How to Run Payroll in The United Arab Emirates: Employment Taxes & Setup

Milani Notshe

Research Specialist

Last Updated

February 13, 2026

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Running payroll in The United Arab Emirates involves many moving parts before your team sees money land in their accounts. Each month you need to calculate gross-to-net correctly, apply statutory withholdings and employer contributions, issue compliant payslips, plus file and remit on schedule. If anything slips through the cracks, you could face penalties, back-pay exposure, and unnecessary friction with your people.

If you’re hiring in The United Arab Emirates, whether you’re building a local presence or expanding your global footprint, this guide is for you. We’ll walk through the choices and compliance requirements that have the biggest impact on your speed and risk, from entity vs. no-entity hiring to worker classification and the statutory bodies you’ll interact with along the way. By the end, you’ll know exactly what to expect and how to keep payroll running smoothly, wherever you’re hiring.

Key Takeaways

Payroll cycle: Employers in the UAE typically process payroll on a monthly basis.

Tax filing: The UAE does not impose personal income tax, so there is no monthly payroll tax filing requirement.

Employer taxes: Employer obligations mainly consist of end-of-service gratuity and, where applicable, social security contributions for GCC nationals.

Tax year: The absence of individual income tax means there is no formal payroll tax year for employees.

Payroll processing methods: Payroll is commonly run through electronic systems, with many employers required to use the Wage Protection System (WPS) to disburse salaries.

How to Choose Your Payroll Structure in The United Arab Emirates

Expanding into The United Arab Emirates? Building a compliant payroll setup involves much more than simply paying salaries. You’ll be responsible for employment compliance, monthly tax and social declarations, and mandatory benefits. Even small delays in filings or payments can lead to real penalties.

You have several operating models to choose from to make this easier. The right one depends on your legal footprint, your appetite for risk, and how quickly you need to start hiring. Let’s break down the main options and when to use each.

1. No Local Entity in The United Arab Emirates: Use an Employer of Record (EOR)

If you don’t yet have a legal entity in The United Arab Emirates, an Employer of Record is usually the fastest and lowest-risk way to hire. An EOR becomes the legal employer on paper, provides locally compliant employment contracts, and manages payroll under local regulations, while you continue to direct the work and manage performance.

This model is ideal for:

Testing a new market
Hiring your first team members
Scaling a distributed workforce without building local infrastructure,

Why it’s the fastest and least risky option:

You skip the lengthy process (and cost) of setting up an entity.
All local registrations, monthly declarations, and statutory payments are handled by a provider already set up in-country, dramatically reducing your compliance risk.

2. You Have a The United Arab Emirates Entity: Run In-Country Payroll

If you already operate a local entity, or you’re planning to establish one, running payroll directly gives you maximum flexibility and control. You can set your own policies, design benefits, and align payroll closely with your finance and internal approval processes. But this also comes with greater operational responsibility.

What you’re responsible for:

Registering with relevant authorities and maintaining compliance with statutory bodies (often involving CSS/IPRES or similar local institutions).
Accurately calculating and remitting payroll taxes and contributions every month – plus handling year-end requirements.
Issuing compliant payslips and maintaining audit-ready payroll documentation.

When this option makes sense:

You’re hiring at scale and want payroll fully “in-house,” even if you partner with a local provider for execution.
You need deeper integration with finance systems or custom benefit structures.

If you want to keep the entity but offload the admin, many employers choose global payroll services to handle calculations, filings, and payments while they remain the legal employer.

3. Contractors Only: Use Contractor Management

Paying independent contractors is often simpler than setting up full payroll, especially for short-term or highly specialized work.

However, you need to watch out for misclassification risk. In The United Arab Emirates, as in many jurisdictions, someone may legally qualify as an employee based on how they work – not what their contract says. If they’re under your direction, working like an employee, you may be responsible for full employer obligations.

When contractor payments work well:

You need specialised expertise for a defined scope or timeframe
The contractor operates independently, not under your control or supervision

You can also use contractor management services to streamline compliant contracts, invoicing, and payments.

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What To Know About Payroll Processing In The United Arab Emirates

Payroll in the United Arab Emirates focuses less on income tax withholding and more on statutory social security for eligible nationals, end-of-service benefits, and strict wage payment rules. You are responsible for managing pension contributions for UAE and other GCC nationals, complying with the Wage Protection System (WPS), and keeping accurate payroll records for inspections by the Ministry of Human Resources and Emiratisation (MOHRE) and relevant pension authorities. Requirements can differ by emirate, employee nationality, and whether staff are in a free zone or onshore, so your processes must be tailored rather than one-size-fits-all.

Non-compliance can trigger fines, WPS blocks that prevent new work permits, reputational damage with employees, and in serious cases suspension of operations or legal action. This guide walks you through how to structure payroll calculations, handle statutory pension and benefits, meet payment deadlines, and choose the right setup whether you operate via your own entity or an Employer of Record. It will also help you understand which rules apply to your workforce segments and how to keep documentation ready for audits.

Types Of Payroll Taxes In The United Arab Emirates

In the United Arab Emirates, payroll compliance centers on social security for UAE and GCC nationals, mandatory wage transfer rules, and end-of-service benefits rather than classic income tax. You still need clear processes to calculate contributions, fund benefits, and prove timely payment to MOHRE, the General Pension and Social Security Authority (GPSSA) or local pension funds, and free zone authorities.

Social Security Contributions For UAE And GCC Nationals

Social security for eligible UAE nationals working in the private sector is administered mainly by GPSSA at a combined rate of 20% of contributable salary, with 12.5% paid by the employer and 5% by the employee, and the federal government adding 2.5%. In Abu Dhabi, the combined rate is typically 26% with around 15% from the employer and 5% from the employee, while some other emirates and GCC nationals follow slightly different local pension fund rules and salary caps.

Employers must register eligible staff with the relevant pension authority, calculate contributions on the approved salary base, and remit payments monthly, usually by the end of the following month. Late or incorrect payments can lead to penalties, surcharges, and potential refusal of government services until arrears are cleared.

Wage Protection System (WPS) Compliance

The Wage Protection System is an electronic salary transfer system overseen by MOHRE that requires most onshore private-sector employers to pay salaries in UAE dirhams through approved banks or exchange houses. While WPS is not a tax, it is a core payroll obligation because it validates that employees receive at least their contracted wage on time.

Employers must upload salary files each pay cycle, typically monthly, matching MOHRE contract data and showing gross pay, deductions, and net pay. Failure to comply can result in automatic fines, suspension of new work permits, and potential downgrading of the company’s MOHRE classification until issues are resolved.

End-Of-Service Gratuity Accruals

End-of-service gratuity is a statutory lump-sum benefit for most expatriate employees who complete at least one year of continuous service, calculated as a multiple of the final basic salary and years of service. While not a recurring tax, it functions like a deferred payroll cost that employers should accrue monthly to avoid cash flow shocks when employees leave.

For employees under the traditional regime, gratuity is generally 21 days of basic pay per year for the first five years and 30 days per year thereafter, subject to caps and any alternative savings schemes in certain free zones. If you miscalculate or fail to pay gratuity on termination, employees can file claims with MOHRE or free zone authorities, leading to orders for back payment and potential penalties.

How To Pay Employees In The United Arab Emirates

Most employers in the United Arab Emirates pay salaries monthly in UAE dirhams via bank transfer, with onshore companies typically required to use the Wage Protection System for eligible employees. You should align your payroll cut-off so that salaries reach employees no later than the agreed payday, as delays can trigger WPS non-compliance flags and employee complaints.

If you do not have a local entity, you can engage an Employer of Record to hire and pay staff compliantly, or set up a local entity and bank account to run payroll directly or via a payroll provider. Payslips are not always mandated by statute, but best practice is to issue them electronically with at least gross salary, allowances, overtime, statutory deductions, net pay, and leave balances so employees can verify their pay.

Payment Method: Use UAE bank transfers and WPS-compliant salary files for most onshore employees.
Currency: Pay salaries in UAE dirhams unless a free zone contract explicitly allows another currency and you manage FX risk.
Pay Frequency: Run payroll monthly and ensure funds reach employees within the contractual timeframe recorded with MOHRE.
No-Entity Hiring: Use an Employer of Record if you need to hire quickly without setting up a local company and bank account.
Payslip Content: Include gross pay, itemised allowances, overtime, deductions, social security where applicable, and net pay.
Bank Setup: Open a corporate bank account in the UAE and register with WPS before onboarding your first employees.
Record Keeping: Store payroll records, contracts, and WPS files securely for at least several years for inspection by authorities.

Payroll Set Up Checklist (Entity Vs No-Entity)

Getting payroll set up correctly in the United Arab Emirates is critical because your ability to obtain and renew work permits depends on clean records with MOHRE, immigration, and pension authorities. The process differs significantly depending on whether you operate through your own legal entity or rely on an Employer of Record to handle local compliance.

With your own entity, you must register for labour and immigration systems, open a UAE bank account, and configure WPS and pension contributions where applicable. Without an entity, an Employer of Record becomes the legal employer, running payroll, sponsoring visas, and ensuring compliance while you manage day-to-day work and costs.

Incorporation: Choose onshore or free zone registration and obtain your trade licence before hiring.
Labour Registration: Register with MOHRE or the relevant free zone authority to issue employment contracts and work permits.
Pension Registration: Enrol eligible UAE and GCC nationals with GPSSA or the relevant local pension fund and confirm contribution rates.
Bank And WPS Setup: Open a corporate bank account and register for the Wage Protection System to process salary files.
Payroll Policies: Define pay dates, allowances, overtime rules, and end-of-service gratuity policy aligned with UAE labour law.
Data Collection: Gather passports, Emirates IDs, visas, contracts, salary details, and bank IBANs for all employees.
System Configuration: Configure payroll software to handle multi-nationality rules, pension, gratuity accruals, and WPS output files.
No-Entity Option: If you are not ready to incorporate, appoint an Employer of Record to hire and pay staff on your behalf.

Example Of Salary Tax Calculation

Assume a UAE national employee in Dubai earns a monthly gross salary of AED 20,000, with the full amount treated as contributable salary for GPSSA purposes. There is no personal income tax, but you must calculate social security contributions for both employer and employee and accrue end-of-service gratuity for any expatriate staff on your books.

For this employee, the combined GPSSA rate is 20%, with 12.5% paid by you and 5% deducted from the employee, while the federal government contributes 2.5% separately. You would also track any allowances, overtime, and deductions to ensure the WPS file matches the contractual salary and statutory contributions.

Step 1 – Determine Contributable Salary: Confirm the basic salary and any pensionable allowances that form the GPSSA base, here AED 20,000.
Step 2 – Calculate Employer Share: Apply 12.5% to AED 20,000, giving an employer contribution of AED 2,500.
Step 3 – Calculate Employee Share: Apply 5% to AED 20,000, deducting AED 1,000 from the employee’s salary.
Step 4 – Compute Net Pay: Subtract the AED 1,000 employee contribution and any other deductions from gross to arrive at net pay.
Step 5 – Record And Remit: Record both contributions in payroll and remit the total due to GPSSA by the required monthly deadline.

Submitting Employee Tax In The United Arab Emirates

In the United Arab Emirates, you submit social security contributions and payroll-related filings primarily through online portals and bank transfers managed by GPSSA, local pension funds, and MOHRE or free zone authorities. You will need your company registration details, employer account numbers with each authority, employee identifiers, salary data for the payroll period, and confirmation of the amounts due.

Online Pension Portals: Use GPSSA or local pension fund portals to upload contribution data and generate payment references.
Bank Transfers: Pay contributions via UAE bank transfer using the reference numbers and beneficiary details provided by the pension authority.
WPS Salary Files: Submit WPS files through your bank or exchange house channel to confirm timely salary payments.
Payroll Software Integration: Configure payroll software to export WPS-compliant files and pension reports directly from your payroll runs.
Third-Party Providers: Engage a local payroll provider or Employer of Record to manage submissions if you lack in-house expertise.

Payroll Tax Due Dates In The United Arab Emirates

Tax Type	Due Dates
GPSSA Social Security Contributions (Federal)	Monthly, typically due by the end of the following month after payroll.
Abu Dhabi Pension Fund Contributions	Monthly, generally due by the 15th to end of the following month depending on fund instructions.
Wage Protection System (WPS) Salary File Submission	Monthly, salaries must be paid within 10 days after the contractual payday recorded with MOHRE.
Free Zone Payroll Reporting (where applicable)	Monthly or quarterly, according to the specific free zone authority’s schedule.
Annual Payroll Reconciliation / Employee Statement (where required by pension funds)	Annually, typically within the first quarter following the calendar year.
End-Of-Service Gratuity Settlement On Termination	On or shortly after the employee’s final working day, as required by UAE labour law.

Running Payroll Processing in The United Arab Emirates

So, what does it actually take to run payroll in The United Arab Emirates? It involves calculating monthly salaries, applying the right statutory deductions, and making sure your team gets paid accurately and on time, while staying fully compliant with local tax and labour laws.

Let’s walk through what that looks like in practice:

Monthly Payroll Workflow

Gather all the essentials: hours worked, leave taken, new joiners, leavers, and any salary or benefit changes.
Double-check timesheets, leave balances, overtime, and any variable pay to make sure everything is accurate.
Work out gross earnings, including base salary, bonuses, commissions, and allowances.
Apply mandatory and voluntary deductions, like income tax, pension contributions, benefits, and any company-specific deductions. Then, calculate net pay after all deductions.
Run internal reviews, compare with previous payroll cycles, and get the necessary approvals.
Pay employees via bank transfer and share payslips through email or your payroll system.
Send statutory payments and required reports to tax authorities.
Update your records and ensure payroll entries flow correctly into your accounting system.
Share payroll summaries with finance and address any open questions or discrepancies.

How Playroll Streamlines Processing

Keeping track of all these steps, especially in a new market, is no easy task. Regulations change, requirements shift, and it’s easy for things to fall through the cracks. Playroll makes this effortless by managing the entire payroll process for you: onboarding employees, handling calculations and deductions, issuing payslips, transferring funds in Dirham, and taking care of statutory filings and compliance.

Income Tax And Social Security In The United Arab Emirates

Understanding the tax obligations for both employers and employees is crucial when operating in The United Arab Emirates's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in The United Arab Emirates.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 12% – 16% on top of the employee salary in The United Arab Emirates. The exact percentage depends on whether you employ UAE or GCC nationals, which emirate they are registered in, and whether any additional insurance or savings schemes apply.

Tax Type	Tax Rate
GPSSA Pension Contribution – Employer Share (Most Emirates)	12.5% of contributable salary for eligible UAE nationals.
Abu Dhabi Pension Fund – Employer Share	Approximately 15% of contributable salary for eligible UAE nationals in Abu Dhabi.
GCC Nationals Pension – Employer Share	Varies by home country scheme, typically around 10% – 15% of contributable salary.
Work Injury Insurance / Workers’ Compensation	Rate set by insurer, often around 1% – 3% of payroll depending on risk profile.
Unemployment Insurance (Job Loss Scheme) – Employer Cost	Usually employee-funded in practice, but some employers choose to reimburse at 0.5% – 1% equivalent.
End-Of-Service Gratuity Accrual (Expatriates)	Commonly accrued at an effective 4% – 8% of monthly basic salary depending on tenure assumptions.

Employee Payroll Tax Contributions

In The United Arab Emirates, the typical estimation for employee payroll contributions cost is around 5%. This mainly affects UAE and GCC nationals who contribute to pension schemes, while expatriate employees generally do not pay income tax or social security through payroll.

Tax Type	Tax Rate
GPSSA Pension Contribution – Employee Share (Most Emirates)	5% of contributable salary for eligible UAE nationals.
Abu Dhabi Pension Fund – Employee Share	5% of contributable salary for eligible UAE nationals in Abu Dhabi.
GCC Nationals Pension – Employee Share	Varies by home country scheme, typically around 5% – 7% of contributable salary.
Unemployment Insurance (Job Loss Scheme)	Low fixed premium per month or around 0.5% of salary within capped bands.
Voluntary Private Pension / Savings Plans	Optional contributions as per plan rules, often 3% – 10% of salary.
Other Statutory Payroll Deductions	Generally none for expatriates beyond agreed deductions such as advances or benefits.

Individual Income Tax Contributions

Individual income tax is not levied on employment income in the United Arab Emirates, so employees do not pay progressive income tax through payroll. This simplifies net pay calculations but increases the importance of correctly handling pensions, insurance, and end-of-service benefits.

Income Bracket	Tax Rate
0 – 60,000 AED per year	0%
60,001 – 120,000 AED per year	0%
120,001 – 240,000 AED per year	0%
240,001 – 480,000 AED per year	0%
Above 480,000 AED per year	0%

Pension in The United Arab Emirates

Pension in the United Arab Emirates is mandatory for eligible UAE and GCC nationals, with contributions shared between employer, employee, and in some cases the government, and benefits administered by GPSSA or local pension funds such as the Abu Dhabi Pension Fund. Expatriate employees are generally covered instead by end-of-service gratuity or, in some free zones, by workplace savings plans that function like defined-contribution pensions.

Managing Common Payroll Challenges in The United Arab Emirates

Global employers operating in The United Arab Emirates often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in The United Arab Emirates.

Maintaining Accurate And Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date –including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping up with ever-changing tax laws & Compliance Laws

In The United Arab Emirates, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

How Playroll Can Streamline Payroll & Taxes In The United Arab Emirates

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.

Disclaimer

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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