Wages and remuneration are fundamental aspects of the employment relationship, providing employees with the financial resources to sustain themselves and their families, while also ensuring that employers meet their legal obligations. In the UAE, wages are governed by Federal Decree-Law No. 33 of 2021 (UAE Labour Law) and the Executive Regulations.
Disambiguation: This article discusses UAE Federal employment laws. For ADGM labour laws, please refer to ADGM Employment Laws. For DIFC labour laws, please refer to DIFC Employment Laws.
Wages
According to the UAE Labor Law, wages comprise any form of compensation provided to an employee, whether in cash or in-kind, in exchange for services rendered under an employment contract. This includes the basic salary, allowances, and any other benefits outlined in the employment contract.
This blog is a part of our Understanding the Labour laws in the UAE blog
Components of Wages
Basic Salary
The fixed portion of the wage as stipulated in the employment contract.
Allowances
These may cover housing, transportation, and other types of allowances.
In-Kind Payments
Non-monetary benefits like accommodation, transportation, and meals provided by the employer.
Bonuses and Commissions
Payments tied to performance or other criteria specified in the employment contract or company policy.
Wages Payment Regulations
Timely Disbursement
According to the UAE Labour Law, salaries must be disbursed on time and completely on the agreed-upon due date in the employment agreement. Typically, this occurs monthly for employees with a monthly salary. The law also stipulates that salaries should be paid in the local currency (AED) unless otherwise specified.
Wage Protection System (WPS)
To ensure that salaries are paid on time and in compliance with the law, the UAE has implemented the Wage Protection System. Employers are required to enroll in the WPS and pay out salaries through this system to avoid penalties and ensure adherence to regulations.
Salary Deductions
The law outlines the circumstances under which deductions can be made from salaries, such as fines for disciplinary actions, repayment of loans or advances, and contributions to social insurance or pension schemes. However, these deductions cannot exceed 50% of the employee’s total salary in a given pay period.
Overtime Provisions
Overtime refers to any work carried out beyond the usual working hours, which typically amount to 8 hours per day or 48 hours per week, in accordance with the UAE Labor Law.
Regular Overtime
Employees have the right to receive an overtime pay rate of no less than 25% above their normal hourly wage for any hours worked beyond the standard working hours.
Night Overtime
Work performed between 10 PM and 4 AM is eligible for overtime pay at a rate of at least 50% above the regular hourly wage, unless in specific roles where night work is typical.
Rest Days & National Holidays
If an employee works on their chosen rest day, they are entitled to compensatory rest days or overtime pay at a rate of 50% above their regular wage. According to Article 28 of the UAE Labor Law, if an employee is found to be working during national holidays, they would receive normal day salary with an addition of a minimum of 50% on the basic salary received.
Wage Payment during Leaves
Annual Leave
Employees will receive their regular wages during annual leave, which will be calculated based on their basic salary if applicable.
Sick Leave
During the initial 15 days (about 2 weeks) of sick leave, employees will receive full wages. For the following 30 days, they will receive half of their wages, and beyond that, sick leave will be unpaid unless otherwise agreed in the employment contract or company policy.
Maternity Leave
Female employees will receive their full wages for the first 45 days of maternity leave and half wages for the following 15 days, provided they have completed at least one year of service. If not worked for one year, she may still be granted a maternity leave however in this case it would be unpaid.
End-of-Service Benefits
- When an employee’s employment comes to an end, they are eligible for an end-of-service gratuity, which is calculated based on their final basic salary. The gratuity is determined as follows:
- 21 days’ wages for each year of service for the initial five years.
- 30 days’ wages for each year of service beyond five years. Employees who choose to resign before completing one year of service do not qualify for gratuity.
Final Settlement: The employer is required to settle all outstanding payments, such as unpaid wages, leave encashments, and end-of-service gratuity, within 14 days of the termination of the employment agreement.
Wage Dispute Resolution Labor Disputes
In the UAE, the Labor Law offers procedures to settle wage disputes between employers and employees. If employees feel that their wages have not been paid correctly, they can submit a complaint to the Ministry of Human Resources and Emiratisation (MOHRE). The MOHRE has the authority to mediate or escalate the issue to a labor court if required.
Consequences of Violations: Employers who do not follow the regulations regarding wage payments, termination, contract related disputes, and the Wage Protection System (WPS) falls under wages mainly, and this may be subject to severe penalties, such as fines (amounting to almost 50, 000 Dirhams), temporary closure of business operations, and limitations on obtaining new work permits.
The provisions on wages and remuneration under the UAE Labor Law are thorough, ensuring that employees are fairly compensated for their work and that employers meet their legal obligations. The law protects both parties, promoting a balanced and transparent employment relationship.
Understanding these provisions is key for both employers and employees to guarantee compliance and to avoid legal disputes.
