Payroll Processing in the UAE in 2026: Laws, WPS, and Taxes

The UAE has become an attractive hub for global businesses. Companies are opening up shop all over Dubai, Abu Dhabi, and other cities because the market is constantly evolving and the talent pool keeps growing. But payroll here works very differently from how most Western companies process it.

There’s no personal income tax. That sounds simple until you run into the Wage Protection System (WPS), a government platform that tracks all salary payments in real time. The Ministry of Human Resources checks for payroll compliance through digital submissions, and mistakes can result in penalties that stop you from hiring.

This guide covers the basics of payroll processing in the UAE in 2026. You’ll learn about the laws that govern how you pay your employees, how WPS really works, and what the recent changes to corporate taxes mean for your business. Think of this as your real-world guide to a system that rewards getting the details right.

Payroll requirements under UAE labor law

The Ministry of Human Resources and Emiratization (MOHRE) provides the regulatory framework for employers operating within the UAE. Whether you employ two people or 2,000, each employer must comply with specific requirements related to paying their employees.

Employment contracts

An employment contract must outline the basic components of the employment relationship, including salary, working hours, and the method of wage payment. All contracts are required by MOHRE to be written in Arabic. If you prepare a contract in both Arabic and English, you may use the bilingual version, but the Arabic version is the only one recognized as valid in the event of a dispute.

Payment requirements

All salaries must be paid in UAE Dirhams (AED). Most companies pay their employees monthly; however, under UAE law, all salaries must be paid within 10 days of the wages being earned. If an employee doesn’t receive their wages on time, they may file a complaint with MOHRE, which may result in serious consequences.

Documentation of pay

Each employee must receive a payslip showing the total amount of wages they received. Each payslip must be written in either Arabic or a bilingual format.

In addition to showing the gross amount of their wages, payslips must specify any additional amounts included in the employee’s wages (allowances), any deductions made from their wages (e.g., taxes), and the employee’s net salary after all deductions have been applied. In the event of an audit or a dispute between an employer and an employee, MOHRE may request to see the original copies of the employee’s payslips.

Mandatory components of UAE payroll

UAE’s payroll obligations include much more than simply transferring an employee’s monthly salary. An employer’s compensation obligations consist of several mandatory components that create a comprehensive benefit plan for the employee.

Basic salary

A fixed basic salary is defined in the employee’s employment contract and serves as the basis for all future benefits, including gratuity and overtime.

Allowances

Employees often receive additional allowances, such as housing and transportation, which may be calculated on a percentage basis of the employee’s fixed salary. Other examples of allowances include education allowances, remote work allowances, and phone stipends, depending on the role.

Overtime compensation

An employee who works beyond standard working hours must receive overtime pay. This compensation needs to be paid per applicable labor laws for the specific industry and type of work being performed. For example, if an employee works overtime on a weekend, they would be compensated differently than if they worked overtime on a standard weekday.

Annual leave pay

Based on UAE labor laws, an employee earns annual paid vacation time based on their length of service. Typically, employees with less than one year of service earn two days of paid vacation per month; however, employees with longer tenure earn more.

Sick leave and maternity leave pay

An employee has the right to take paid sick leave under certain circumstances. Female employees also have the right to take paid maternity leave, including up to 60 days, with 45 days fully paid and 15 days at 50% of their salary.

Gratuity (end-of-service benefit)

When employment ends, the employer must make a gratuity payment to the employee equal to 21 days’ wages for every year of service completed, but not exceeding 14 months’ salaries for five years of continuous service. If the employee leaves before completing one year of service, the employee receives no gratuity.

Reimbursements

Some employers reimburse employees for business costs like travel expenses or purchasing essential equipment. These payments should be handled separately from regular salary payments and clearly documented.

Understanding the Wage Protection System (WPS)

The WPS is an electronic salary transfer platform developed by the MOHRE in 2009, where each wage payment is tracked live to ensure the full salary amount is issued to the worker at the right time.

The WPS system eliminates the need for manual wage payments. It requires employers to conduct all transactions through qualified banks and financial institutions that are certified WPS agents.

Each employer must enroll in a WPS agent’s banking services before it can start using the WPS system to process salary and wage payments. At the start of each month, you’ll create a Salary Information File (SIF), which includes information about the gross wages, allowances, and deductions for each employee. The SIF file is sent to your banking institution to initiate salary processing and report the transaction to MOHRE.

You can only make wage payments from a WPS-approved bank account or financial institution. Penalties for failure to meet the wage payment deadline may include a fine and/or suspension of the ability to issue new work visas. Note that wage payment deadlines are usually 10 days before the scheduled due date. Any non-compliance is immediately reported to MOHRE and the WPS system.

Payroll taxes and deductions in the UAE

The UAE doesn’t have a personal income tax on employees’ salaries, an advantage that applies to both national and foreign workers. Gross salary is paid to employees minus any employer-related contributions or deductions.

UAE citizens contribute 5% of their salary towards their social security, while employers also make an additional 12.5% contribution. These contributions are used to provide retirement and social protection to UAE nationals.

Nationals from the other Gulf Cooperation Council (GCC) countries can contribute to their national pension plans via the Gulf Organization for Social Insurance (GOSI) at varying contribution levels based on nationality.

In addition to paying employee salaries, employers are required to pay the cost of obtaining work permits for all new hires, the cost of processing visas for all new hires, as well as providing health insurance for all employees. These costs don’t fall within payroll. They’re considered when determining your total labor burden costs.

How to calculate end-of-service gratuity

To be eligible for a gratuity, employees must have worked for the company for at least one year without a break. The calculation only uses the final basic salary, not any bonuses or allowances.

Employees with limited contracts get 21 days of pay for each year of the first five years. The rate goes up to 30 days per year after five years. Unlimited contracts work the same way, but they might lower the pay if the employee quits before five years are up.

Take an employee earning AED 10,000 monthly. First, calculate the daily rate: 10,000 ÷ 30 = AED 333.33.

• At three years of service, multiply 3 years × 21 days × 333.33 = AED 21,000.
• At five years, multiply 5 years × 21 days × 333.33 = AED 35,000.
• At ten years, the first five years earn 105 days (5 × 21) and the next five years earn 150 days (5 × 30), totaling 255 days × 333.33 = AED 85,000.

If an employee quits before their first year is up, they do not qualify for end-of-service gratuity. People who leave after one to five years on an unlimited contract get a smaller gratuity. An employee may lose everything if they are fired for bad behavior.

Common payroll options for employers in the UAE

Running payroll in the UAE means choosing how to handle the mechanics. The approach you choose determines payroll costs, levels of control, and levels of complexity.

In-house payroll processing

Your own HR and finance teams handle everything inside the company. This lets you completely control the timing and data. It does, however, require dedicated staff who are familiar with UAE labor law, WPS submissions, and MOHRE compliance standards.

Local payroll outsourcing firms

Payroll companies in the UAE take care of the technical side of things while you keep the employment relationship going. They handle WPS filings, figure out how much to tip, and make sure they follow local rules. You still need a business in the UAE to sponsor workers.

Global payroll providers (GPP)

These platforms bring together payroll from many countries into one system. If you already have businesses in the UAE and other markets, they work well. The benefit is that all of your global employees will report in the same way and follow the same steps.

Employer of Record (EOR) services

You run the day-to-day business, but an EOR is the legal employer on paper. With this option, you don’t have to set up an established business in the UAE, acquire trade licenses, or figure out how to register an entity.

EOR providers like Pebl take care of all the legal requirements, including employment contracts, payroll processing, and WPS compliance. You can find and hire UAE talent in weeks instead of months.

Payroll recordkeeping and reporting obligations

MOHRE anticipates that employers have all necessary payroll documentation to support compliance with UAE labor law regulations and provide supporting records if requested by employees, their representatives, or any governmental agencies.

• Payroll documentation requirements. You should keep copies of your employment contracts, pay stubs, WPS submission confirmations, and proof of salary transfers. The basic file for each employee should include their leave records, overtime logs, gratuity calculations, health insurance certificates, and UAE work permit information.
• Retention of documents. According to UAE labor law, employers must keep payroll records for at least five years after an employee leaves. Digital storage is allowed as long as the documents can still be read and accessed.
• Preparation of internal audits. Regular reviews within the company help find mistakes before MOHRE does. Check that the WPS files match your actual salary transfers each month, and make sure that the contracts match the current payroll data.

Challenges and mistakes to avoid

Even experienced employers trip over UAE payroll rules. Here are the mistakes that cause the most trouble.

• By wrongly classifying employees as contractors, you may have to pay them back for benefits, tips, and social security contributions that add up quickly.
• Paying overtime at regular rates instead of the legally required multipliers can lead to employee complaints and fines from MOHRE.
• Missing WPS submission deadlines results in automatic fines, and you may not be able to process new work permits or visa renewals.
• When you calculate gratuity based on total salary instead of just basic salary, the amount owed goes up, and employees leaving can cause budget surprises.
• If you don’t tell MOHRE about changes to an employee’s salary, the differences between contracts and actual payments will raise red flags during audits.
• It’s against the law to only give out payslips in English, which can be used as evidence during labor inspections.
• Adding housing allowances to basic salary makes it harder to figure out gratuities and may lower what employees are legally owed.

Streamlining UAE payroll with expert support

Proper payroll management in the UAE protects your company from fines, work permit suspension, and employee conflicts. UAE’s payroll regulations are highly detailed and provide immediate consequences if a violation occurs.

Working with a partner reduces the uncertainty and provides you with an expert team of advisors who are knowledgeable in all aspects of WPS compliance, gratuity calculation, and MOHRE compliance. Risks can be greatly mitigated while hiring speeds can be significantly increased.

Ready to make managing UAE payroll easier? Contact Pebl to handle compliant payroll processing and employment administration. Let us take care of the complexity, and you can focus on growing your team.

This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.

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