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Steps for Payroll Processing in UAE


For businesses in United Arab Emirates, processing payroll is an important operation business has to carry out. Laws and regulations determine procedures that businesses adhere to regarding payroll management; however, they are often amended, which can be hard to keep up.

Read more: Benefits of Payroll Outsourcing

What is company payroll?

Payroll refers to the entire process that ensures all employees of a business are paid with the amount that are due to them on a timely manner. Payroll involves keeping track of employee work hours, paid leave, as well as main calendar events.

In the UAE, all businesses are regulated by UAE labor law, which implies that it’s the duty of businesses in keeping payroll systems well managed, allowing for the proper processing of wages of employees.

Steps on processing payroll

The actual calculation of payroll can vary from what we will mention below as there may be differences with regards to the system used. Some businesses choose computerized or software payroll solutions, others do manual computation, while majority of businesses in UAE choose outsourced payroll processing. The most likely responsibilities and procedure in the management of payroll are as follows:

  1. Maintain or collect employee master files

A business has to maintain all basic details and information of employees such as designation, basic salary, employee contact number, allowance amount, and types of payable allowance. The information crucial for payroll processing has to be updated regularly, as needed, most especially when the wages of the workers are changed or incremented.

A business also has to take care of the cash advances that are given to employees. There is a need to properly maintain payroll records and update them according to each employee. There are companies that utilize spreadsheet records. They can work in maintaining records; however, one has to be on top of the task to ensure proper recording and record maintenance.

  1. Properly calculate the gross wage of every employee

Prior to the end of every pay period, there has to be computation done for gross wages that are owed by the business to all the employees. When computing the gross wage, an employee’s basic salary is taken, added with allowance amount that is assigned to every employee. Then, simply find the sum and update the payroll records.

  1. Calculate the overtime pay owed to employees

Calculate the overtime hours that your employees have worked every pay period. The overtime hours will be divided into categories: the normal over time and the Friday over time. General formulas in calculating overtime rate with respect to normal days over time is salary or 30 days or 8 hours multiplied by 1.25. For weekend over time, it is salary or 30 days or 8 hours multiplied by 1.5.

Take note: the calculation of overtime hours can be tedious but it has to be done by a meticulous professional. When it is calculated manually, it is essential that only an expert does it. In addition to the expertise of a professional, the calculations also have to be reviewed twice or even thrice for accuracy.

  1. Add additional allowances due

For many employees in the UAE, they are paid extra allowances every single month e.g. sales commissions, bonus, car expenses, and more. It is, therefore, required of an employer to add the extra allowance to the salary of the employee for the pay period.

  1. Calculate salary deductions

There may be many different deductions that are to be taken form the salaries of employees. Absences, violations, fines, etc – they all need to be taken from basic salaries or the gross wages. You can calculate the deductions by adding all necessary deductibles. Then, the total deductions are to be deducted from the total gross wage and allowances of employees.

  1. Make salary statements and pay slips

There is a need to prepare summary reports or salary statements that contain all salary components. This includes basic salary, deductions, absences, over time, and allowance. A report will help in maintaining records of the paid salaries every single pay period. Pay slips have to be prepared for employees. A pay slip is a type of document that comprises the calculations for an employee’s salary. The pay slip is both for record-keeping and clarification. A pay slip that is done manually can be tiresome and time-consuming at the same time.

You may also read: Outsourcing Payroll Services for A Branch of Foreign Company in Dubai

  1. Make a WPS sif file

The payroll process is almost done. However, the last part is creating a sif or salary transfer file. The file format will be defined by the Ministry of Labor. It is also followed by all exchanges and banks in the country. Take note: this is one of the most crucial steps to payroll processing in UAE as it is mandated by the government.

If you have questions regarding payroll in UAE or you are interested in payroll outsourcing, call us!