This guide of payroll processing will help you understand all the aspects related to this process. Said process is one of the most extensive and, therefore, errors are very common. Most companies that want to have a payroll that meets all legal requirements opt for outsourcing.
In this article, we demonstrate the previous processes, as well as the complete procedures of a payroll. In this way, you will have an idea of how are all these procedures in the United Arab Emirates. Below you can see these aspects:
- What is the payroll process?
- A payroll processing summary
- What happens when you do payroll outsourcing in the UAE?
- Do you need our help with payroll outsourcing in the United Arab Emirates?
1. What is the payroll process?
In this guide of payroll processing, you can see how is this process, which not only includes the payment of salaries. This procedure can become more complex as you add more components. Furthermore, this is an essential function of your business as it involves a delicate aspect of your business, paying your employees correctly.
For these reasons, the process must be carried out efficiently with step-by-step planning. Therefore, to facilitate this entire process for your business, it is important to have payroll services in the UAE.
2. A payroll processing summary
Payroll processing consists of several stages, which involve before, during, and after it. For example, with payroll outsourcing in Dubai, you ensure that each stage is completed properly. Below you can see each of these stages in detail.
2.1 Before the payroll process
You must carry out the following activities before beginning the payroll process:
- Set a clear payroll policy
In this case, your company must define the policies regarding your payroll and convert them into standards. For example, you can set employee pay and attendance policies, leave and benefits, and more.
- Collect the necessary data
In this case, you must collect the necessary data from each department.
- Data verification
You must validate all data you collect to ensure that there are no errors since the result of the process will not be reliable. Also, check that you only include all of your active employees and none of your inactive ones. In addition, all the data must have the same structure so that they are consistent and do not affect the process.
2.2 Payroll processing
Later in this guide of payroll outsourcing, you will be able to see in detail how the complete process is. This provider will work with the data that you have provided, therein lies the importance of the previous point. Thus, the processing of your payroll will be carried out by a certified specialist and you will be able to take care of other more important matters.
2.3 The end process
Final payroll reports will be provided by payroll services in the United Arab Emirates. In this way, your finance team can perform analyzes to certify that everything is correct.
3. What happens when you do payroll outsourcing in the UAE?
An important point of this guide of payroll outsourcing is to know what happens during this process. In this way, you will be able to know what activities the payroll services in the UAE carry out with the data of your employees. Next, you will be able to know in detail the whole process along with other important aspects.
3.1 Wage Protection System (WPS)
This digital payroll system instituted in the UAE pays salaries directly to the accounts of its employees. In addition, you must register your company with WPS to pay your employees through the Central Bank of the UAE. Registration in this system is mandatory for all companies that work in the Emirates.
Likewise, this system protects the rights and interests of workers in the country and certifies the adequate payment of wages. For example, with payroll outsourcing in Dubai, your employees will be paid in full and on time. In addition, the most outstanding points of this system are:
- Payment frequency
Which, under the labor laws of the UAE, is done monthly or fortnightly, depending on the contract of the employee. However, if not specified, it expires every 14 days.
- Back wages
If the employer does not make the salary payment in less than 10 days after the established date, it is a delay. In addition, if the company does not pay the salary after 30 days, it receives a penalty for delay and non-compliance.
- WPS evasion fines
In this case, an employer receives a fine for entering incorrect data on their employees, as it is considered evasion. In this case, it is useful to payroll outsourcing in the United Arab Emirates so as not to incur this problem.
3.2 Collect information from employees
Another important point in this guide of payroll outsourcing is that you must gather all of your employee information.The human resources department of your company must intervene in this process, to communicate all the data to the supplier. Also, the information you need to specify is:
- The personal data of each of your employees including full name, and date of birth, with their respective backups.
- A detailed job description, as well as your experience and educational level.
- The base salary and benefits of the employee.
- Results of performance evaluations.
- Bank account information, if the employee has one.
3.3 Creating employee records
In these files, you should store details for all your employees, including payment details. For example, these may contain credentials, base salary, compensation, advance payments, and salary increases, among others. Thanks to this database, payroll services in the UAE carry out thepayroll processing made easy.
3.4 Salary calculation
In this guide of payroll outsourcing, you can also learn about one of the important parts of the process. The full salary to make payment to an employee consists of base salary, allowance, and overtime. Payroll services in the United Arab Emirates calculate these items as follows:
3.4.1 Base salary
In this sense, there are two types of contracts in the UAE, limited and unlimited contracts. In the case of the former, the contract establishes a start date and an end date from the beginning. On the other hand, unlimited contracts (as the name implies) do not set the length of time of the job.
Therefore, the base salary of your employees is the one agreed upon and can be monthly or fortnightly.
Allowances may include sales commissions, travel allowances, food allowances, and more. You have to include all of these in the initial contract and change it according to company policy. The manual calculation of these allocations is a difficult task since the amounts vary and can change constantly.
If, for example, you do payroll outsourcing in Abu Dhabi, they make this process easy, thanks to the use of a smart payroll system.
In the UAE, it is established that workers must be fairly compensated for overtime hours worked. In this way, the legislation ensures that the employer does not exploit the worker. Also, overtime should not be more than two a day. Below is a brief explanation of overtime calculation:
If the worker must work overtime between ten at night and four in the morning, he will receive compensation of at least 50% of his salary. In the case of other overtime outside these hours, the assignment is a minimum of 25% of the salary. There must be a coverage of overtime on weekends and holidays, by at least 50% of the salary of the employee as well.
3.5 Salary deductions
To calculate the net salary of an employee, the corresponding deductions such as licenses, fines, and infractions must be determined. In the case of payroll services in the UAE, this will help with the exact calculation of all these. Among these deductions are:
- Annual vacation: an employee is allowed to take a 30-day paid vacation if they have worked for more than one year.
- Sick leave: if you have probationary employees, you are not eligible for paid sick leave. However, if an employee is under a permanent contract, they can have 90 days of sick leave. In this case, the compensation calculation is performed as follows:
- They will enjoy full salary for the first 15 days of the leave.
- They will enjoy half the salary for the next 30 days.
- Finally, in the last 45 days, you will not receive any salary.
- Maternity leave: in the case of employees with more than one year of service, they will enjoy 45 days of leave with pay.
- Paternity leave: in the case of this leave, you are entitled to five days of paid leave.
- Pilgrimage leave: an employee is entitled to 30 days of unpaid leave for Hajj, the Muslim pilgrimage. This is only one time for the entire length of your contract.
In the case of fines and infractions, these depend on each company but it refers to the calculation of the working day. With payroll outsourcing in the UAE, the payments of net salaries are facilitated.
In this case, you can recognize the employee for their services in the company. You can do this periodically and in this is how you should calculate it in the UAE:
- 21 days of salary for each year of the first 5 years of service.
- 30 days of payment for each year after those 5.
3.7 WPS salary transfer file
The next thing you need to know in this guide of payroll outsourcing is the creation of a Salary Information File (SIF). This document is necessary for the Ministry of Labor to approve payments through WPS. Likewise, this must include all the data concerning the employee included in his record. In addition, banks and financial exchanges work with this system and may require a personalized format. Thanks to payroll outsourcing in the United Arab Emirates you can have this format precisely.
3.8 Receipt of payments
Another of the payroll services in the United Arab Emirates is the generation of payment receipts for your employees. This document allows employees to view their salaries, allowances, and deductions. Likewise, it is useful for you to know the performance of the employee, the compensation, and to evaluate the salary increase. This process is also time-consuming and errors are common, as it must be specific to each employee. Therefore, making payroll outsourcing in the UAE is an ideal solution to make this process efficient.
3.9 Payroll outsourcing in the United Arab Emirates
As you have seen in this guide of payroll outsourcing in the UAE, these providers make the job easy. Additionally, they have payroll systems with which you can easily access your data to learn about and evaluate the entire process. In the same way, you will be able to comply with legal regulations, comply with WPS, and save on costs.
4. Do you need our help with payroll outsourcing in the United Arab Emirates?
In this guide of payroll processing, you could see how professionals permorm the payroll and HR procedures. All these processes represent a lot of work for your company, which is why outsourcing is very advantageous. In addition, you must know the entire process to have good feedback from the provider that will handle your payroll.
As a business-focused outsourcing company, we have everything you need to run the payroll process smoothly. Likewise, we offer you other corporate services, including the contract hire, HR management, and more in the Middle East. Also, we are one of the best professional employer organizations in the UAE.
Still, have questions regarding this guide of payroll outsourcing in the UAE? You can send us an email to the web address [email protected]. Also, you can contact us at +971 43 316 688, where our agents will answer your queries.