UAE payroll compliance is more complex than many employers realise. Between the Wages Protection System (WPS), end-of-service gratuity, annual leave entitlements, and GPSSA contributions for UAE nationals, there are multiple overlapping obligations. Getting payroll wrong exposes businesses to Ministry of Human Resources penalties and can invalidate work permit renewals.
What Is the Wages Protection System (WPS)?
The Wages Protection System is a UAE government initiative managed by the Ministry of Human Resources and Emiratisation (MOHRE). It requires all private sector employers to pay salaries via an approved financial institution and submit salary data electronically to MOHRE. This protects workers against unpaid wages and gives the government real-time visibility into salary payments.
- Mandatory for all private sector employers with 1 or more employees
- Salaries must be paid via WPS-approved banks or exchange houses
- A Salary Information File (SIF) must be submitted with each payroll
- Partial payments are flagged — employees must receive full contracted salary
- New companies must register for WPS within 30 days of hiring first employee
WPS Payment Deadlines
Salaries must be paid and the WPS file submitted within 10 days of the end of the salary period. For monthly payroll, this means salary must be in employees' accounts by the 10th of the following month.
Penalty for WPS non-compliance: MOHRE can impose a ban on hiring new staff, block work permit renewals, and fine the company. Repeated delays can result in the business being blacklisted from the MOHRE portal.
End of Service Gratuity: How to Calculate It
End of Service Gratuity (EOSG) is a lump-sum payment due to employees who complete at least 1 year of service. It's calculated on the employee's basic salary (not total remuneration) at the time of termination.
- First 5 years of service: 21 working days' basic salary per year
- After 5 years: 30 working days' basic salary per year
- Maximum gratuity: 2 years' total basic salary
- Less than 1 year: no gratuity entitlement
- Resignation (1-3 years): one-third of gratuity
- Resignation (3-5 years): two-thirds of gratuity
- Resignation (5+ years): full gratuity
Example: An employee with 7 years of service and a basic salary of AED 10,000/month. First 5 years: 5 × (21 × 10,000/30) = AED 35,000. Years 6-7: 2 × (30 × 10,000/30) = AED 20,000. Total gratuity: AED 55,000.
Annual Leave Entitlement
- Less than 1 year: 2 days per month of service
- After 1 year: 30 calendar days per year (UAE Labour Law minimum)
- Some free zone authorities (DIFC, ADGM) have different rules — check your zone
- Annual leave pay: full basic salary plus allowances during leave
- Unused leave at termination: must be paid out
Sick Leave
- First 15 days: full pay
- Next 30 days: half pay
- Beyond 45 days: unpaid
- Sick leave during probation: at employer discretion
GPSSA for UAE National Employees
UAE nationals employed in the private sector are enrolled in the General Pension and Social Security Authority (GPSSA). This is mandatory and replaces end-of-service gratuity for UAE nationals.
- Employee contribution: 5% of gross salary
- Employer contribution: 12.5% of gross salary (Abu Dhabi) or 12.5% (other emirates, employer share)
- Total contribution: 17.5% (employer + employee)
- Must be registered with GPSSA within 30 days of hiring a UAE national
- Monthly GPSSA payments due by the 15th of the following month
Payroll Records You Must Maintain
- Employment contracts for all staff
- Monthly payroll summaries with gross pay, deductions, net pay
- WPS transfer confirmation reports
- Leave records (annual leave balance, sick leave taken)
- Gratuity calculation worksheets for terminations
- GPSSA contribution reports for UAE nationals
Outsource Your UAE Payroll
Our payroll service covers WPS file preparation and submission, gratuity calculations, leave tracking, GPSSA reporting, and monthly payslips. All processes are MOHRE-compliant. Contact us via WhatsApp to set up payroll for your UAE business.