How to Calculate Payroll in the UAE (2026 Guide)

How do you calculate an employee's monthly pay in the UAE?

Work from the MOHRE contract in five steps. First, take the basic salary. Second, add the allowances written in the contract — housing and transport are the usual ones. Third, add overtime for the month (worked out below). Fourth, subtract any deductions the employee has agreed to, such as a salary advance repayment or a loan instalment. Fifth, check the result: with no income tax, that net pay is what the employee receives, and it is the figure that goes into the WPS file.

Worked example — one expatriate employee in a single month. Basic salary AED 8,000 a month, housing allowance AED 3,000, transport allowance AED 1,000, so the package is AED 12,000. The employee worked 10 hours of daytime overtime: the hourly basic rate is AED 8,000 ÷ 30 ÷ 8 = AED 33.33, and daytime overtime pays 125% of that, so AED 41.67 an hour — AED 416.67 for the 10 hours. Gross pay for the month is AED 12,416.67. The employee is repaying a salary advance of AED 500, so net pay is AED 11,916.67, rounded to AED 11,917 for the WPS transfer.

Note the last line: the gratuity accrual is not deducted from the employee — it is a cost the employer sets aside each month so the lump sum is funded when the employee leaves. At 5.83% of basic salary a month, a year of accrual is 21 days' pay, which is exactly the first-five-years gratuity rate. Our payroll calculator guide covers the same gross-to-net steps for any country, and the UAE salary calculator runs the employee-side figures.

How is overtime calculated in the UAE?

Overtime pay in the UAE is calculated on basic salary only — allowances are excluded. The hourly basic rate is the monthly basic salary divided by 30 days, divided by 8 hours. Standard working hours are 8 hours a day and 48 hours a week, and an employer may ask for up to 2 extra hours a day. Daytime overtime pays the hourly basic rate plus 25% (125% of the rate). Overtime between 10pm and 4am pays the hourly rate plus 50% (150%). Work on the weekly rest day is paid with a substitute day off, or the day's wage plus 50%.

Worked example: on a basic salary of AED 6,000, the hourly rate is AED 6,000 ÷ 30 ÷ 8 = AED 25.00. Eight hours of night overtime pay AED 25.00 × 1.50 × 8 = AED 300, and eight hours of daytime overtime pay AED 25.00 × 1.25 × 8 = AED 250. The 10pm–4am rate does not apply to workers on regular night shifts. During Ramadan, daily working hours are reduced by two hours. Our overtime pay guide walks through the same calculation step by step for any pay period.

What is the Wages Protection System (WPS)?

The Wages Protection System (WPS) is the electronic system through which MOHRE-registered employers must pay salaries in the UAE. Instead of paying cash or an ordinary bank transfer, the employer sends each month's salaries through a bank, exchange house or financial institution approved by the UAE Central Bank, which reports every payment to MOHRE. The employer submits a Salary Information File (SIF) each month listing every employee's Emirates ID, basic salary, allowances and pay period, so MOHRE can see in real time that each worker was paid in full and on time.

The deadline changed in 2026. Under Ministerial Resolution No. 340 of 2026, salaries for a month are due on the 1st day of the following month, and an employer is treated as compliant when at least 85% of total wages have been paid on time. The old 10-day grace period after the due date no longer applies, so a short delay now triggers the enforcement sequence automatically.

A few workers sit outside WPS — for example, staff reported for work abandonment and employees on documented unpaid leave. Some free zones run their own arrangements, so always check the rules of the zone that issued the licence. For everyone else, the rule is simple: pay through WPS, on the 1st, in full.

How is end-of-service gratuity calculated in the UAE?

End of service gratuity is a lump sum every expatriate private-sector employee earns on leaving, and it is the biggest single payroll obligation most UAE employers carry. Under Article 51 of Federal Decree-Law No. 33 of 2021, an employee who has completed at least one year of continuous service is entitled to 21 days' basic wage for each year of the first five years, and 30 days' basic wage for each year after that. The calculation uses the last basic wage, not an average, and the total cannot exceed two years' wage. The employer must pay it, with all other final entitlements, within 14 days of the contract ending (Article 53).

Two points catch people out. First, the daily rate is the monthly basic salary divided by 30 — that is the convention MOHRE and the market use; the law itself states the entitlement in days. Second, resigning no longer reduces gratuity: the old law cut the entitlement to one-third or two-thirds when an employee resigned early, but those reductions were abolished by the 2021 law, so resignation now pays in full. Unpaid leave does not count as service, and part years count pro rata once the one-year minimum is passed.

Worked examples, all on the last basic wage. Three years on AED 8,000 basic: AED 8,000 ÷ 30 = AED 266.67 a day, times 21 days times 3 years = AED 16,800. Seven years on AED 10,000 basic: the first five years give 105 days (AED 35,000) and years six and seven give 60 days (AED 20,000), for a total of AED 55,000 — well under the two-year cap of AED 240,000. Ten years on AED 10,000 basic: 105 days plus 150 days is 255 days, or AED 85,000.

Smart employers accrue for it monthly instead of facing the lump sum at the end: 21 days a year is 5.83% of basic salary a month for the first five years, rising to 8.33% a month (30 days a year) from year six. DIFC works differently — it replaced gratuity with the DEWS workplace savings scheme on 1 February 2020, under which the employer contributes 5.83% of basic salary a month for under five years' service and 8.33% from five years. Since Cabinet Resolution No. 96 of 2023, mainland employers may also opt into an approved savings scheme at a 5.83% basic subscription instead of paying gratuity at the end. Emirati employees do not receive gratuity at all — their end-of-service benefit is the GPSSA pension, covered next.

What are the GPSSA pension contributions?

The General Pension and Social Security Authority (GPSSA) runs the pension scheme for UAE national employees in the private sector. Expatriate employees are not covered — they receive gratuity instead — and GCC nationals working in the UAE are covered by their own country's pension system. Every employer must register its Emirati staff with GPSSA and contribute monthly, and the rates depend on when the employee first joined the scheme.

*The government's 2.5% applies when the contribution salary is under AED 20,000; above that, the employer absorbs it, so the employer's share becomes 15% for pre-2023 members and stays at 15% for new members. Worked example — an Emirati employee who joined before 31 October 2023 on a contribution salary of AED 18,000: the employee pays 5% (AED 900), the employer pays 12.5% (AED 2,250) and the government pays 2.5% (AED 450), for a total of AED 3,600 a month. The same employee under the post-October 2023 rules would pay 11% (AED 1,980), the employer 12.5% (AED 2,250) with the government's 2.5% (AED 450), for a total of AED 4,680 a month. The employee's 5% or 11% is the only deduction an Emirati employee sees on a UAE payslip — there is still no income tax.

What is the monthly payroll checklist?

UAE payroll runs as a monthly cycle with four phases: collect the inputs, calculate, pay through WPS, then issue payslips and keep records. Missing a phase is how fines happen, so run the same list every month.

• Step 1 — Collect inputs. Attendance, overtime hours, leave taken, new joiners and leavers, and any agreed deductions such as advance repayments.
• Step 2 — Calculate each employee. Basic salary plus allowances plus overtime, minus deductions — and check the basic-versus-allowances split against the MOHRE contract before you finalise anything.
• Step 3 — Add the employer costs. Gratuity accrual at 5.83% of basic salary (8.33% from year six) and GPSSA contributions for Emirati staff, on the right tier.
• Step 4 — Build the SIF and pay. Generate the Salary Information File and transfer salaries through WPS so at least 85% of total wages land by the 1st of the month.
• Step 5 — Issue payslips and file. Give every employee a payslip showing basic, allowances, overtime, deductions and net pay, and archive the SIF and payment confirmations — MOHRE can ask for them.

Five common mistakes in UAE payroll

• Calculating gratuity on the total package. Gratuity is on basic salary only. Using basic plus allowances overstates the entitlement by thousands of dirhams over a few years.
• Paying salaries outside WPS. Cash or ordinary transfers do not count as WPS payment, and MOHRE treats the wages as unpaid — with the permit and fine sequence that follows.
• Using the old 10-day WPS grace period. Since Ministerial Resolution No. 340 of 2026, salaries are due on the 1st of the month with an 85% threshold. Paying on the 10th is now late.
• Applying the old resignation fractions to gratuity. The one-third and two-thirds cuts belonged to the pre-2022 law. Under Federal Decree-Law No. 33 of 2021, resignation pays gratuity in full.
• Using the wrong GPSSA tier. Employees who first joined before 31 October 2023 are on the 20% scheme; new joiners are on the 26% scheme. Mixing them up underpays the pension by 6% of salary every month.