United Arab Emirates: Payroll Practices In Gulf Cooperation Council Countries

The Kingdom of Saudi Arabia, Kuwait, UAE, Qatar, Bahrain and Oman each have their own laws, but many of their payroll regulations are similar.

The Gulf Cooperation Council (GCC) member states comprise the Kingdom of Saudi Arabia (KSA), Kuwait, the United Arab Emirates (UAE), Qatar, Bahrain and Oman. While each have their own laws, many of their payroll rules and regulations are similar. Here is an overview.

Income tax

Residents live tax-free in GCC member states. Individuals' tax situation is not assessed.

Visas

All expatriate workers (non-nationals with a work permit or residency visa) employed in GCC countries are required to have a labour card and to register with the Ministry of Labour.  All visas are linked to their employer or the Free Zone Authority, which becomes their sponsor. The visas of any dependents are also connected to the worker's visa.

Taking out health insurance is mandatory in most GCC countries and, in many jurisdictions, is now linked to the visa process. The visa process requires applicants to undergo a medical examination, which includes a blood test. Some first time applicants must also have a chest x-ray and/or vaccinations.

Issuing a visa is at the discretion of each country's immigration and foreign affairs department.  Processing times will differ depending on the nationality, background and even, in some cases, religion of the applicant.

At the time of writing, no residency visas are being issued for Qatari nationals in the UAE, KSA or Bahrain. Restrictions also apply in some GCC states to the issuance of visas for Israeli, Syrian, Yemini and Iraqi nationals, with delays and rejections on Indonesian, Egyptian, Moroccan and Lebanese passport holders.

Social security

Social security laws do not apply to expatriates, apart from in Bahrain, but companies that employ locals are required to register with the Pension Regulatory Authorities and make monthly contributions on their behalf. GCC countries share this framework so that all nationals, regardless of the country they work in, can benefit. However, pension rules and contribution rates differ from country to country.

Payroll cycles

It is common practice for employers to pay salaries once a month, usually between the 25th and 31st of each month.

Mode of salary payment

In 2009, the UAE introduced the Wage Protection System (WPS) to streamline, monitor and ensure that the salaries of all its resident workers were paid. KSA followed suit in 2013 and Qatar in 2015. Bahrain, Oman and Kuwait are currently in the process of implementing the system too.

WPS is a regulatory framework that requires all companies to register and pay employee wages through an electronic transfer to banks and other authorised financial institutions. Payment records are shared between local banks, the Central Bank and the Labour Department to ensure the payment of wages is timely. Following this approach is mandatory and non-compliance to WPS requirements incurs fines and other penalties.

Gratuity/end of service benefits

A gratuity is the typical statutory severance benefit that is paid across GCC countries and is usually correlated with retirement pay. Eligibility and how to calculate the benefit depends on each country's specific legislation, but common factors include tenure of service and type of contract termination, that is, whether workers have resigned or been dismissed.

Employers can also choose to contribute to the employee's pension scheme in lieu of their obligation to pay the gratuity. Once their employment is terminated, employees can likewise choose whether to receive either a pension or the gratuity, depending on which is more favourable to them.

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A version of this article originally appeared in the September 2017 edition of GPA magazine.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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