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How Overtime is calculated as per UAE Labour Law

In every country, labour laws are intended to protect employees from being taken advantage of by their employers.

The overtime law is intended to stop companies from forcing employees to work excessively long hours. Any additional time worked longer than the usual number of hours is considered overtime. Employees receive an additional payment for working beyond the regular working hours.

When the job necessitates an employee to work longer than the usual number of hours, the employee is compensated with the normal hourly rate plus at least a 25% bonus. Private sector workers frequently have to put in extra time and work past their regular shifts to increase productivity and meet company goals. Employers cannot demand an employee to work overtime, the employee’s consent is essential.

Formula for calculating overtime

One hour payment = basic salary × 12/365 days × 1/8 hours …………………. (1)

One hour overtime = 1 hour payment + 25% of 1 hour payment ……………………. (2)

Total Overtime Payment = Total Overtime hours × One hour overtime …………………. (3)

Example:

Let an employee’s basic salary equals AED 2,800 and works 120 hours a month.

Basic Salary = 2800 AED

Total overtime hours = 120

Therefore, overtime is calculated as follows:

2800 × 12/365 × 1/8 = 11.50 normal hour payment …………….using formula (1)

11.50+ 25% × 11.50 = 14.375 per hour overtime …………….using formula (2)

Total Overtime Payment = total overtime hours × per hour overtime pay

= 120 × 14.375 = 1725 AED …………….using formula (3)

Monthly Payment = Basic Salary + Total Overtime Payment ………………………..(4)

= AED 2,800 + AED 1,725

= AED 4,525 monthly payment.

Calculating overtime during public holidays

Total Overtime pay = Basic salary × 12/365 × 1/8 × Total Overtime hours × 1.5 ……………….(5)

The employee must get one extra day off. The employee must receive a bonus equal to 150% of their basic salary if the employer does not provide an off day.

Example:

Let an employee’s basic salary equals AED 2,800 and worked 8 hours overtime.

= 2800 × 12/365 × 1/8 × 8 × 1.5 ……………..using formula (5)

= 138 (8 hours pay + 1 day off)

Calculating overtime on Friday or off-day

In the UAE, the calculation for overtime on Friday is different. The company has two alternatives if they want to make an employee work on Friday or a holiday. The first is to grant an additional day off or pays a basic salary plus 50% over normal working hrs. No employee may work more than two consecutive off days, except for daily wage workers.

Overtime = Basic salary × 12/365 × 1/8 × total overtime hours × 1.5 or an additional Day off……….(6)

Example:

Let an employee’s basic salary equals AED 2,600 and did 12 hours of overtime on Friday.

= 2600 × 12/365 × 1/8 × 12 × 1.5 ……………using formula (6)

= 192 (12 hours overtime payment)

Reference:

U.A.E. LABOUR LAW

FEDERAL LAW NO. (8) OF 1980

LABOUR LAW AND ITS AMENDMENTS 2001