Comprehensive Guide to Employee Benefits and Compensation in the UAE

A survey conducted by Bayt.com and YouGov reveals the latest trends  in employee attraction, engagement and retention in the UAE. As per survey, the three factors that attract prospective employees to join a company in the UAE are:

• Salary and compensation (64%)
• Office environment (61%)
• Job Security (50%)

And post joining, the factors that drive loyalty are:

• Job security (38%)
• Career opportunities (37%) 
• Training and development opportunities (35%)

This survey clearly shows the importance of having a good employee benefits policy in the UAE for companies to attract and retain the best talents.

Even the UAE labor law has mandated certain employee benefits that every employer has to offer to its employees without fail for employee welfare. 

Further, we will discuss in detail about compensation and employee benefits policy of the UAE

Employee Benefits are the benefits that are provided to the employees of an organization in addition to the pre-decided salary or wage. These benefits could be in the form of monetary or non-monetary features that enhance the overall compensation received by employees. Some common examples of employee benefits are as follows:

• Employees’ Provident Fund 
• Health Insurance For Employees 
• Paid leaves 
• Statutory leaves 
• Maternity and Paternity leaves 
• Allowances, for instance, transportation allowance 
• Gratuity
• Reimbursement of mobile and Internet bills, etc.

In the UAE, Federal Decree Law No. 33 of 2021 is the main law that regulates Labor Law and its correlative Executive Regulations and all other ministerial orders implementing these provisions. These laws regulate employer employee relations. 

These laws are applicable to all national and international works except:

• Federal and local governments officers and workers
• Armed forces, police and security officers
• Workers who come under DIFC (Dubai International Financial Center) Employment Law no. 2 of 2019 and Workers who come under ADGM Employment Regulations 2019 (ADGM Employment Regulations)

Except for maintaining employment relationships, these laws protect employees from any unjust termination of employment; and guide employers on minimum wages standards, compensation and employee benefits, retirement plans, and other employment related matters.

To design a compensation package in the UAE, employers must be mindful of the employees’ needs, company budget, the statutory compensation laws in the country, as well as the conditions prevailing in the local economy. Here is a basic guide as to how you can design an efficient Employee Benefits Programme in the United Arab Emirates. 

• Define a clear goal: The first step towards the designing of an excellent Employee Benefits Program is the determination of the goals employers seek to accomplish with the program. The form, scope, and structure of such a program is influenced by several factors, including the number of employees, employees’ need, and reason to offer the benefits. 
• Take stock of company budget: Once the employer has clarity on the goals of the proposed Employee Benefits Programme, they must proceed with the assessment of your budget for the same. It is important to remember that any discrepancy between the estimated budget of the programme and the funds employers can spare towards the programme can cause a major financial imbalance for your organization. 
• Identify the major requirements of the employees from a compensation program: At the core of any employee benefits programme are its beneficiaries, namely the employees. Whilst designing such a program, you must be mindful of the major requirements of employees from the programme. The easiest way to do so is to invite suggestions from them through surveys and focus groups. You can also employ secondary research on employee expectations from compensation packages in the UAE. 
• Carry out a cost benefit analysis: Employers must determine the total projected cost of the programme to the organization as well as the average cost per employee, and try to establish whether the cost and the expected benefits (in terms of lower attrition and higher employee satisfaction and productivity) are feasible. 
• Implement the programme: After making the necessary tweaks to the programme, the employer can go ahead and implement the programme. One thing that employers must keep in mind is that all the provisions of the employee benefits programme should be in compliance with the laws of the United Arab Emirates. 
• ‍Evaluate and Revise: It is must for employers to periodically evaluate the benefits program and get feedback from employees to understand how satisfied they are with the benefits. Understanding employees and aligning it with their needs can help employers to offer the best benefits plan and achieve their goal.

Minimum wages

• There is no universal minimum wage and salary mandatory for  expatriates UAE
• For UAE nationals, the minimum wage and salary has been fixed depending on their educational qualification. The following table highlights the minimum wages based on a UAE citizen’s highest educational qualification.

The New Labor Law will replace current labor law (Federal Law No. 8 of 1980) on 2nd February 2022, announced Ministry of Human Resources and Emiratisation (“MOHRE”)

Social Security Benefits: All employers in the United Arab Emirates are required to contribute 12.5% of an employee’s gross salary or wage towards social security benefits. 5% of the gross remuneration is to be contributed by the employee and 2.5% by the government of the country. The aforementioned provision is applicable only for UAE nationals and GCC (Gulf Cooperation Council) nationals. Expatriates are not entitled to this category of compensation benefits in the UAE. 

Payroll Cycle

The payroll cycle in UAE is monthly.

13th Salary 

There is no such rule about offering 13th salary in UAE.

Working Hours

The working hours in the private sector are 8 hours a day or 48 hours per week. For public sector employees, school and university working weeks are four and hour days. 

Employees are entitled to one and more breaks during the working hours if work continues more  than five hours. These breaks are not calculated as working hours.

Overtime

Employers may need to ask employees to work for extra hours.  In that case, it cannot be more than two hours in a day. 

• Employees will be entitled to extra pay for extra working hours on normal days at a rate of 125%.
• For overtime done between 10pm to 4 am, employers have to pay at rate 150% increase on normal working hours remuneration. 
• In case employees have to work on off-days, employers can compensate for it with a rest day or pay at rate 150%.

Leaves

Minimum number of leaves in a calendar year: According to the compensation structure in the UAE, there are specific leave policies in place. The leave benefits in the UAE mandate that all employees must be eligible for a minimum of 30 days of paid leave in a calendar year once they complete 12 months of service.

Public holidays:  In addition to 30 days paid leave, there are 15 public holidays in 2022. 

Sick leave: The United Arab Emirates has generous sick leave policies for employees. After the completion of three months of service with their present organization, an employee in the UAE is entitled to a sick leave of 90 days per annum. 

The aforementioned leave shall be categorised as paid leave and will be contingent upon the submission of a medical certificate within 48 hours of the first day of the leave. Although the first fortnight of the sick leave is fully paid leave, the next 40 days are 50% paid leave. 

Maternity Leave: Akin to a majority of nations, the United Arab Emirates has provisions for maternity benefits in its compensation laws. The maternity benefits in the UAE entail a 60 days paid maternity leave for female employees who have worked with an organization for a period exceeding one year. The first 45 days of the aforementioned leave are fully paid leaves whilst the remaining 15 days are 50% paid leaves.

Paternity Leave: The compensation and benefits policy in the UAE also comprises provisions for paternity leave. Individuals employed in the private sector in the nation are eligible for a minimum of 5 days of paternity leave. However, the aforementioned benefit must be utilised not later than six months from the birth of an employee’s child.

Pilgrimage leave: One of the employee compensation and benefits in the UAE is a pilgrimage leave. According to the nation’s employment legislations, all employees working in the United Arab Emirates can avail of a 30 day leave to go for a pilgrimage. This leave shall, however, be an unpaid leave and available only once during the tenure of an employee with an organization. 

Compassionate Leave: There is a provision of compassionate leave for the employees in the United Arab Emirates in the following instances:

• Death of a spouse (5 days leave is permissible)
• Death of a parent, sibling, child, or grandparent (3 days leave is permissible)

Study Leave: If a person employed in the United Arab Emirates is studying at an approved educational institution in the country, they can avail of 10 days of study leave. However, the aforementioned leave can be availed only after the completion of two years of employment with their present employer. 

‍Severance Pay: One of the important employee benefits in the UAE is severance pay. The following table offers a quick glimpse of the laws pertaining to severance pay in the UAE.

The total quantum of the severance pay must be lower than the amount of 2 years’ salary, and shall be paid within 14 days of the termination date for an employment contract. 

‍Health Insurance: It is common practice for modern-day organizations to offer health insurance benefits to their employees and, in some cases, their families as well. The medical benefits for employees in the UAE are no exception to this rule. Most organizations across the seven emirates offer Group Health Insurance to all of their employees. And all organizations in Dubai and Abu Dhabi have been mandated to offer health insurance to their employees as well as their dependents and spouses.

The employee compensation and benefits in the UAE are applicable for the citizens of the country and expatriates alike. Other than certain specific benefits available only for UAE nationals, all the mandatory employee benefits are provided to every person employed in the country.

There is no personal income tax levied on the employee benefits in the United Arab Emirates. Therefore, as a general rule, employers are not required to deduct any tax from the salary or wage of an employee. The same holds true for different benefits as well. If there is any doubt about the taxability of a particular employee, an employer can seek the advice of the nation’s tax department.

There are no specific restrictions for employee compensation and benefits in the UAE. As long as all the laws of the country are complied with and the mandatory compensation and benefits provided to employees, there is no restriction on the quantum of the benefits that an employer can offer to their employees. 

The only restriction can be having an entity to offer these benefits to the employees. If you don’t have an entity in the UAE, the best solution is to collaborate with Employer of record like Multiplier. EOR works as a co-employer and helps you stay compliant with local laws and regulations while handling payroll and benefits for your employees.

In addition to the mandatory employee benefits in the UAE, an employer may opt to offer some additional benefits to their employees to retain them.

For example, some employers offer life insurance, additional holidays, flexible work hours, free meals, family health insurance and ESOPs. 

Fringe benefits

Flexible Working Hours: Flexible work hours policy gives freedom to  employees to work from where and when they want to work. It helps employees to maintain work-life balance and enjoy the work. It also increases employee loyalty for employers.

Extra Holidays: Offering extra holidays and leaves to employees can be a good fringe benefit. Daily 8 to 9 hours of continuous work can burn out the employees. Extra holiday leaves can be great opportunities for catching up with family and friends and spending nice time with them. It keeps employees happy and makes them more productive.

Workshops and Trainings

Workshops and free courses are great fringe benefits for employees who want to learn and grow their skills. It helps them to improve their career prospects.  As employers, you can consider offering free courses to your employees and show interest in their personal development. 

Health Insurances

Additional health benefits for employees and their families can be great supplemental benefits. It can be gym memberships, health insurance or other kind of health related benefits. 

In recent times, employees are more aware about their rights and labor laws that give  them value and offer protection along with minimum wages and mandatory benefits. If you are planning to expand your business to the UAE and struggling to understand the compensation and benefits rules and other compliances, you can collaborate with Multiplier.

Multiplier is a global employment solution that offers Employer of Record service and helps organizations to create best employee benefits for their employees while staying compliant with the country’s labor law.

With our excellent EOR suite, you can access the following benefits. 

• Multi-country and Multi-currency payroll 
• Management of employees benefits 
• Management of employee expenses 
• Compliance with local tax laws 
• Drafting of multi-lingual contracts, etc. 

Contact us now to learn more about our globally renowned Employer of Record service.