Our guide to Payroll in the United Arab Emirates (UAE)

Doing Business in UAE

The United Arab Emirates (UAE) continues to solidify its position as a global business hub, renowned for its dynamic economy, strategic geographic location, and world-class infrastructure.  

Businesses operating in the UAE benefit from the country's stable political environment, robust legal framework, and a highly diversified economy, reducing reliance on oil revenues.  

The government's commitment to fostering innovation and entrepreneurship is evident in its numerous free zones, offering tax benefits, 100% foreign ownership, and custom duty benefits. Sectors such as tourism, real estate, trade, logistics, and financial services are thriving, presenting myriad opportunities for business growth.

The UAE's focus on digital transformation and sustainable development aligns with global trends, making it an attractive destination for businesses aiming for regional and global expansion. With its cosmopolitan culture and a forward-thinking approach to business, the UAE remains a top choice for companies looking to tap into the vast opportunities in the Middle East and beyond. 

Investing in UAE

The UAE's investment landscape is known by resilience, strategic diversification, and an investor-friendly environment.  

The nation's strategic initiatives, including significant investments in infrastructure, technology, and renewable energy, provide a robust foundation for sustainable economic growth.

Investors are particularly drawn to the UAE's free zones, which offer a range of incentives such as 100% foreign ownership, tax exemptions, and world-class facilities.  

The real estate sector continues to be a cornerstone of the UAE's economy, with Dubai and Abu Dhabi offering high-end residential and commercial properties. The burgeoning tourism sector, bolstered by iconic landmarks and luxury hospitality offerings, presents lucrative opportunities for investment in travel, leisure, and cultural projects.  

Moreover, the UAE's commitment to becoming a green economy opens new avenues for investment in renewable energy, clean technologies, and sustainable urban development.

With its pro-business policies, strategic geographic location, and commitment to innovation, the UAE is a magnet for investors seeking stability, growth potential, and access to regional and global markets. 

Foreign Direct Investment in UAE

The UAE stands as a premier destination for foreign direct investment (FDI), offering a conducive environment for international investors. The country's FDI strategy is centered on diversifying the economy, fostering innovation, and integrating into the global market.

Key areas for FDI include: 

Technology and Innovation
The UAE's focus on becoming a hub for innovation attracts FDI in sectors such as artificial intelligence, fintech, and biotechnology. The establishment of tech parks and innovation centers provides a supportive ecosystem for tech startups and global tech companies. 

Real Estate and Infrastructure
The UAE's ambitious infrastructure projects and iconic real estate developments continue to attract significant FDI. Opportunities exist in residential, commercial, and industrial property development, as well as in large-scale infrastructure projects such as airports, ports, and roads. 

Tourism and Hospitality
With its reputation as a luxury travel destination, the UAE offers investment opportunities in hotel development, entertainment projects, and cultural initiatives. The country's strategic efforts to boost tourism further enhance its attractiveness for FDI in this sector. 

Renewable Energy and Sustainability
Aligned with the global shift towards sustainability, the UAE is investing heavily in renewable energy sources, including solar and wind power. This presents opportunities for FDI in green energy projects, environmental technologies, and sustainable urban solutions. 

The UAE government's commitment to creating a favorable environment for FDI, coupled with initiatives such as 100% foreign ownership in selected sectors and comprehensive support services for investors, reinforce the country's position as an attractive investment hub.  

For businesses and investors looking to capitalise on the opportunities in the UAE, the nation's strategic location, economic stability, and forward-looking policies make it an ideal choice. 

Basic Facts about UAE

How to Say

• Hello: As-Salām Alaykum
• Good Morning: Ṣabāḥul KẖAyr
• Good Evening: Masā' Al-Khayr
• Do you speak English?: Hal Tatakallam El-ngliziyya
• Goodbye: Bāy Bāy
• Thank you: Shukran Jazīlan
• See you later: Ashoufak Ourayyeb

The company is required to have a legal entity established in order to process a payroll in UAE. All the applicable payroll registrations of the company are completed during the process of establishing of the legal entity.

Foreign investors may choose to set up in one of the mainland, free zones, or offshore jurisdictions. Each has different regulatory authorities and conditions for ownership.

A mainland company allows you to trade across the UAE but generally requires a local sponsor (for some business activities). Free zone companies are popular due to benefits such as:

• 100% foreign ownership
• Full repatriation of profits
• Exemption from import/export duties
• Quick setup (2–5 days in many zones)

Key authorities include the Ministry of Economy, Federal Tax Authority (FTA), Ministry of Human Resources and Emiratisation (MOHRE), and General Directorate of Residency and Foreigners Affairs (GDRFA).

To employ workers legally, businesses must be licensed, registered for tax (if required), and obtain an Establishment Card, Labour Card, and Immigration Card.

A local bank account is mandatory for salary and tax remittances. All companies must register for the Wages Protection System (WPS).

Registrations and Establishing an Entity

Legal entities must be established for payroll operations. Incorporation varies:

• Free-zone entity: 2–3 weeks
• Mainland (DED): 2–3 months

Setup includes:

• Business plan
• Company name approval
• Trade license from Department of Economic Development (DED)
• Registration with Ministry of Labour
• Setup of in-country bank account

Banking

Payroll must be processed through UAE-based bank accounts, especially under Wage Protection System (WPS). WPS is mandatory in mainland and many free zones.

Working Week

The working week in UAE is Monday to Thursday from 8am to 5pm and 8am – 12pm on a Friday (4.5 day working week was introduced on the 1st January 2022).

The maximum working hours are 8 hours/day, 48 hours/week (6 days). During Ramadan, daily hours are reduced by 2 hours.

Employment Law

Employment contracts must be written and filed with MOHRE, specifying wages, benefits, working hours, probation period, and termination procedures.

Probationary period cannot exceed 6 months.

The Labour Law (Federal Decree Law No. 33 of 2021) regulates employment matters across the private sector.

Labour Ban Rules: A labour ban may be imposed on an employee who fails to comply with proper notice terms or contractual obligations, especially in cases of limited contract terminations before expiry. Certain professions and salary brackets may be exempt.

• Annual Leave: 30 calendar days after one year of service
• Maternity Leave: 45 days (full pay after 1 year, half pay if <1 year)
• Paternity Leave: Not statutory
• Sick Leave: 90 days (first 15 full pay, next 30 half pay, balance unpaid)
• National Service: Mandatory for Emirati males; leave granted with pay

Income Tax

There is currently no individual income tax in the UAE. 

Where a UAE entity employs UAE nationals, it is required to make social security contributions, but there is no requirement for an employer of an expatriate or an expatriate employee to make any social security contributions.

VAT

Value Added Tax (VAT) was introduced in the UAE on 1 January 2018 and the rate of VAT is 5%. The introduction of VAT provides the UAE with a new source of income which will continue to be utilized to provide high-quality public services.

Businesses will be responsible for carefully documenting their business income, costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods/services that they buy from suppliers.

Social Security  

There is no social security scheme available to expatriates. 

Expatriate employees are not required to make social security contributions.  

Appropriate health care insurance is required in order for an individual to obtain a UAE Residence Permit. 

It is mandatory for all employers to provide medical insurance to their employees.

It is compulsory for the employer to register a UAE national/GCC Nationals with the General Pension and Social Security Authority (GPSSA) after one month of hiring the employee. 

Contributions should be made by both the employer and employee: 

• Employer Contribution – 12.5% of employee’s monthly salary (Basic + Housing Allowance) 

• Employee Contribution – 5% 

• Late Payment Fee – 10% 

• For GCC nationals, pension rates will vary depending on their country’s pension scheme 

The 5% employee contribution will be deducted from the employee’s salary each month while the payment to GPSSA should be done before 15th of the following month. 

The social security payments that have to be made for the UAE nationals/GCC Nationals must be processed through the UAE Funds Transfer System (UAEFTS). UAEFTS payments are facilitated by the UAE commercial banks.  

Payroll Process

Reports

New Starts

• Must be registered with Ministry of Labour and immigration
• Federal Labour Contract required
• Probation period up to 6 months allowed

Leavers

• Final settlement includes:
  • Unused leave
  • Pro-rata salary
  • End-of-service gratuity (ESG)

Hiring

Employers must:

• Obtain a valid work permit and residence visa
• File an employment contract with MOHRE
• Register the employee with WPS
• Provide mandatory health insurance coverage

The employer and employee are required to sign a Federal Labour Contract, which is obtained from the Ministry of Labour and is written in both Arabic and English.

A second contract must be translated into Arabic to be legally binding.

Required documents:

• Passport copy
• Emirates ID application
• Medical test
• Labour contract
• Visa application and entry permit

Termination

Notice periods:

• Minimum of 30 days
• Up to 90 days depending on contract and job grade

Termination must be processed through MOHRE and GDRFA, including cancellation of labour card and visa.

Final settlements must be paid within 14 days, including:

• Outstanding salary
• Unused annual leave

End-of-service gratuity (if eligible)

ESG Calculation

• First 5 years: 21 days’ wage/year
• 6+ years: 30 days’ wage/year
• Cap: Not to exceed 2 years’ gross salary

Minimum Wage

There is no official national minimum wage, except for domestic workers (AED 1,500/month). Wages are agreed contractually.

Annual Leave

• 30 calendar days after 1 year of service
• Pro-rated after 6 months

Sick Leave

• 90 days per year
• First 15 days: 100% pay
• Next 30 days: 50% pay
• Final 45 days: unpaid
• Sick leave requires MOHRE-approved medical certificate

Maternity Leave

• 60 days (45 paid at 100%, 15 at 50%)
• Additional 45 days unpaid if medically required
• In public sector, maternity leave is 90 days with salary
• Further unpaid maternity leave: 100 days without pay

Paternity Leave

• Paternity leave is not provided for under UAE law.  

End-of-Service Gratuity (EOSG)

For unlimited contracts:

• 21 days’ wage for each of the first 5 years
• 30 days’ wage for each year beyond

EOSG is capped at 2 years' gross wage. Resignation within 3 years forfeits some gratuity:

• 1–3 years: ⅓ EOSG
• 3–5 years: ⅔ EOSG
• 5+ years: full entitlement

Separate calculation methods apply for limited-term contracts. Repatriation costs must be covered by the employer unless forfeited.

Benefits are paid at the employer’s discretion. There is no legal provision for 13th/14th month bonuses.

To employ a foreign national, employers must:

1. Obtain approval quota from MOHRE
2. Apply for Entry Permit (valid for 60 days)
3. Complete Medical test
4. Apply for Emirates ID
5. Issue Labour Card
6. Stamp Residency Visa in passport

Work permits are valid for 2 years and renewable.

Visa process can take 2–4 weeks depending on emirate and employee nationality.

Failure to process visa/residency can result in fines up to AED 50,000 per violation.

Service fees include:

• Entry Permit deposit
• Labour contract fee
• Medical fee
• Visa stamping
• Emirates ID

Change of Status (if applying in-country)

• Abu Dhabi and Dubai have specific labour and immigration departments
• Abu Dhabi employers must register with Abu Dhabi Retirement Pensions and Benefits Fund for Emiratis
• Public holidays are declared by government and change annually (Islamic calendar)
• Employment contracts must follow MOHRE template in Arabic and English
• Salaries must be paid by the 15th of each month via WPS
• Medical insurance is mandatory for all employees
• Violations of WPS can result in work permit bans and fines
  
  

Islamic banks open 8:00–16:00, except Friday (8:00–12:00); some banks reopen 16:30–18:30.

Bank transfer, cheque, cash, and WPS are permitted payment methods; actual options depend on company’s licensing authority.

Further Information

For more information, or assistance with UAE tax and payroll enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.