An accurate overtime calculation in the UAE is an important process for your company to comply with the local labor laws. There is a defined formula that applies to all the variables of this payment. This is because the percentage varies depending on the circumstances and ranges from 25% to 150% of the base salary.
In this article, you will see how the Emirates law defines normal working hours and overtime. In addition, you will know the exact formula and the variables in the percentage according to the circumstances of the hours worked. Let us observe:
1. Understanding what overtime is
2. What are working hours and overtime in the United Arab Emirates?
3. How to carry out a correct overtime calculation in the UAE?
4. How can we help you perform an accurate overtime calculation in the UAE for your employees?
1. Understanding what overtime is
Overtime refers to the additional hours that an employee works beyond the hours established by law. In addition, these hours have a higher value than the usual payment that the worker normally receives. Therefore, there is a formula to carry out the overtime calculation in the UAE to determine this payment correctly.
Normal working hours are those established by law or in the contract that the employee has signed. Typically, in the United Arab Emirates, the working day consists of 8 hours, with a break of 1 hour after 5 hours of work. So, if a person works more than these statutory hours in a day, they must receive extra payment.
There are two particular cases in which a company will need employees to work overtime. These are:
- Overtime due to force majeure. They are those in which the company needs personnel to prevent an accident or to repair damage urgently.
- Structural overtime. These refer to tasks necessary to solve unforeseen situations, accumulation of work, and other similar circumstances.
In both cases, the calculation of overtime in the UAE depends on the moment of the hours worked. In addition, the UAE labor law determines the maximum overtime hours an employee can work daily.
2. What are working hours and overtime in the United Arab Emirates?
The overtime calculation in the UAE Labor Law determines what is considered normal hours and overtime. In this sense, those who work in the private sector have a schedule of 8 hours a day or 48 hours a week. Also, during the holy month of Ramadan, the hours go from 8 to 6 hours daily.
Likewise, other legal considerations need to be taken into account when making these calculations.
2.1 Hours of work
These are the most relevant provisions related to normal working hours in the private sector in the UAE:
- Article 17 of Federal Decree-Law No. 33 determines that working hours in this sector are 8 hours a day or 48 hours a week.
- In some sectors or categories, the daily working hours may increase or decrease as specified in the Execution Regulations of the Labor Law.
- The time it takes for the employee to travel from home to the workplace is not included in the workday. However, there are some exceptions defined in the Execution Regulations of the Labor Law.
- If the worker has more than one employer, they cannot demand them to work more than the agreed hours. However, if the worker has agreed in writing with the employer(s), they may work overtime. In this case, an overtime calculation is also necessary.
- The employer must determine the specific working hours for remote workers, both inside and outside the UAE.
- Employees who work 5 consecutive hours are entitled to a break of not less than 1 hour. In addition, these breaks are not included in the calculation of the working day.
2.2 Overtime
Likewise, to carry out an overtime calculation in the UAE, you must consider the following factors:
- The company may request the employee to work overtime, although these must not exceed two hours per day.
- If the job requires the employee to work more than normal hours, the employee should be paid extra for it. This consists of a payment equal to the base salary plus 25 percent of that payment.
- Likewise, if the overtime hours are between 10:00 p.m. and 4:00 a.m., the overtime percentage increases to 50%. However, this rule does not apply to those workers who work on a shift basis.
- If the employee must work on their day off, they must receive a substitute day of rest. On the contrary, they must receive a payment equal to that of the normal working day plus 50%. This day off must be determined in the employment contract or work regulations of the company.
3. How to carry out a correct overtime calculation in the UAE?
The calculation of overtime in the UAE will depend on the specific moment in which the worker fulfilled these hours. This is because the percentage of the base salary differs according to the circumstances. Thus, the percentage on a normal day (25%) is not the same as for holidays (50%).
We would like to add that you can always hire our payroll outsourcing services and allow us to take care of the overtime calculation process, as well as other payroll-related matters. You can easily request them in any of the following countries:
- Saudi Arabia
- United Arab Emirates
- Oman
- Lebanon
- Bahrain
- Qatar
- Israel
- Turkey
- Kuwait
- Jordan
- Libya
- Egypt
3.1 Calculation of overtime in the UAE on normal days
To have an accurate estimate of payment, you must use a proper overtime calculation formula in the UAE. Have at hand the amount of the base salary and the hours worked by the employee. The formula for this specific case is:
- Pay per hour of work = Base salary x 12 / 365 / 8 hours
- Overtime pay = Pay per working hour + 25%
To better understand these calculations, we will give you an example based on a monthly salary of AED 2000. You need to know the number of overtime hours worked. In this case, we will say that it is 100 hours. You must do the overtime calculation in the UAE as follows:
- Multiply the monthly base salary, in this case, AED 2,000, by 12.
- 2000 x 12 = 24000
- Divide the result obtained by 365 to obtain the daily wage.
- 24,000 / 365 = 65.75
- Then, divide this last result by 8 to get the hourly wage.
- 65.75 / 8 = 8.21
- To calculate the payment in AED for each overtime hour worked, you need to do the following calculation:
- 8.21 + 8.21 x 25% = 10.26
- The next thing is to multiply this last result by the total hours worked by the employee in the month.
- 10.26 x 100 hours = 1026
- This figure indicates the amount of AED that you must pay to the employee, adding it to the normal monthly salary. In this way:
- 2000 + 1026 = 3026
Therefore, the payment that this employee should receive in the month in which he worked said overtime hours is AED 3026. In the case of hours worked between 22:00 and 4:00, the percentage is 50%.
3.2 Public holiday overtime calculation in the UAE
If an Emirates-based company asks its workers to work on holidays, it must do an overtime calculation in the UAE on public holidays. The process is the same as for the previous case except that the percentage is 50% of the basic salary. Thus, continuing with the data from the previous example, we will do the calculation based on AED 2000.
However, there are two cases you should consider:
3.2.1 Overtime payment with 50% more based on the basic salary, plus a day off
In that case, for the Eid holiday overtime calculation in the UAE or other, the formula would be:
- Base salary × 12/365/8 × total overtime hours × 1.5 = total overtime pay
The steps for the calculation, with the data of our example, are the following:
- 2000 x 12 = 24000
- 24,000 / 365 = 65.75
- 65.75 / 8 = 8.21
- 8.21x 8 = 65.68 (this number 8 indicates that the worker completed 8 hours of work on the holiday).
- 65.68 x 1.5 = 98.52
- Therefore, the worker will receive an extra AED 98.52, plus a day off.
3.2.2 Payment of overtime with 150% more based on the basic salary, without a day off
In case the employer considers not giving the day off, the worker receives a 150% bonus. In that case, for the holiday overtime calculation in the UAE, the formula would be:
- Base salary × 12/365/8 × total overtime × 2.5
You need to perform the calculations as follows:
- 2000 x 12 = 24000
- 24,000 / 365 = 65.75
- 65.75 / 8 = 8.21
- 8.21x 8 = 65.68
- 65.68 x 2.5 = 164.20
- The worker will receive AED 164.20 for that day but will not receive the day off.
3.3 Overtime calculation in the UAE on Fridays
In the case of Friday overtime calculation in the UAE, the formula only differs by one point, the percentage of salary. This calculation is made by adding 50% to the basic salary and the formula is:
- Base salary × 12/365/8 × total overtime × 1.5
Continuing with the example, the calculation will be as follows:
- 2000 x 12 = 24000
- 24,000 / 365 = 65.75
- 65.75 / 8 = 8.21
- 8.21x 8 = 65.68
- 65.68 x 1.5 = 98.52
- The worker will receive AED 98.52 extra for working on Friday.
3.4 Overtime calculation in the UAE during Ramadan
During the holy month of Ramadan, the working day is reduced to 6 hours, 2 less than the regular ones. In this case, article 65 of the Employment Law establishes this reduction in working time during this important celebration. Therefore, the employer must perform a Ramadan overtime calculation in the UAE, if the workers exceed these hours.
This is defined in Articles 67 and 68 of the UAE Labor Law. The first of them states:
“If the circumstances of the work make it necessary for an employee to work more than the normal working day, this time will be considered as overtime, for which the worker will receive a remuneration equal to that corresponding to his normal working day plus an extra of at least 25 percent of said remuneration.”
In addition, Article 68 of the same law states that:
“If the work conditions require that an employee works overtime between 21:00 and 4:00, they must receive payment for normal working hours plus an increase equal to at least 50 percent of said payment.”
Therefore, in the first case, the formula for overtime calculation in the UAE would be:
- Base salary × 12/365/8 × total overtime × 1.25
However, in the second case, the formula faces a small change and looks like this:
- Base salary × 12/365/8 × total overtime × 1.5
In both cases, just follow the steps above.
4. How can we help you perform an accurate overtime calculation in the UAE for your employees?
The calculation of overtime is a simple process to perform when dealing with a single employee. However, it becomes more complex with a large payroll and when different conditions exist. Also, although you can perform your overtime calculation in the UAE in Excel, it can be even more complicated and exhausting.
For this reason, on PEO Middle East, we offer you our experience in payroll solutions in the Middle East to make all these calculations easy. Additionally, we have the best specialists to cover a variety of HR-related matters. Thanks to them, we can offer you high-quality services, such as:
- Employer of Record
- Professional Employment Organization
- Relocation services
- Hire contractor
- HR management
- Global Immigration
- Payroll outsourcing
- Hire remote worker
We can provide you with all the necessary information about the overtime calculation process in the UAE. You can easily contact us and speak to our professional team about your demands, requirements, and concerns. Write to us anytime you wish at [email protected]. On the other hand, you can always call us at +971 43 316 688. We will gladly offer you the advice you need.
If you want to join the team of an important company in the Middle East, you can send your CV to [email protected]. To find out more and know all the details about these job opportunities, visit thetalentpoint.com.
