Payroll and Gratuity in the UAE

A UAE payroll is a labour-law exercise before it is an accounting one. The rules come from the Ministry of Human Resources and Emiratisation and from Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships, which took effect on 2 February 2022 and abrogated Federal Law No. 8 of 1980. They do not come from the Federal Tax Authority: nothing in the corporate tax, VAT or excise regimes creates a deduction from an employee's pay.

The single most consequential fact about a UAE payslip is a negative one. The UAE Government states plainly that it does not levy income tax on individuals, so there is no PAYE equivalent, no withholding schedule and no annual employee tax return. For expatriate staff there is also no employer social security contribution. What the employer owes instead is a set of statutory entitlements that accrue as the employee works: wages paid on time and through a monitored channel, paid leave, notice, overtime, and an end-of-service gratuity that behaves like a deferred, unfunded benefit.

Five instruments do most of the work. The Labour Law sets the entitlements. Cabinet Resolution No. 1 of 2022, its Implementing Regulation, fills in the mechanics — including how gratuity works for people who are not on a full-time contract. Ministerial Resolution No. 340 of 2026 governs the Wages Protection System. Cabinet Resolution No. 96 of 2023 created the optional savings scheme that can replace gratuity. And for Emirati and GCC-national staff, pensions legislation displaces the gratuity rules entirely.

The Labour Law has been amended once, by Federal Decree-Law No. 20 of 2023, in force from 1 January 2024; the change the Government highlights concerns labour dispute procedure and the claim value at which a complaint is referred to the judiciary. The entitlement articles quoted throughout this page are as they appear in the English text the UAE Government Portal circulates, which is marked as not an official translation. Statement current at 17 August 2026.

WPS stands for the Wages Protection System — the UAE Government Portal and the Ministry use both "Wages Protection System" and "Wage Protection System" for the same thing, so a search for either is a search for the same regime. It is an electronic transfer and monitoring system developed with the Central Bank of the UAE, through which establishments registered with MoHRE must pay their employees, using banks, exchange houses or financial institutions the Central Bank has authorised to provide the service. Its purpose is to let the Ministry see, month by month, whether wages were paid in full and on time.

Wages are currently governed by Ministerial Resolution No. 340 of 2026 concerning the Wage Protection System. Under it, salaries for the previous month fall due on the first day of each Gregorian month, and the employer must transfer at least 85 per cent of the total wages due to its employees on time, where lawful deductions apply. Article 22 of the Labour Law adds that wages are paid in UAE dirhams unless another currency is agreed in the employment contract.

The consequences of missing that date are graduated rather than a single fine, and they escalate quickly once an establishment is large enough for the Ministry to treat non-payment as a labour-market risk.

Article 51 is short, and reading it directly disposes of most of the confusion around UAE end-of-service benefits. For a full-time foreign worker who has completed a year or more of continuous service, the benefit is calculated on the basic wage: 21 days' wage for each year of the first five years of service, and 30 days' wage for each year exceeding that period. Fractions of a year are paid in proportion to the time served, provided the first full year has been completed. Days of unpaid absence do not count toward the service period. The total benefit may not exceed two years' wage, and the employer may deduct amounts payable under the law or a judgment.

Two definitions in Article 1 do the heavy lifting. "Basic Wage" is the wage stated in the employment contract in consideration of the work, excluding any allowances or benefits in kind. "Wage" is the basic wage plus cash allowances and benefits in kind. Gratuity is calculated on the first figure, which is why an employee on AED 20,000 total with a basic of AED 8,000 accrues gratuity on AED 8,000. It also explains why the split between basic and allowances in an offer letter is a live commercial term, not paperwork.

Article 53 sets the payment deadline: the employer must pay wages and all other entitlements within 14 days from the end date of the contract term. Article 51 covers full-time work; Article 52 hands the treatment of other work patterns to the Implementing Regulation, and Article 30 of Cabinet Resolution No. 1 of 2022 prorates the full-time entitlement by the ratio of contracted annual hours to full-time annual hours.

The arithmetic follows from two rules. Article 67 of the Labour Law provides that a month represents 30 days for the purposes of the law, so the daily basic wage is the monthly basic divided by 30. Article 51 then supplies the day counts. In words: multiply the daily basic wage by 21 for each of the first five years and by 30 for each year after that, prorating any final part-year, and stop at the ceiling in Article 51(6).

As a single spreadsheet expression, with the monthly basic in one cell and completed years of service (including the fraction) in another, this is: IF(years < 1, 0, (MIN(years, 5) 21 + MAX(years - 5, 0) 30) basic / 30). Wrap that in a MIN against 24 basic if you want the statutory ceiling enforced, and read the note on that ceiling below before you do, because the law expresses it in terms of "wage" rather than "basic wage".

That one line is the entire "gratuity calculation excel format" question. There is no official MoHRE workbook to download, no prescribed template, and no separate rule set for a spreadsheet; anything presented as an official Excel format is somebody's reconstruction of Article 51. If you would rather not build it, our gratuity calculator applies the same expression.

Article 51(6) provides that the end-of-service benefit for a foreign worker, in its entirety, may not exceed two years' wage. That is the maximum, and it is the answer to the question people are really asking when they search for a cap: there is no dirham figure, no band table and no per-emirate variation. It is a multiple of the individual's own pay.

It is worth seeing how long it takes to reach. Accrual is one month of basic wage for each year beyond the fifth, and 0.7 of a month for each of the first five. Five years therefore produce 3.5 months of basic; reaching 24 months takes a further 20.5 years, so on a basic-wage reading the ceiling is not touched until roughly 25 and a half years of unbroken service with one employer. For most people the cap is a theoretical limit rather than a live constraint.

One genuine ambiguity deserves flagging rather than smoothing over. The benefit is calculated on the basic wage under Article 51(2) and 51(5), but the ceiling in Article 51(6) is expressed as two years' "wage", and Article 1 defines Wage as basic plus allowances. Read literally, the ceiling is measured against a larger number than the accrual, which pushes it out further still. The English text circulated by the UAE Government Portal is marked as not an official translation, and we have not found a MoHRE clarification resolving the point. Statement current at 17 August 2026. If you are near either reading of the ceiling, that is a question for a lawyer working from the Arabic text, not for a calculator.

The most persistent piece of misinformation about UAE end-of-service benefits is that resigning cuts the entitlement — that an employee who resigns before five years receives one third or two thirds of the gratuity. That rule belonged to Federal Law No. 8 of 1980, which Article 73 of Federal Decree-Law No. 33 of 2021 abrogated with effect from 2 February 2022. Article 51 as it now stands draws no distinction at all between resignation and employer termination. The trigger is one year of continuous service and the end of the contract, however it ends.

The old law's other structural feature also went. The 2021 law abolished unlimited contracts and admits only fixed-term contracts, which may be extended or renewed and where each renewal is added to the continuous service period for gratuity purposes. Article 68 required employers to convert existing unlimited-term contracts within one year of the law taking effect, and permitted the end-of-service benefit accrued under the old unlimited-term regime to be calculated under Federal Law No. 8 of 1980 for that earlier period. Long-serving employees whose service straddles February 2022 can therefore have a two-part calculation, and that is the one case where the old rules still legitimately appear.

Dismissal for cause is a separate question from gratuity. Article 44 lets an employer dismiss without notice, after a written investigation, in ten specified cases — but it does not extinguish accrued end-of-service benefit. Article 45 works the other way: an employee may resign without notice, keeping end-of-service entitlements, where the employer breached its obligations and failed to remedy after MoHRE notice, assaulted or harassed the employee, assigned fundamentally different work without written consent, or failed to remove a grave danger. Where dismissal follows a genuine complaint to MoHRE or a successful lawsuit, Article 47 treats it as arbitrary and the court may award compensation of up to three months' wage, on top of gratuity and any unpaid dues.

Article 3 of the Labour Law applies it to all establishments, employers and workers in the UAE private sector, and excludes only federal and local government employees, the armed forces, police and security, and domestic workers. Ordinary free zones are not excluded. An employee of a company in Jebel Ali Free Zone, DMCC, SAIF Zone, RAKEZ or any other commercial free zone is therefore on the same 21 and 30-day bands, the same one-year qualifying period, the same two-year ceiling and the same 14-day payment deadline as a mainland employee. That is the honest answer to "gratuity calculation Jebel Ali free zone": there is no separate JAFZA formula.

What a free zone authority does add is administration. Zones issue their own employment contracts and personnel rules, run their own visa and work permit processes, and some operate their own dispute channels before a matter reaches MoHRE or the courts. Those rules can improve on the statutory minimum — which Article 65 expressly permits — but they cannot reduce it. If your free zone contract shows a smaller gratuity than the Article 51 calculation produces, the Article 51 figure governs.

The genuine exceptions are the two financial free zones. The Dubai International Financial Centre applies its own Employment Law, DIFC Law No. 2 of 2019, under which the lump-sum gratuity was replaced by mandatory monthly contributions to a qualifying scheme — the DIFC Employee Workplace Savings plan and its alternatives. Article 66(7) sets the employer's core contribution at 5.83% of monthly basic wage for the first five years of service and 8.33% for each additional year. Abu Dhabi Global Market likewise runs its own employment regime rather than the federal Labour Law. We have not reproduced ADGM's figures here because its rulebook was not reachable from our network at the time of writing; if you are employed in ADGM, work from ADGM's own regulations rather than from any federal figure on this page.

Article 51(8) of the Labour Law allows the Cabinet to approve alternative schemes in place of the traditional gratuity, and Cabinet Resolution No. 96 of 2023 did exactly that. MoHRE now operates a voluntary savings scheme under which the money that would have accrued as gratuity is instead paid monthly into an investment fund approved by the Securities and Commodities Authority. It applies to employers and employees in the private sector and in free zones, and it is optional: an employer opts in by request to MoHRE and by contracting with an approved fund.

The basic subscription for full-time employees is 5.83% of monthly basic salary where the employee has not completed five years of service, and 8.33% thereafter, transferred to the fund within 15 days of the beginning of each calendar month. Employees may add voluntary contributions of their own, by salary deduction or direct transfer, capped at 25% of total wage monthly or annually as a lump sum. The funds offer a capital-guarantee portfolio for unskilled workers, risk-based portfolios, and Sharia-compliant options. On termination, the employee receives the basic subscription amounts and any investment returns within 14 days, and may leave the money invested or withdraw it at any time. Subscription terms for work patterns other than full time are set out in Ministerial Resolution No. 668 of 2023.

The operational detail that catches employers out is the switch itself. An employer may enrol all employees, particular groups or selected professional categories — but once employees are enrolled, the employer must stop applying the traditional gratuity system to them and must calculate and settle the gratuity that accrued before enrolment in accordance with the law. Enrolment is therefore a crystallisation event for the historic liability, not a way of deferring it. MoHRE and the SCA supervise the scheme jointly, with MoHRE taking labour complaints and the SCA handling complaints about fund performance; in the financial free zones, the zone authority supervises.

Article 51(1) sends national workers somewhere else entirely: their end-of-service benefits follow the legislation regulating pensions and social security, not the 21 and 30-day bands. Public and private employers must register their Emirati employees with the General Pension and Social Security Authority from the first month of employment, and contribute monthly. Registration requires the employee to be a UAE national, between 18 and 60, and medically fit on appointment. GPSSA's remit covers the federal government, local governments other than Abu Dhabi and Sharjah, and private sector employers in every emirate except Abu Dhabi, where the Abu Dhabi Pension Fund applies instead.

Which law applies depends on when the employee first joined. Emiratis who entered the labour market for the first time on or after 31 October 2023 fall under Federal Decree-Law No. 57 of 2023; those registered before that date remain under Federal Law No. 7 of 1999 as amended. Under the 2023 law the monthly contribution is 26% of the pensionable salary, of which the employee pays 11% and the employer 15%, and the government pays 2.5% on the employer's behalf for private-sector Emiratis on pensionable salaries below AED 20,000. The maximum pensionable salary in the private sector rose from AED 50,000 to AED 70,000 a month, and pensions are calculated on the average monthly pensionable salary over the last six years of service.

GCC nationals working in the UAE private sector are treated as UAE nationals for Ministry procedures and insurance coverage under Cabinet Resolution No. 72/5 of 2007, though they do not count toward Emiratisation quotas. Cabinet Resolution No. 18 of 2007 extends social insurance to them: the UAE employer registers them and contributes according to the rules of their home country's scheme, paying what it would pay for an Emirati, with the employee bearing any difference. Under Cabinet Resolution No. 292 of 2015 they need a MoHRE work permit but may start work without a residence visa.

Gratuity dominates the search volume, but it is rarely the largest line in a UAE payroll accrual. Four other statutory heads sit alongside it.

Annual leave runs at 30 days for each year of extended service under Article 29, or two days a month where service is over six months but under a year. Unused leave is paid out on exit, calculated on the basic wage, regardless of how many days have accrued — which makes untracked leave balances a real balance-sheet exposure rather than an administrative annoyance. Sick leave is up to 90 days per year of service after probation: the first 15 days at full pay, the next 30 at half pay, the last 45 unpaid. Maternity leave is 60 days, 45 at full wage and 15 at half. Parental leave is five working days for either parent. Study leave is ten working days a year to sit examinations, for an employee studying at an accredited UAE institution who has completed at least two years with the employer.

Working hours are eight a day or 48 a week under Article 17, with breaks of at least an hour after five consecutive hours, which are not counted as working time. Overtime under Article 19 is capped at two hours a day, within an overall limit of 144 total working hours in any three weeks, and is paid at the normal hourly rate calculated on the basic wage plus at least 25% — rising to at least 50% for hours worked between 10pm and 4am, and 50% for work on the contractual weekly rest day, unless a substitute day is given.

Notice is 30 to 90 days under Article 43, payable in full at the last wage. A party that does not serve it owes notice-period compensation equal to the wage for the unserved part, whether or not any damage was caused. And under Federal Decree-Law No. 13 of 2022, workers are covered by the unemployment insurance scheme, which pays 60% of the contribution salary for up to three months per claim, to a maximum of AED 20,000 a month, after at least 12 consecutive months of subscription and with total coverage capped at 12 months across a working life. Investors who own and manage their own business, domestic workers, temporary contract staff, under-18s and re-employed pensioners are outside it. We have not stated the monthly premium: the Decree-Law leaves its value to a Cabinet decision that we could not open, and the figure is worth confirming with the scheme operator before it goes into a budget.

The compliance work in a UAE payroll is front-loaded into the contract and back-loaded into the exit. The middle is a repeating cycle with one hard external deadline.

Wages are not taxed in the employee's hands, but they are not invisible to the tax system either. Under Article 28 of Federal Decree-Law No. 47 of 2022, expenditure incurred wholly and exclusively for the purposes of the business, and not capital in nature, is deductible in the tax period in which it is incurred. Ordinary payroll costs, gratuity accrued on a proper basis, savings-scheme contributions and GPSSA contributions all sit comfortably inside that test.

The exception is the one that catches owner-managed companies. Article 36 makes a payment or benefit provided to a Connected Person deductible only to the extent it corresponds with the market value of what that person actually provides, and only if it is incurred wholly and exclusively for the business. A Connected Person includes an owner of the taxable person, a director or officer, and a related party of either. A shareholder salary set to move profit rather than to pay for work is therefore a corporate tax exposure, not merely an accounting preference, and Article 36(5) applies the transfer pricing rules in Article 34 to test it. Companies listed on a recognised stock exchange and those under the regulatory oversight of a competent UAE authority are outside Article 36(1).

On the VAT side, input tax on goods and services provided free to employees for their personal benefit is blocked under Article 53 of the VAT Executive Regulation, with narrow exceptions — among them where the provision is a legal obligation under labour law, where it is a documented contractual obligation that is normal business practice, and employee health insurance including a spouse and up to three children under eighteen. Benefits granted purely as goodwill therefore carry an irrecoverable 5% that a payroll budget rarely shows.