Payroll Process in UAE for Small Businesses

The payroll process in UAE is a highly core function for businesses in UAE. Companies must be very cautious and thorough about each step of payroll processing in order to avoid errors. Successful payroll processing does not just help businesses in preventing errors but they also ensure that the workforce is satisfied and also to stays compliant with various labor laws in UAE. There are several procedures by law in UAE to which payroll processing companies must comply with. As it is a crucial thing for businesses to avoid non-compliance risks, many companies, especially small businesses tend to go for payroll outsourcing Dubai. Payroll outsourcing companies assure the laws are in compliance on behalf of businesses.

Procedure for Payroll Process in UAE?

Running a business successfully is a great opportunity for small and large companies both. UAE has a multi-cultural population which gives investors from all over the world a big chance to make larger profits. However, like any other business, establishing a successful business in UAE involves staff and human resources who are dedicated towards your business and a very crucial factor for managing the human resources well is the payroll process. The laws and regulations regarding labor and employment in UAE keep changing time and again and to keep your business stay in compliance, you must keep yourself up-to-date with these changes.

To avoid discrepancies related to law violations, many companies choose to partner with an Employer of Record which acts as a legal employer for the company’s staff and manages the payroll services on its behalf. This minimizes the risk of non-compliance with a great margin.

Here is a few tasks listed procedure for Payroll Processing in UAE:

  1. Calculation of all types of payments by the company
  2. Monitoring working hours of the employees
  3. Keeping paid leaves in consideration
  4. Calculations of applicable deductions
  5. Preparation and issuance of payslips
  6. Calculations for taxes

What are the steps that are involved in payroll processing?

Most businesses outsource payroll processing companies which helps them save cost, time and effort since payroll processing is a lengthy and intricate function. When you are handling the payroll for your company yourself you must learn about all the requisitions and steps.

The steps for payroll processing in UAE are discussed below:

  1. Detailed employee information
  2. Gross wage calculation
  3. Overtime Calculation
  4. Applicable Allowances
  5. Applicable Deductions
  6. Salary statement and payslips
  7. WPS File

#1. Detailed employee information

While processing the payroll, the first and foremost data you must need is the details of each and every staff. These details must include; complete name, salary, designation, contact number, amount of allowance, type of allowance, etc.

#2. Gross wage calculation

The gross wage is calculated by adding the allowance amount to the basic salary of each employee.

#3. Overtime Calculation

As per UAE labor law, overtime payment is mandatory where applicable so the payroll must include accurate calculations of staff’s overtime.

#4. Applicable Allowances

Other than the allowances mentioned in a salary package, there are extra allowances offered as well according to the role and performance. These extra allowances could be car allowance, bonus or sales commissions.

#5. Applicable Deductions

If there are any deductions applied to be reflected on salary, calculate them thoroughly while preparing the payroll.

#6. Salary statement and payslips

Salary statements are summarized reports of the respective month’s salary which consists of the following components; basic salary, allowances, deductions, absences and overtime.

#7. WPS File

The last step is to make the WPS file which is a salary transfer file in a format recommended by the Ministry of Labor.

What are the things that small businesses must consider during payroll processing in UAE?

For small businesses, there are certain do’s and don’ts that they must consider when processing payroll n UAE. Some of these things are:

1. Always consider seeking assistance from payroll processing companies

While running a business in UAE, it is very wise to seek advice from payroll processing companies as they can be the best source of guidance for your business in terms of laws, regulations and other crucial matters such as taxes, etc.

2. Don’t dissolve the entire payroll department

As a small business owner, you might think about outsourcing payroll services to Dubai and partnering with an Employer of Record or payroll processing company but this should not make you eliminate your internal payroll department completely as you might always need a backup for support.

3. Think about partnering with a payroll specialist in UAE

Partnering with a reputed payroll processing company will make things easier for your business big time and help you in regulating and monitoring your costs through proper report management.

4. Don’t terminate your staff and change them frequently

Last but not the least; constant change in staff will affect the loyalty you need for your business. As a small business, you must keep the right people in your company while educating and training them effectively for the long run. This will eventually affect your payroll processing as well.

Seeking more guidance on payroll services in Dubai?

Preparing payroll is a sensitive and crucial task and while processing it, you must be sure there are no errors. Many companies use payroll processing software to automate payroll processing. Payroll Middle East is one of the finest payroll processing companies in Dubai. We have a highly qualified team of professionals and consultants who invest their due diligence in making payroll outsourcing Dubai smooth for small businesses. We have many clients from the Middle East who have partnered with us as their Employer of Record and other payroll services Dubai. Contact us today for managing payroll processing of your workforce in UAE.