handle trade license renewals and some employment-related approvals.

2026 brought several significant payroll changes to United Arab Emirates. Here's what you need to update.

The most impactful changes affect social security contributions, visa processing fees, and end-of-service benefit calculations. These updates directly impact your monthly payroll costs and compliance requirements.

Key payroll changes for 2026

Enhanced Social Security Coverage - Effective January 1, 2026

The UAE expanded mandatory social security coverage to include additional categories of expatriate workers. Previously limited to UAE nationals and GCC citizens, the system now includes expatriates in specific sectors including healthcare, education, and financial services.

Employers in covered sectors must register eligible expatriate employees within 30 days of the effective date. The contribution rate remains 17.5% of basic salary (12.5% employer, 5% employee) but now applies to a broader workforce.

Visa Processing Fee Increase - Effective March 1, 2026

Work permit and visa renewal fees increased by 15% across all categories. The standard work permit fee rose from AED 3,000 to AED 3,450, while dependent visa fees increased from AED 1,200 to AED 1,380.

This change affects your annual HR budget calculations and new hire cost projections. Factor these increases into your 2026 recruitment budgets.

End-of-Service Benefit Calculation Update - Effective April 1, 2026

The Ministry of Human Resources clarified that housing allowances must be included in end-of-service benefit calculations when they constitute more than 25% of total compensation. This affects employees hired after April 1, 2026.

Review your current compensation structures and update employment contracts to reflect this change. Consider restructuring packages where housing allowances exceed the 25% threshold.

Upcoming changes to monitor

Digital Salary Certificate System launches in Q4 2026, requiring all employers to issue salary certificates through the government portal. Prepare for system integration requirements and staff training.

Enhanced Labor Inspection Powers take effect January 2027, including unannounced payroll audits and increased penalties for non-compliance.