How Payroll Process is managed in UAE

The payroll process ensures that all employees in your company receive their salaries on time. Maintaining records of paid leave, work hours, and significant calendar events are all part of the payroll.

All firms in the UAE must abide by UAE labour law, which indicates that payroll systems must be kept in good working order to facilitate the timely processing of employee payments. The payroll calculation procedure may vary due to differences in organisational regulations, automated systems, or outsourced payroll processing options.

Steps in payroll processing

1. Collect Employee Information

Include the following information about your employees:

  • Personal details
  • Job details
  • Salary
  • Payable allowance type
  • Allowance amounts

This information must be updated frequently, particularly as the employees’ earnings change or increase, as it is required for processing payroll. Each employee’s payroll records need to be kept up to date.

2. Calculate each employee’s gross wage

Each employee’s gross wage must be calculated before the end of each pay period. As a result, to determine the employee’s gross wage, the basic salary and allowance amount are added and the total is then updated in the payroll records.

3. Calculate employee’s overtime pay

Employees who work extra time beyond their regular working hours should be compensated.

In UAE, there are two types of overtime: Normal overtime and Friday overtime. Determine the number of overtime hours your employees worked for each pay period.

4. Add extra allowances

The extra allowances are added after the overtime is determined. A lot of employees receive extra payments each month for things like sales commissions, bonuses, and more. The type of allowances each employee receives must be known for the pay period.

5. Calculate salary deductions

Salary deductions may be made for violations, absence, fines, etc. You can figure up the deductions by adding all required deductibles. The total deductions must then be reduced from the employee’s allowances and the entire gross salary.

6. Make salary statements and payslips

The summaries of all the payments made to your employees are reported in salary statements. You should provide them with everything they need to know about the salary components while preparing the payslip. Here are some of them:

  • Basic Salary
  • Payroll Deductions
  • Absences
  • Overtime
  • Allowances

Pay slips must be generated for each employee. These payslips for each employee will help them keep track of the salaries that have been paid each month. Additionally, the preparation of these payslips for the workers includes their wage calculations. A record must be kept for each pay period so that it provides your business with complete knowledge of the payments made to the employees.

7. WPS file

The final step of the payroll process is creating the WPS sif report. The Ministry of Labour established the WPS SIF file format, which is used by practically all banks and exchanges in the UAE. Transferring employee wages between bank or exchange accounts is done using the SIF file.

This method is used by every bank and financial institution in the United Arab Emirates, though some of them demand customised file formats for salary transfer files.