UAE Payroll 2026: The Complete Employer Guide — WPS, Gratuity, Leave, and New Rules

🔴 IMPORTANT: From 1 June 2026, new WPS rules apply under Ministerial Resolution No. 340 of 2026. New salary payment deadline: the 1st of each month with no grace period. The previous 15-day grace period no longer applies to most companies.

1. How UAE Payroll Differs from Other Jurisdictions

Three key distinctions make UAE payroll fundamentally different from most countries.

•       No personal income tax. The UAE levies no personal income tax. Employers do not withhold income tax. Employees receive the full contractual amount.

•       No social security for expatriates. Foreign employees do not pay pension or social security contributions. Only UAE and GCC nationals are covered by the GPSSA system.

•       WPS — mandatory payment system. Salaries must be paid through MOHRE-approved banks or exchange houses, with payments recorded in the government monitoring system.

⚠ There is no federal minimum wage for expatriates. The minimum wage for UAE nationals is AED 5,000/month (including allowances) or AED 3,000 (basic salary) plus housing and transport.

2. Salary Structure: Basic Salary and Allowances

Salaries in the UAE are structured differently from most countries. The law requires a separation between basic salary and allowances. This is not merely an accounting distinction — the basic salary is the sole basis for gratuity calculation.

Component	Mandatory?	Affects gratuity?	Subject to income tax?	Included in WPS?
Basic Salary	Mandatory in all contracts	Yes (basis for calculation)	No (no personal income tax in UAE)	Yes
Housing Allowance	No (employer discretion)	No (unless specified in contract)	No	Yes
Transport Allowance	No	No	No	Yes
Food Allowance	No	No	No	Yes
Medical Insurance	Mandatory in Dubai and Abu Dhabi (per emirate regulations)	No	No	No (paid directly to insurer)
Bonuses and commissions	No (per contract)	No (unless contract states otherwise)	No	Yes (if regular)
Overtime	Yes — if employee worked overtime (Federal DL No. 33/2021, Arts. 19–20)	No	No	Yes

Practical rule: basic salary to total compensation ratio

There is no statutory minimum percentage for basic salary as a share of total compensation. In practice, most employers set the basic salary at 40–60% of total compensation. An excessively low basic salary reduces the employee's gratuity entitlement, which may lead to labour disputes.

Example structure for total compensation of AED 20,000:

•       Basic salary: AED 10,000 (50%).

•       Housing allowance: AED 6,000 (30%).

•       Transport allowance: AED 2,000 (10%).

•       Food allowance: AED 2,000 (10%).

Gratuity will be calculated only on the basic salary of AED 10,000. With total compensation of AED 20,000, this distinction is critically important.

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3. WPS: The Wage Protection System — New 2026 Rules

What is WPS

The Wage Protection System (WPS) is the mandatory electronic salary payment system for the UAE private sector. Launched in 2009. All employers registered with MOHRE must pay salaries exclusively through approved banks or exchange houses, generating a Salary Information File (SIF) each month. MOHRE monitors payments in real time.

🔴 NEW FROM 1 JUNE 2026: Ministerial Resolution No. 340 of 2026 (issued 12 May 2026) fully replaces the previous Ministerial Resolution No. 598 of 2022. New deadline: salary for the previous month must be paid on the 1st of the current month. The former 15-day grace period has been abolished.

How WPS works

•       SIF file: each month, the employer generates a Salary Information File — a structured file with each employee's details, amounts, and transfer instructions.

•       Bank submission: the SIF is uploaded to an approved bank or exchange house. The bank executes the transfers and transmits the data to MOHRE.

•       MOHRE monitoring: the system automatically compares planned and actual payments. If there is a delay or incomplete payment (less than 85% of payroll), the employer is automatically flagged as non-compliant.

WPS non-compliance penalties

Violation	Timing from deadline	Sanction (Ministerial Resolution No. 340/2026)
Salary payment delay	From the 1st of the month (from June 2026)	System flags the delay in real time. Day-by-day mechanism: Day 1 — payment absent, delay recorded; Day 11 — MOHRE applies admin fines (Cabinet Resolution No. 21/2020) and reclassifies establishment to Category 3; Day 16 — automatic labour dispute registration in MOHRE. Applies to companies with 25+ employees
Incomplete payment (less than 85% of payroll)	Immediately	Employee is treated as unpaid. Employer receives violation status in the MOHRE system
Payment outside WPS (cash or other means)	—	Fine up to AED 50,000; suspension of new hire permits
Repeat WPS violation	—	Fine up to AED 50,000 + possible business closure + inclusion in MOHRE violation register
Failure to submit salary payment documentation	—	Mandatory submission of documentation confirming payment (introduced by Ministerial Resolution No. 340/2026)

Who is excluded from WPS

•       Employees who filed a wage complaint referred to the judiciary.

•       Employees recorded as having "abandoned the workplace".

•       Employees of certain micro-employers below the threshold (some SME categories).

⚠ Free zone companies (DMCC, DAFZA, JAFZA, ADGM, DIFC, and others) operate under their own free zone regulations and are not directly subject to MOHRE's WPS. However, most major free zones have equivalent salary payment monitoring systems.

4. Gratuity (End-of-Service Benefits): Formula and Calculation

Legal basis

Gratuity (end-of-service benefit) is governed by Article 51 of Federal Decree-Law No. 33 of 2021. It is a mandatory payment for all foreign private-sector employees who have completed at least 1 year of continuous service with the same employer.

Key change introduced by Federal Decree-Law No. 33 of 2021

Before 2022, employees who resigned after less than 5 years of service received a reduced gratuity or none at all. The new law abolished this distinction: all employees — regardless of the reason for termination — are entitled to full gratuity after 1 year of service.

Years of service	Rate	Formula	Example (basic salary AED 10,000/month)
Less than 1 year	No gratuity entitlement	—	AED 0
1–5 years (inclusive)	21 days of basic salary per full year	(Basic salary ÷ 30) × 21 × number of years	1 year: (10,000 ÷ 30) × 21 × 1 = AED 7,000
Over 5 years (beyond the first 5)	30 days of basic salary per additional year	(Basic salary ÷ 30) × 30 × years beyond 5	Year 6+: (10,000 ÷ 30) × 30 × 1 = AED 10,000/year
Maximum cap (Art. 53)	No more than 2 full years of basic salary in total	—	AED 10,000 × 24 months = AED 240,000 — ceiling
Partial year	Proportional to days worked	(Basic salary ÷ 30) × Day rate × (Days of service ÷ 365)	Example: 1.5 years at 21-day rate: (10,000 ÷ 30) × 21 × 1.5 = AED 10,500

Full calculation example: 7 years of service

Basic salary: AED 15,000/month.

•       First 5 years: (15,000 ÷ 30) × 21 × 5 = AED 52,500.

•       Years 6 and 7 (2 years): (15,000 ÷ 30) × 30 × 2 = AED 30,000.

•       Total gratuity: AED 82,500.

•       Maximum cap: AED 15,000 × 24 = AED 360,000. Cap not reached — full amount is payable.

Key exceptions and nuances

•       Gratuity is calculated on the last basic salary — not an average over the employment period.

•       Unpaid leave periods are excluded from service calculation (Art. 51, Federal DL No. 33/2021).

•       On summary dismissal under Art. 44, the employee retains gratuity rights but loses the notice period entitlement.

•       UAE nationals do not receive gratuity — they are covered by GPSSA.

•       The employer must pay gratuity within 14 days of the last working day.

5. End-of-Service Savings Scheme: the Voluntary Alternative to Gratuity

Since 2023, UAE employers may switch to the End-of-Service Savings Scheme instead of traditional gratuity accrual. In 2026, the scheme has been expanded and covers a larger number of participants.

How the scheme works

•       The employer makes monthly contributions to an approved investment fund.

•       Under 5 years of service: 5.83% of basic salary per month (equivalent to the 21-day annual gratuity rate).

•       Over 5 years of service: 8.33% of basic salary per month (equivalent to the 30-day rate).

•       Contributions must be deposited into the fund within 15 days of the start of each month.

•       The employee receives accumulated contributions plus investment returns on departure.

Advantages for the employer

•       Reduces the risk of large lump-sum payouts upon terminations.

•       Moves the liability off the balance sheet into an external fund — improves financial reporting.

⚠ The Savings Scheme is voluntary for employers. To enrol, the employer must select an approved fund manager from the MOHRE list. Switching does not cancel accrued rights under prior gratuity terms.

6. Leave and Public Holidays

Leave type	Duration	Legal basis	Pay
Annual paid leave	30 calendar days (after 1 year of service); 2 days/month for 6–12 months of service	Federal Decree-Law No. 33/2021, Art. 29	Full salary including allowances
Sick leave	15 days — full pay; 15–45 days — 50% pay; over 45 days — unpaid (per incident)	Federal Decree-Law No. 33/2021, Art. 31	Full / partial
Maternity leave	60 calendar days (45 pre-birth, 15 post-birth or flexible)	Federal Decree-Law No. 33/2021, Art. 30	Full pay if 1+ year service; 50% if under 1 year
Paternity leave	5 working days	Federal Decree-Law No. 33/2021, Art. 32	Full pay
Study leave	10 days/year (for registered students)	Federal Decree-Law No. 33/2021, Art. 33	Full pay
Bereavement leave	3–5 days depending on family relationship	Federal Decree-Law No. 33/2021, Art. 28	Full pay
Public holidays	15 federal public holidays in 2026	MOHRE official list	Full pay

Annual leave: practical notes

An employee who has worked 6 months is already entitled to leave — at the rate of 2 days per month. After 1 year: 30 calendar days annually. The employer may determine when leave is taken based on operational needs, but may not deny the right to leave entirely. Cash-in-lieu of leave is permitted only on termination.

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7. Pension Contributions: GPSSA for UAE Nationals

UAE and GCC nationals employed in the private sector are covered by GPSSA (General Pension and Social Security Authority) — not by the gratuity system.

•       Employee contribution: 5% of basic salary.

•       Employer contribution: 12.5% of basic salary.

•       Government contribution: 2.5% (for UAE nationals).

•       Total: 20% of basic salary directed to the pension fund.

•       Regulator: GPSSA (gpssa.gov.ae).

⚠ Foreign employees have no pension contribution obligations in the UAE. A foreign worker is personally responsible for their own pension savings — in their home country or through private instruments.

8. Overtime: Rules and Pay

•       Standard working day: 8 hours; working week: 48 hours (Art. 17, Federal DL No. 33/2021).

•       During Ramadan: maximum 6 hours per day for Muslim employees.

•       Overtime (over 48 hours per week): the employee is entitled to additional rest time or a supplemental payment.

•       Overtime rate (Art. 19): standard rate + 25% premium. Between 21:00 and 04:00: standard rate + 50% premium.

•       Employer cannot require more than 2 hours of overtime per day.

•       Overtime is not included in the basic salary base for gratuity purposes.

9. Common Employer Mistakes

•       Setting an excessively low basic salary. Some employers deliberately reduce the basic salary in favour of allowances to minimise gratuity. Employees may challenge this with MOHRE if actual responsibilities and market pay levels do not match the structure.

•       Delaying gratuity payment. Gratuity must be paid within 14 days of the last working day. A delay is grounds for an MOHRE complaint with subsequent sanctions.

•       Missing the WPS deadline. From June 2026 the deadline is the 1st of the month. Payment on the 2nd already constitutes a delay. Adjust your payroll cycle in advance.

•       Not accounting for unpaid leave in service duration. Unpaid leave days are excluded from the service period for gratuity calculation. Maintain accurate records.

•       Neglecting mandatory medical insurance. In Dubai and Abu Dhabi, employee health insurance is mandatory under emirate regulations. Non-compliance attracts fines.

•       Failing to register the employment contract with MOHRE. The contract must be registered with MOHRE within 60 days of the hire date. An unregistered contract creates legal exposure for the employer.

10. Monthly Payroll Compliance Checklist

•       By the 20th of the current month: collect data on employment changes (hires, terminations, salary changes, overtime, leave).

•       By the 25th: generate the SIF file for WPS.

•       1st of the following month (new WPS deadline): submit SIF to the bank and confirm crediting of employee accounts.

•       Quarterly: update Emiratisation headcount on the NAFIS platform (for companies with 50+ employees).

•       On termination: calculate gratuity, unused leave compensation, and notice period; pay within 14 days.

•       Annually: verify employment contract compliance with Federal Decree-Law No. 33/2021; renew health insurance.

•       When hiring a UAE national: register with GPSSA; do not accrue gratuity.

Sources

• Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relationships in the UAE — official text (mohre.gov.ae)

• Ministerial Resolution No. 340 of 2026 — new WPS rules (in force from 1 June 2026) (mohre.gov.ae)

• MOHRE — Official Ministry of Human Resources and Emiratisation portal (mohre.gov.ae)

• u.ae — Official UAE Government portal: Wage Protection System (u.ae)

• MOHRE — Official Gratuity Calculator (mohre.gov.ae)

• GPSSA — General Pension and Social Security Authority (gpssa.gov.ae)

• FTA — Corporate Tax for natural persons conducting business activities (tax.gov.ae)

• Gulf News — UAE salary rules new WPS June 2026 (gulfnews.com)

• Khaleej Times — UAE labour law updates 2026 (khaleejtimes.com)

Disclaimer

This article is provided for informational purposes only and does not constitute legal, employment, or HR advisory. Information is based on current UAE legislation as of May-June 2026. Labour laws and subsidiary regulations are subject to change; before making any HR decisions, readers are advised to consult a qualified legal adviser or contact MOHRE directly. UPPERSETUP accepts no liability for actions taken solely in reliance on this material.