The United Arab Emirates (UAE) is a federation composed of seven regions. Most companies look to incorporate in Abu Dhabi, Dubai, or one of the country’s approximately 45 Free Trade Zones. Although the incorporation process might seem simple, many businesses find it labor-intensive to meet the UAE’s requirements and regulations on payroll and other matters of compliance.
Instead of getting caught up in this confusing process, G-P can give you access to our local talent to help your expansion succeed. We ensure that all employees on our United Arab Emirates payroll are paid in accordance with local compliance requirements. All risk of compliance is on our shoulders, so you can focus on your business.
Taxation Rules in the UAE
The UAE does not mandate any employer taxes, which is one of the reasons it is such an attractive place for expansion. It does not have a corporate income tax, except for specific industries such as branches of foreign banks and companies in the oil and gas industries. However, we recommend you still accrue 8.3% of the employee’s compensation for the End of Service Benefit or Gratuity.
As of January 2023, UAE requires both domestic and foreign workers to subscribe to the Involuntary Loss of Employment Scheme. The deadline to subscribe has been extended. For workers hired prior to December 31, 2022, the deadline to sign up is June 30, 2023. Workers starting employment on or after January 1, 2023, must sign up within 4 months of starting employment. The insurance premiums vary depending on the employee’s salary. Workers earning less than AED 16,000 per month must pay up to AED 5 plus Value Added Tax (VAT). Those earning more than AED 16,000 are required to pay up to AED 10 plus VAT.
United Arab Emirates Payroll Options for Companies
Just as companies have multiple business structure options for incorporation, you’ll find a variety of payroll options for your business:
- Remote: If your parent company already runs payroll, you can add your UAE employees to that payroll. However, you’ll need to follow separate employment compliance laws based on the location for each set of employees.
- Internal: Larger subsidiaries may run their own payroll in the UAE. This option is the most expensive since you would have to hire a full HR staff.
- A United Arab Emirates payroll processing company: If outsourcing is a better option for your company, you can work with a local UAE payroll processing company. However, you will still be held liable for all of their work and any compliance mistakes.
- Outsourcing Services from G-P: With G-P, you can outsource your local service needs and we are responsible for payroll and compliance.
How to Set Up a Payroll in the UAE
If you opt to set up your United Arab Emirates payroll alone, you will need to establish a subsidiary first. The process differs based on the type of entity you incorporate as, but you are legally required to complete your subsidiary’s setup before running payroll. You will also need an in-country bank account if you are required to pay employees registered under the Wage Protection System (WPS) .
When terminating an employee in the UAE, you will typically owe some type of severance. Employees who have worked for your company for a year or more should receive severance or a gratuity depending on the length of their service. For example, if service is less than 1 year, End of Service Benefit is not Applicable. If service is between 1 to 5 years, End of Service Benefit is calculated as 21 days base salary * a number of years. If service is more than 5 years, End of Service Benefit is calculated as 21 days base salary for the first 5 years + 30 days basic salary for the rest of the years
Payroll Processing Company in the United Arab Emirates
Let G-P hire and process payroll in the United Arab Emirates so you can get access to the talent you need to succeed in a foreign environment. Contact us today to learn more.