The basic salary in the United Arab Emirates (UAE) is the minimum amount of money that an employee has a right to receive for their work. It is determined by the UAE labor law and varies depending on several factors. The basic salary in UAE labor law serves as the foundation for calculating other benefits and allowances.
In this article we will discuss everything relevant about the basic salary in the UAE labor law. Such as housing, transportation, and medical allowances. Moreover, employers need to pay their workers at least a minimum amount of money. To ensure fair compensation and adherence to employment regulations in the UAE.
Basic Salary in UAE Labor Law
The basic salary is the contractual sum you are bound to pay an employee, exclusive of allowances, expenditures, and other perks.
Every employment contract must define the amount of pay the employee might anticipate for performing their contractual responsibilities.
The basic wage, as the Article 1 of the new Labor Law says, can be specific as the wage in the employment contract states. Which they will pay to the worker in consideration of their work under the employment contract, on a:
Monthly,
Weekly,
Daily, hourly or piecework basis,
And which does not include any other allowances or benefits in-kind.
In this context, basic salary in UAE labor law refers to the base remuneration in an employment contract, excluding allowances.
Commissions and Bonuses
The previous and new laws did not clarify whether commissions and bonuses were included in the base income (wage). Therefore, whether you include or exclude personnel will come to determination by the contract you sign at first with them.
Allowances and Gross Salary
After establishing basic pay, the new labor legislation defines wage as “the basic wage, in addition to the cash allowances and benefits in-kind allocated to the worker under the employment contract.”
Wage is the basic salary plus perks and allowances that they pay to the employee. Some popular allowances include:
Housing allowance.
Phone allowance
Transport allowance
Communication allowance
Among other things, students receive a school fee allowance.
In the United Arab Emirates, the gross wage includes both the basic salary and allowances. Allowances, like basic wage, must be quite specific in the employment contract. This, to avoid conflicts and unnecessary legal issues.
Deductions and Net salary
The difference between gross income (wage) and net salary (wage) is due to deductions.
These are regular deductions from employees salaries. In the new Labor Law (Article 25), the following deductions are permissible in the UAE:
Possible deductions
The repayment of loans provided to the worker, within the maximum limit of the monthly deduction percentage from the worker’s income stated, after receiving the worker’s written approval and without any interest.
The recovery of the amount paid to the worker in excess of their entitlements and they provide that the amount withheld does not exceed twenty percent of the pay.
The amount deducted for the purpose of calculating contributions to schemes, pension plans, and insurance, provided they are in accordance with the legislation in effect in the UAE.
The worker’s contributions to a savings fund, provided the fund is approved by the Ministry.
Installments for any social project or any other benefits or services supplied by the employer and approved by the Ministry, if the worker agrees in writing to participate in the project.
Amounts withheld from the worker owing to infractions they commit, according to the rule of penalties in place at the business and approved by the Ministry, provided that they do not exceed 5% of the pay.
More deductions
Debts due to a legal judgment, without exceeding a quarter of the wage payable to the worker, except for the awarded alimony debt. As more than a quarter of the wage may come to deduction. In case of several debts, the amounts that they will have to pay shall has it distribution as per the privilege categories.
Amounts necessary to repair damage(s) caused by the worker as a result of their error or violation of their employer’s instruction, which result in the destruction, demolition, or loss of tools, machines, products, or materials belonging to the employer, provided that the deducted amounts do not exceed the wage of five days per month. It is not possible to deduct more than that amount without the consent of the appropriate court.
Other uses for basic salary
The basic salary in UAE labor law serves as the foundation for calculating an employee’s yearly leave and end-of-service gratuity.
Annual Leave
Full-time employees who have been with your firm for a year have a right to 30 days of annual leave with payment. Whereas those who have only been there for six months have an entitlement to two days of leave every month until they have been working for a year.
According to UAE Labor Law annual leave’s calculation can be done using the employee’s last complete income (gross compensation. Which includes basic salary in UAE labor law and allowances).
End-of-service gratuity (also called end-of-service benefit)
The end-of-service gratuity has its calculation with a basis on the UAE’s basic wage. Without allowances (unlike annual leave).
Employees working for five years or more have a right to 21 working days of basic wage each year of service. They have an entitlement to 30 days of basic wage for each year of service after the fifth.
Furthermore, this new labor law includes some provisions for end-of-service gratuity:
Employers will prorate partial years. An employee who works for nine and a half years will receive an amount for the remaining six months. (The payment will represent 15 days of basic income instead of 30 days).
An employee who resigns or that has to abandon without notice will keep the full amount of the end-of-service gratuity.
The total gratuity payable cannot exceed two years’ worth of the employee’s entire wage.
If a worker dies, they will pay the gratuity to the family within ten days.
Is there a specific Basic Salary in UAE Labor Law?
Currently, the UAE has no minimum wage. Furthermore, there is no basic pay percentage in the UAE Labor Law. Which means that the basic income is not required to be a certain proportion of the gross compensation.
Nonetheless, it is normal practice to provide a base wage of 60% of the gross compensation and, 40% in allowances. However, it may be different for your organization.
While there is presently no specific basic salary in UAE labor law, the legislation requires that the payment must be sufficient to cover employees fundamental necessities.
However, Article 27 of the new legislation states:
The Cabinet may, upon the proposal of the Minister with the right authorities, issue a resolution determining the minimum wage.
This provision means that a minimum salary legislation is quite possible in the future.
How to pay salary in the UAE
According to Ministerial Decree No. 788 of 2009 and Ministerial Decree No. 739 of 2016, all private enterprises in the UAE and Jebel Ali Free Zone (JAFZA) need to pay salaries through the Wage Protection System (WPS).
Furthermore, they require you to complete and submit a Salary Information File (SIF) to a WPS agent. Who will verify the information with the Ministry of Human Resources and Emiratization (MOHRE).
Every salary must be paid via their WPS system. Which is meant to ensure that you pay your employees the correct amount at the appropriate time.
Why choosing us to help you out?
When you need a dependable partner to assist you develop your business throughout the Middle East, we can be the ideal choice. EOR Middle East has the knowledge and experience to help you thrive in this vibrant and diverse area of business.
We provide a comprehensive variety of services to assist you enter and operate in the Middle East. Moreover, we can help you with:
We have a global presence and reputation. In addition, we are a part of EOR Global, a global leader in EOR and PEO services. Furthermore, we provide you with industry-leading resources and partners. We can assist you grow your business across borders and continents.
Our clients come first. We have a customer-focused strategy and a devoted workforce. Furthermore, we can tailor our solutions to your individual demands and goals. Our staff may assign you a professional account manager who will walk you through each stage of the process. Furthermore, we are constantly available and attentive to your questions and demands.
In conclusion, the basic salary in UAE labor law is a crucial component of employee compensation. Even if there is no specific amount for it. It is determined by factors. Such as, job position, qualifications, and experience.
Adhering to the UAE labor law, employers must ensure that employees are paid at least the minimum basic salary, ensuring fair compensation and compliance with employment regulations.
The basic salary forms the foundation for calculating other benefits and allowances. For example, housing, transportation, and medical allowances. By providing a fair basic salary, the UAE aims to promote employee welfare and maintain a balanced and harmonious work environment.
However, if you require any other information, please contact us now. We are thrilled to give out a helpful hand for you.
Harneet Bhatia is the Sales and Compliance Officer at Connect Group.
She is Specialized in Company Setup Services ,
Business Consultancy and Sales Assistance.
She is Working Within Middle East and UAE. Also she has Done
her Master of Business Administration in Literature.
Basic Salary UAE
The basic salary in the United Arab Emirates (UAE) is the minimum amount of money that an employee has a right to receive for their work. It is determined by the UAE labor law and varies depending on several factors. The basic salary in UAE labor law serves as the foundation for calculating other benefits and allowances.
In this article we will discuss everything relevant about the basic salary in the UAE labor law. Such as housing, transportation, and medical allowances. Moreover, employers need to pay their workers at least a minimum amount of money. To ensure fair compensation and adherence to employment regulations in the UAE.
Basic Salary in UAE Labor Law
The basic salary is the contractual sum you are bound to pay an employee, exclusive of allowances, expenditures, and other perks.
Every employment contract must define the amount of pay the employee might anticipate for performing their contractual responsibilities.
The basic wage, as the Article 1 of the new Labor Law says, can be specific as the wage in the employment contract states. Which they will pay to the worker in consideration of their work under the employment contract, on a:
In this context, basic salary in UAE labor law refers to the base remuneration in an employment contract, excluding allowances.
Commissions and Bonuses
The previous and new laws did not clarify whether commissions and bonuses were included in the base income (wage). Therefore, whether you include or exclude personnel will come to determination by the contract you sign at first with them.
Allowances and Gross Salary
After establishing basic pay, the new labor legislation defines wage as “the basic wage, in addition to the cash allowances and benefits in-kind allocated to the worker under the employment contract.”
Wage is the basic salary plus perks and allowances that they pay to the employee. Some popular allowances include:
In the United Arab Emirates, the gross wage includes both the basic salary and allowances. Allowances, like basic wage, must be quite specific in the employment contract. This, to avoid conflicts and unnecessary legal issues.
Deductions and Net salary
The difference between gross income (wage) and net salary (wage) is due to deductions.
These are regular deductions from employees salaries. In the new Labor Law (Article 25), the following deductions are permissible in the UAE:
Possible deductions
More deductions
Other uses for basic salary
The basic salary in UAE labor law serves as the foundation for calculating an employee’s yearly leave and end-of-service gratuity.
Annual Leave
Full-time employees who have been with your firm for a year have a right to 30 days of annual leave with payment. Whereas those who have only been there for six months have an entitlement to two days of leave every month until they have been working for a year.
According to UAE Labor Law annual leave’s calculation can be done using the employee’s last complete income (gross compensation. Which includes basic salary in UAE labor law and allowances).
End-of-service gratuity (also called end-of-service benefit)
The end-of-service gratuity has its calculation with a basis on the UAE’s basic wage. Without allowances (unlike annual leave).
Employees working for five years or more have a right to 21 working days of basic wage each year of service. They have an entitlement to 30 days of basic wage for each year of service after the fifth.
Furthermore, this new labor law includes some provisions for end-of-service gratuity:
Is there a specific Basic Salary in UAE Labor Law?
Currently, the UAE has no minimum wage. Furthermore, there is no basic pay percentage in the UAE Labor Law. Which means that the basic income is not required to be a certain proportion of the gross compensation.
Nonetheless, it is normal practice to provide a base wage of 60% of the gross compensation and, 40% in allowances. However, it may be different for your organization.
While there is presently no specific basic salary in UAE labor law, the legislation requires that the payment must be sufficient to cover employees fundamental necessities.
However, Article 27 of the new legislation states:
The Cabinet may, upon the proposal of the Minister with the right authorities, issue a resolution determining the minimum wage.
This provision means that a minimum salary legislation is quite possible in the future.
How to pay salary in the UAE
According to Ministerial Decree No. 788 of 2009 and Ministerial Decree No. 739 of 2016, all private enterprises in the UAE and Jebel Ali Free Zone (JAFZA) need to pay salaries through the Wage Protection System (WPS).
Furthermore, they require you to complete and submit a Salary Information File (SIF) to a WPS agent. Who will verify the information with the Ministry of Human Resources and Emiratization (MOHRE).
Every salary must be paid via their WPS system. Which is meant to ensure that you pay your employees the correct amount at the appropriate time.
Why choosing us to help you out?
When you need a dependable partner to assist you develop your business throughout the Middle East, we can be the ideal choice. EOR Middle East has the knowledge and experience to help you thrive in this vibrant and diverse area of business.
We provide a comprehensive variety of services to assist you enter and operate in the Middle East. Moreover, we can help you with:
We have a global presence and reputation. In addition, we are a part of EOR Global, a global leader in EOR and PEO services. Furthermore, we provide you with industry-leading resources and partners. We can assist you grow your business across borders and continents.
Our clients come first. We have a customer-focused strategy and a devoted workforce. Furthermore, we can tailor our solutions to your individual demands and goals. Our staff may assign you a professional account manager who will walk you through each stage of the process. Furthermore, we are constantly available and attentive to your questions and demands.
Moreover, please visit our insights to learn more about our services and helpful suggestions.
Conclusion
In conclusion, the basic salary in UAE labor law is a crucial component of employee compensation. Even if there is no specific amount for it. It is determined by factors. Such as, job position, qualifications, and experience.
Adhering to the UAE labor law, employers must ensure that employees are paid at least the minimum basic salary, ensuring fair compensation and compliance with employment regulations.
The basic salary forms the foundation for calculating other benefits and allowances. For example, housing, transportation, and medical allowances. By providing a fair basic salary, the UAE aims to promote employee welfare and maintain a balanced and harmonious work environment.
However, if you require any other information, please contact us now. We are thrilled to give out a helpful hand for you.
Harneet
Harneet Bhatia is the Sales and Compliance Officer at Connect Group. She is Specialized in Company Setup Services , Business Consultancy and Sales Assistance. She is Working Within Middle East and UAE. Also she has Done her Master of Business Administration in Literature.
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