Paying employees’ wages or remuneration is a major facet of any business; thus, the determination of overtime is relevant. This information is relevant in the way the employers and the employees are expected to work and observe the laid-down rules so that they are paid their deserved wages and salaries.
This article is a detailed manual on how to calculate overtime in the UAE.
What is Overtime?
Overtime is the extra working time that each employee spends in the workplace beyond the normal number of working hours. However, based on the UAE Labour Law, it is reasonable to argue that a lot of this extra working time should come at a much higher premium to guard the employees.
Standard UAE Working Hours
UAE Labour Law vide Decree No. 33 of 2021 under Article 17 deals with the working hours:
- Standard working hours: 8 hours a day, or 48 overall hours a week.
- For certain sectors like trade, hotels, and cafeteria security: This can be up to 9 hours a day.
Types of Overtime
- Force Majeure Overtime: This type of overtime is invoked where there is a necessity to undertake special assignments or any work that may be deemed special, that is, to avert or to minimize some ills.
- Structural Overtime: This is applied whereby there is a need for an extended time in activity than was earlier anticipated, for example, boosted workload or any other connected organizational necessity. Thus, in the matrix of Labour Law, it can be pointed out that the additional hours are those that can be made as much as the structure of the structural overtime.
- Calculating Overtime: Overtime has also been recognized under the UAE Labour Law and is computed on the basic wage. The following are specific provisions about overtime:
Key Elements of Employee Pay Structure in a Company
- Overtime Hours: Overtime options include normal pay, Friday pay, and other public holiday pay.
- Overtime on a Normal Working Day: For overtime on a normal working day, the constituents of pay are as follows:
- Normal Hour Payment: Wage per day
- Overtime Pay: (Overtime Hours) x (Per Hour Rate) x 1.25
Overtime Calculation in UAE
Example 1:
- Basic Salary: AED 3,200 monthly
- Overtime Hours: 100 hours
Calculations:
- Per Day Wage: (3200×12) / 365 = AED 105.20
- Normal Hour Payment: 105.20 / 8 = AED 13.15
- Per Hour Overtime: 13.15 × 1.25 = AED 16.43
- Total Overtime Pay: 100 × 16.43 = AED 1,643
Total Monthly Payment:
- Total Salary = Basic Salary + Overtime Pay = AED 3,200 + AED 1,643 = AED 4,843
- Overtime Remuneration for 10 PM TO 4 AM = Overtime Hours × Hourly Rate of Pay × 1.5
Example 2:
- Basic Salary: AED 3,200 per month
- Overtime Hours: 100 hours
Calculations:
- Per Day Wage = (3,200 × 12) / 365 = AED 105.20
- Per Normal Hour Payment = 105.20 / 8 = AED 13.15
- Per Hour Overtime = 13.15 × 1.5 = AED 19.72
- Total Overtime Pay = 100 × 19.72 = AED 1,972
Total Monthly Payment
- Total Salary = Basic Salary + Overtime Pay = AED 3,200 + AED 1,972 = AED 5,172
Overtime on Public Holidays
For overtime on public holidays:
- Total Overtime Pay= Basic Salary per month / 365 × 12 / 8 × Total Overtime Hours × 1.5 + Compensatory Day Off
Example:
- Basic Salary: AED 3,200 per month
- Overtime Hours: 8 hours
Calculations:
- Per Hour Overtime = (3,200 × 12) / 365 / 8 × 1.5 = AED 157 (including compensatory day off)
- If no compensatory leave is granted: (3,200 × 12 / 365 / 8 × 2.5) = AED 263
Common Mistakes in Overtime Calculation
Employers must use the correct formulas to avoid legal issues and penalties:
- Correct Formula: Basic Salary/30 or Basic Salary/30/8
- Incorrect Formula: Basic Salary × 12/365 or Basic Salary × 12/365/8
UAE Labour Law Overtime Payment Rules
- Maximum Overtime Hours: One to two hours a day.
- Compensation: Wages for a full day’s work plus twenty-five percent for normal overtime, forty-five percent for overtime between ten at night to four in the morning.
- Compensatory Off: Applicable for work on off days or half of the salary to be paid even for working on the normal off day.
- Breaks: Anyone who is working for 5 or more consecutive hours is expected to get a one-hour break.
- Ramadan Hours: 6 hours a day.
- Exemptions: Certain probationary and managerial occupations, and particular branches of the economy, especially those connected with water and water transport.
FAQs
How to Define 1.25 Overtime?
1.25 Overtime is a pay rate that involves the normal pay rate of the employee plus 25 percent of the said rate.
Whether Gross Salary or Basic Salary Are Base for Overtime Calculation?
Overtime in UAE is computed based on the basic salary of the employee and not based on the total basic salary plus any other allowances an employee may be receiving.
What Can an Employee Do If the Overtime Is Not Compensated?
An employee can file an application regarding non-compensation before the MoHRE (Ministry of Human Resources and Emiratisation).
Whether an Employee Can Be Compelled for “Overtime” in the UAE?
The employment contract is the only legal ground that allows employers to make employees work extra hours.
Whether Lunch Break Is Also Considered As “Working Hours”?
Lunchtime is not recognized as working time regarding overtime.
Is There Any Exception Available for Overtime Compensation?
Some management and executive worker categories do not receive overtime pay.
Whether Overtime Work Can Be Refused?
Workers can decline overtime work if they are not bound by their contracts to do so; however, the employer may ask for 2 hours of extra work daily.
Is There Any Fixed Standard For Maximum Or Minimum Overtime?
Overtime hours are not pegged at any minimum but the maximum is two hours in a single day.
Conclusion
Accurate calculation and management of overtime pay are essential to ensure compliance with UAE Labour Law. Such processes can be carried out by a reliable payroll system to avoid making errors and reduce the time taken. Both employers and employees must know the legal frameworks in place regarding the rules and regulations to prevent legal issues and also to ensure that employees are correctly paid for their overtime.
Employers and employees should make sure that they know the various rules and regulations that govern the particular company or organization in which they work to avoid legal implications as well as fairly remunerate the employees for the overtime working hours.
