Employers are required to ensure compliance with the provisions of the UAE Labor Law on salary deductions and avoid disputes with employees or penalties from the Ministry of Human Resources and Emiratization (MOHRE). Hence, businesses are advised to seek professional payroll services in the UAE to effectively ensure compliance with the law and cost-effectively streamline salary processing. Salary deductions in UAE are regulated under Federal Decree-Law No. 33 of 2021 on the Regulation of Labor Relations and its Executive Regulations.
Arbitrary or excessive deductions are strictly prohibited, ensuring employees receive the majority of their agreed wages.
Legal Grounds for Salary Deductions
Employers may only deduct from employee wages under specific, legally recognized circumstances:
- Repayment of Advances or Loans
Employers can deduct instalments to recover salary advances or loans. However, the amount deducted each month must not exceed the percentage permitted by law.
- Recovery of Overpaid Wages
If an employee is mistakenly overpaid due to payroll or clerical errors, the excess can be deducted after notifying the employee.
- Social Security or Provident Fund Contributions
Where applicable, deductions may be made for pension or social security contributions in accordance with the law.
- Disciplinary Penalties (Article 39)
Deductions are permitted as disciplinary measures for misconduct, but they must strictly follow the rules under Article 39 of the Labor Law, including proper documentation and grievance procedures.
- Employee-Caused Loss or Damage (Article 25)
If an employee damages or loses company property through negligence or non-compliance with instructions, deductions may be applied. However, these may not exceed five days’ wages per month unless MOHRE approval is obtained.
- Court-Ordered Deductions
Employers must comply with court orders for deductions, such as garnishments for debts, alimony, or other legal obligations.
Article 25: Work-Related Loss Deductions
Article 25 provides specific rules on deductions for employee-caused losses:
- Deductions cannot exceed five days’ wages per month without MOHRE approval.
- Employers must conduct an internal investigation to establish liability before deducting.
- If losses exceed the cap, the employer must file a complaint with MOHRE.
This ensures deductions remain fair, reasonable, and legally supervised.
Article 39: Disciplinary Sanctions and Salary Deductions
Article 39 regulates salary deductions imposed as disciplinary measures. Key requirements include:
- Written notification to the employee about the offence and penalty.
- Giving the employee the right to defend themselves during the disciplinary process.
- Ensuring deductions are proportional and within statutory limits.
This protects employees from unfair treatment and ensures due process is followed.
Maximum Salary Deduction in the UAE
The Labor Law places a cap on total deductions: no more than 50% of an employee’s monthly wage can be deducted, even if there are multiple reasons for deduction. This rule ensures employees retain sufficient income to cover their living expenses.
Importance of Payroll Compliance in the UAE
Managing payroll in compliance with the UAE Labor Law can be complex, especially for companies with large workforces. Non-compliance may result in:
- Employee disputes.
- Regulatory fines and penalties.
- Reputational damage.
To mitigate risks, many businesses rely on payroll outsourcing services in UAE, which help ensure:
- Accurate payroll records.
- Lawful and justified deductions.
- Compliance with Articles 25 and 39.
- Smooth relations between employers and employees.
Seek the Expert Services of Payroll Service Providers in UAE
Under the UAE Labor Law, salary deductions are permitted only under specific conditions, such as loan recovery, disciplinary actions, or losses caused by employees, and are regulated by law.
Employers are required to ensure deductions are lawful, proportionate, and within statutory limits. By partnering with experienced payroll service providers in UAE, businesses can process salaries efficiently, remain fully compliant, and foster trust with their workforce. Contact us today, and we shall be glad to assist you.
FAQs on Salary Deductions in UAE
- Can my employer deduct money from my salary in the UAE?
Yes, but only under legally approved grounds such as loan repayments, payroll errors, disciplinary fines, or employee-caused losses. Arbitrary deductions are prohibited. - What does Article 25 of the UAE Labor Law state about deductions?
Article 25 permits deductions for work-related losses caused by employees, but limits them to five days’ wages per month unless MOHRE authorizes a higher deduction. - Can salary be deducted as a disciplinary measure in the UAE?
Yes. Under Article 39, deductions may be imposed for misconduct, but only after written notice, due process, and within legal limits. - What is the maximum salary deduction allowed in the UAE?
Salary deductions cannot exceed 50% of the employee’s monthly wage, regardless of the number of deduction reasons. - How can companies ensure salary deductions comply with UAE law?
By strictly following the Labor Law, maintaining clear payroll records, and working with professional payroll services in the UAE, to can avoid disputes and penalties.
