What Are the Employer Responsibilities in the UAE for Ensuring Compliance in Salary Payment?


Question:

What Are the Employer Responsibilities in the UAE for Ensuring Compliance in Salary Payment?

Answer:

The UAE’s labour landscape has undergone a significant transformation with the implementation of Federal Decree-Law No. 33/2021, which focuses on the Regulation of Labour Relations. One of its key objectives is to ensure that employees receive their salaries promptly and accurately, thereby encouraging transparency and equity in the workplace.

This article comprehensively explores the essential obligations employers must fulfil under the new labour law, including the Wage Protection System (WPS), particulars of annual leave salary calculations, dispute resolution, and safeguarding employees’ rights against arbitrary termination.

Salary Payment Compliance:

In the dynamic labour landscape, the prompt and precise payment of salaries holds significance for both employers and employees.

  1. Wage Protection System (WPS):

    This system mandates that businesses registered with the Ministry of Human Resources and Emiratisation (MoHRE) utilize the WPS for salary payments. Non-compliance carries penalties, including work permit suspensions until full salary payment is realized. The Decree’s provisions establish escalating penalties for delayed wage disbursements, highlighting the importance of adherence to this requirement.

    The Ministry of Human Resources and Emiratisation (Mohre) has introduced stringent penalties against employers who neglect timely wage payments. The electronic salary transfer system offered by WPS ensures transparency and accountability in payment processing, benefiting both employers and employees alike.

  1. Timely Payment of Post-Termination Entitlements:

    Article 53 of the UAE Labour Law underscores the significance of promptly compensating workers upon the conclusion of their contracts. Employers are obligated to settle all outstanding payments, including remuneration, within 14 days from the contract termination date.

    This encompasses end-of-service benefits, allowances, and other entitlements stipulated within the employment agreement. Failure to adhere to these provisions may result in penalties.

Calculation Methods for End-of-Service Gratuity (EOSG):

  • Emirati Employees: The calculation of End-of-Service Gratuity (EOSG) for Emirati employees is rooted in the laws governing pensions and social security.
  • Expatriate Employees: Full-time expatriate employees with a continuous employment period of one year or more are entitled to EOSG based on their basic salary. This calculation follows a structured pattern:
  • 21 days’ salary for the first five years of employment.
  • 30 days’ salary for each subsequent year of employment.
  • The cumulative EOSG cannot exceed two years’ salary.

Additionally, any outstanding amounts owed by employees to the employer can be deducted from their EOSG. These deductions encompass loans, excessive payments, penalties for violations committed by the employee, debts arising from court judgments, and costs related to repairing damages caused by the employee’s failure to adhere to workplace regulations.

  1. Dispute Resolution and Wage Deductions:

    The legislation introduces a structured framework for addressing salary-related disputes. In instances where conflicts arise between employers and employees concerning pay or entitlements, either party can seek mediation from the Ministry of Human Resources and Emiratisation.

    This mediation process assumes an essential role in facilitating resolution, thereby ensuring that disputes are resolved fairly and expeditiously.

    Additionally, the law outlines acceptable wage deductions, permitting employers to deduct up to 20% of an employee’s wage to recover entitlement advances, with a maximum of 50% of the total wage. If any dispute arises regarding these deductions, the Ministry provides an official channel for employees to voice their concerns and seek resolution.

Navigating the Path to Compliance:

The journey to compliance involves several strategic steps:

  1. Contract Review: Employers must update employment contracts to align with Federal Decree-Law No. 33/2021, considering shifts in employment relationships. Notably, the UAE has extended the deadline for private sector companies to transition from unlimited-term employment contracts to fixed-term ones.

    The Ministry of Human Resources and Emiratisation (MoHRE) has set the new deadline as December 31, 2023, as opposed to the initial February 2 date.
  1. Transparent Payroll Procedures and Comprehensive Policies: Employers should establish transparent payroll processes that accurately reflect wages and deductions. Employers should draft and communicate workplace policies that encompass various aspects, such as salary payments, deductions, and dispute resolution.

    Comprehensive policies provide employees with a clear understanding of their rights and entitlements, minimizing potential conflicts and ensuring smoother operations within the organization.
  1. Organizational Work Rules: Employers must provide rules governing work organization, including work instructions, penalties, promotions, rewards, and other regulations, under the law.
  1. Maintain Accurate Records: Employers must maintain accurate employee records for at least two years following service termination, following Federal Decree-Law No. 33/2021. Maintaining detailed records of employment-related matters, including salary payments and deductions, serves as a critical reference point for resolving disputes and demonstrating compliance with the law.
  1. Mandatory Subscription to ILOE Scheme: Employers should ensure that employees are familiar with the Involuntary Loss of Employment (ILOE) insurance scheme to ensure compliance and prevent potential fines.

Establishment owners may be subject to significant fines in case of non-compliance with salary payment regulations.

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