Payroll process in the UAE: A complete guide

The payroll is a document with legal validity where the salary that the worker of a company will receive is presented. With the payroll, the amount that will be paid is detailed, in addition to some deductions that will be used to meet your tax obligations and before social security. Here we will focus on the payroll process in the UAE.

In this article, we are going to explain how to correctly carry out the payroll process in the UAE. Since every company seeks to maximize its processes to save money and time. Having your employees on the payroll achieves that task and here we show you why.

  1. What is a payroll process?
  2. Goals of the payroll process in the UAE
  3. What are the different types of payroll?
  4. What is the procedure to create a payroll?
  5. Advantages of the payroll process in the UAE
  6. How can we help you with your payroll process in the UAE?

1. What is a payroll process?

It is a sequence of activities that allow, in an orderly manner, to make the payment of salaries to employees, as well as providing administrative and accounting information, both for the company and for the entities in charge of regulating labor relations. They are the financial record that a company makes on the salaries of its employees, bonuses, and deductions.

Payrolls are a very important document when it comes to keeping your business accounts. These, accompanied by pay stubs, are the document that justifies the income for the worker’s services, and the company must prepare and deliver generally every month. In addition to this, generating and calculating payroll is a complex process, which is why many digital platforms can help automate payroll calculation, and even allow you to do it online.

The payroll operation in companies is one of the most important processes because due to an error or delay in the payroll you can have problems with the tax authorities and annoying employees, which can affect productivity. The process begins each time a payment period begins with the income report of staff news and ends with the payment of salary to the employee and payments to third parties based on allowable deductions.

A critical aspect of the impact and scope of payroll is its effect on the morale of your employees. They must be sure that they will receive their remuneration punctually and consistenly. If this process is not correct, it can cause your collaborators to question the financial stability of your company.

2. Goals of the payroll process in the UAE

The payroll process has the following objectives:

  • Take control of the payment of wages.
  • Comply with the payment obligations to third parties contracted by the company and the personnel based on the law and authorized deductions.
  • Provide administrative and accounting information for the company and entities in charge of regulating labor relations.

If you have good payroll control, pay salaries on time, correctly and comply with the bonuses, there will be a pleasant work environment and this will translate into positive situations for the company such as employee loyalty and greater effort. Also, when keeping track of payroll, there is protection against loss of resources through waste, unnecessary expenses, errors, and mismanagement.

On other hand, the most common in terms of payroll is the fraud of the ghost employee. People who receive a salary to work, usually in collusion with supervisors, but who do not perform as expected or do not exist. The way to avoid this type of fraud is not to make payments in cash, it is preferable to do it through a bank.

And finally, another of the objectives of having a correct payroll process is that companies can have savings of up to 20% on the total cost of payroll, subject to factors of size, finances, and the number of employees.

3. What are the different types of payroll?

There are different types of payroll in a company. These vary according to the periodicity in which they are delivered. Depending on the contract or type of work , employees can receive the payroll in these formats:

  • Weekly: every 7 days.
  • Fourteen-yearly: every 14 days.
  • Fortnightly: every 15 days.
  • Monthly: every 29-31 days.

In addition to the pay that the workers receive and the deductions that are made on a fixed basis, there may be other bonuses, discounts, or extraordinary circumstances that may be contemplated in the payroll process in a company, such as those extra benefits represented in prizes for attendance, bonuses for productivity or the payment of utilities for workers.

Payroll can also differ depending on the type of workers. For example, payroll for managers and executives is usually confidential and includes, in addition to what is already established, other additional payments and salary supplements.

4. What is the procedure to create a payroll?

Follow these steps to create your payroll:

4.1 Initial stage

Step 1: Determine wages and benefits. The company must have established the salary that each worker will receive. To achieve this, there is usually an investigation of the different positions in the company and thus calculate the fair figure according to the hierarchy and performance of functions.

Another important factor to take into account is the economic capacity of the company. For this reason, there is no predetermined amount for the work according to the position that applies to everyone equally, since this will depend on the money available and fair so that the company can continue operating and generating profits.

Step 2: Define payment policies. To avoid confusion or lack of information about salary and deductions, it is necessary to define payment policies as a company. It is necessary to detail as precisely as possible all the sections on the determination of salary, benefits, and deductions that by law correspond to the worker. Keeping employees aware of these policies will serve to clarify doubts and avoid confusion about their payroll.

Step 3: Determine payment schedules. Make a schedule to determine payments. It is a requirement for the company before starting the work year, this avoids delays and conflicts in the payment scheme. Remember that these payments can be weekly, fortnightly, monthly, etc.

Step 4: Consider payments and discounts in processes. In some cases, other concepts are contemplated in the payroll. A regular payroll is different, for example, from the payroll that is granted when the worker is paid bonuses.

It may also happen that in addition to the deductions by law, the payroll is deducted from the payment of loans that the worker received from the company, so the payroll can be normal, with extra payments or with additional discounts.

4.2 Intermediate stage

Step 5: Calculate payroll. Now is the time to do addition and subtraction. To calculate the payroll, we must know the salary that the workers will receive for the position held, the number of days attended or if there were incidents, verify that there are no debts for loans, discount credits, discount the amounts destined for social security and if there is housing savings or credit fund, make the relevant payment. Similarly, take into account if the worker is deserving of a bonus or incentive for activities and sales.

Step 6: Get reports. Because the creation of the payroll involves more organizations outside the company, there will be several files and forms that we must fill out and these must be signed by the worker.

4.3 Final stage

Step 7: Make payments and close payroll. Finally, the company pays the workers either cash, check, or by transfer. If an error is detected, it must be corrected immediately because once the payroll process is closed, it is immovable. Now, it will only be necessary to file these payments and make the monthly and annual declarations.

5. Advantages of the payroll process in the UAE

If you have or manage a company, you know how important it is to have your employees on the payroll, the importance of complying with this process lies not only in the payment of wages but also has other administrative and legal benefits for employers and workers.

These are some of the advantages of having a correct payroll process:

  • Facilitates legal processes:

Streamlining and minimizing the legal process involved in having or managing a company is another reason why it is important to have your employees on the payroll. If you comply with this, the process of paying taxes and the paperwork that this entails will be made easier for you.

Likewise, it must be taken into account that a company’s payroll is tax deductible. However, the support of an HR manager is needed to be able to determine under what type of concepts it is deductible. With this, you will avoid problems such as incorrect calculations, reviews, and audits. Remember that the accountant’s advice can help you solve problems in the short, medium, and long term.

5.1 Automated payroll system

Now, having an automated payroll system will allow you to obtain greater advantages, such as:

  • Save time and money:

Manual payroll calculations often involve complex salary and tax calculations that can take many hours each month. With a payroll system, your staff can make more efficient use of those hours in other work domains. In addition to saving time, it is also profitable, since the installation of the payroll system will allow you to reduce the salary costs of those who carried out the process manually, increasing your company’s profits.

  • Reduce human errors:

With the help of a payroll system, your employees can reduce human error and do a perfect job. These systems also help you maintain fairness and transparency across all departments, while simultaneously avoiding errors in data entry and processing. Therefore, your employees will be more competent, precise, and impeccable.

  • Automate processes:

Payroll systems update the general work processes of companies. Track all activities in real-time, keep your employee information up-to-date, monitor and control the flow of information, and ensure tight security. All of these factors significantly improve your company’s productivity and deliver better results.

A payroll system provides multiple benefits to your business. On a day-to-day basis, it consistently contributes to various procedures and workflows within the company. Plus, it increases productivity on a larger scale. But above all, it is simple, flexible, and offers customized solutions to the needs of your business.

6. How can we help you with your payroll process in the UAE?

The payroll process in the UAE, which is a nearly tax-exempt economy is not as simple as you might think. The diversity of nationalities of expatriates and the constant changes in local regulations make payroll management a complex matter.

If you are looking for a company to handle your payroll process and other administrative responsibilities, EOR Middle East is the place to go. Our firm provides the best payroll services in the area. Our services are accessible in the next areas:

We have spent a lot of time assisting businesses on their way to success. Assisting them in expanding and developing new markets. EOR Middle East boasts a 98 percent success rate, numerous awards, and over 800 ratings, demonstrating our status as the best consultant firm specializing in the area of ​​payroll process in the UAE. Our company provides a tailored set of services to boost your company’s productivity quickly. Furthermore, we have a dedicated team of agents who will ensure that your experience with us is one-of-a-kind.

Do you want EOR Middle East to handle your foreign payroll? Contact us at our email [email protected] or call us at +971 43 316 688 if you need assistance with international payroll outsourcing and other HR solutions. Our agents will answer all your questions.

You can also submit your resume or CV to if you are looking for the ideal career opportunity. You may also send us an email at [email protected]. As a result, our recruiters will make certain that you are in a position in the UAE that is a good match for your qualifications.

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