Payroll management is more than just issuing salaries. In the proper sense, it’s actually more of a complex operation that intersects with local UAE labour laws, statutory reporting requirements, and several social security obligations.
It gets worse for global employers here, as challenges tend to multiply due to differences in regulations between mainland and free-zone jurisdictions. Even varying regulations for UAE nationals vs. expatriates and cross-border employment make it more complex than simply “paying salaries.”
Outsourcing payroll in the UAE has become an efficient solution widely adopted by many corporations. It’s hard enough to run a business; keeping up with employee compensation regulations is best handled by professionals who specialize in this area.
Any activities of a company related to compensating employees accurately, on time, and in compliance with labour laws fall under “Payroll Services.” For local and global employers, this means outsourcing the stress of calculating workers overtime, commissions, bonuses, deductions, and even end-of-service benefits as regulated by UAE labour laws.
The benefits for companies outsourcing payroll center on a simple principle: reducing administrative burden. Professional payroll providers don’t just assist a company’s compensation process; they create a robust system that helps businesses securely manage talent data in compliance with Wage Protection System (WPS) regulations.
Across the UAE, there is a well-detailed and comprehensive legal framework that protects employees’ rights to ensure transparency.
Examples of regulatory bodies governing a company’s payroll include:
The Ministry of Human Resources and Emiratisation (MOHRE), through its mandate via the WPS, ensures that all salary payments go through an electronic system. This regulation is intended to help monitor corporations that comply with on-time employee compensation.
Under UAE Labour laws, employees who have completed a contractual period with a company in the Emirates are entitled to gratuity payments, depending on their basic salary and years of service.
For example, the law applies to workers employed for 3+ years, having earned the right to 21 days’ pay per year of service.
All UAE nationals and some selected GCC employees have the right to pensions from their employers. An employer must register under the General Pension and Social Security Authority (GPSSA) and make monthly pension contributions on behalf of employees.
These contributions must be in accordance with the Federal Decree-Law No. 57 of 2023 concerning Pension and Social Security. It describes how employers calculate employee contribution rates based on “subscription account salary.”
Many UAE free zones operate systems that differ from those on the mainland. Employers in the free zone must ensure payroll complies with the specific laws governing the area. Meanwhile, mainland employers typically follow the federal labour laws.
The Federal Decree-Law No. 45 of 2021 regarding the Protection of Personal Data (PDPL) requires any organization —Payroll service provider included— to secure all employee personal data. It also outlines the conditions for use, storage, and transfer of that data in confidentiality.
Every employer across the UAE must comply with Emirate-specific regulations protecting employee health insurance. For instance, Dubai Law No. 11 of 2013 on Health Insurance obliges all employers to cover their expatriate staff working in Dubai.
Non-compliance with any of these regulations (general or Emirate-specific) may result in financial penalties and restrictions on labour permits in the UAE.
As a business operating in the UAE, the services rendered by a payroll provider can vary depending on the needs. However, a full-service payroll provider typically offers:
The reasons large and growing companies across the UAE depend on payroll service providers are all about relieving themselves of certain burdens.
To clearly state the benefits, they include:
How should you find the balance between outsourcing administrative services and meeting regulatory requirements?
For any business considering hiring a third-party provider for its payroll duties, there are some key things to look out for.
Whatever payroll provider you choose for your company, it must have an in-depth knowledge of the UAE’s labour laws, non-compliance penalties, and free-zone regulatory requirements.
Payroll providers must have testimonials available that demonstrate they fulfilled the role in the best possible way for a previous client. Such testimonials and reviews must come from companies in similar industries.
The provider must ensure they offer the standard approved security measures for employee data privacy. Using encryption and confidentiality measures that comply with PDPL regulations.
Ensure the services of such a provider include the use of online or cloud-based systems and offer HR software integration for efficiency.
Any provider hired must offer services beyond a one-off period. Their presence should continue to help public- and private-sector employers with regulatory changes, queries, and compliance.
It’s vital that whichever payroll provider gets the job they can deliver across the board. Other key considerations include a transparent pricing structure with no hidden costs.