When can an Employer Deduct Salary in the UAE?


Question:

When can an employer deduct salary in the UAE?

Answer:

Employers in the UAE may have the authority to deduct an employee’s salary under specific circumstances governed by Federal Decree-Law No. 33/2021, Cabinet Decision No. 1/2022, Ministerial Resolution No. (598) of 2022.

These laws and regulations provide a comprehensive framework that balances employees’ rights with the employer’s ability to manage their workforce effectively.

Conditions for Salary Deductions: According to Article 25 of Federal Decree-Law No. 33/2021, here are the conditions under which an employer can deduct salary:

  1. Loan Repayment with Consent: Employers may deduct amounts from an employee’s salary to repay loans granted to the employee, but this requires the written consent of the employee, and such deductions should not carry any interest.
  1. Recovery of Overpaid Amounts: If an employee has received payments exceeding their actual salary amount, an employer may deduct these excess amounts. However, this deduction should not exceed 20% of the employee’s remuneration.
  1. Retirement Contributions and Insurances: Employees may have amounts deducted from their salary to calculate contributions to retirement pensions, benefits, and insurances under UAE law.
  1. Provident Fund Contributions and Loans: Deductions may be made for the employee’s contributions to the company’s provident fund or loans related to the fund, as long as these deductions are approved by the Ministry.
  1. Participation in Social Projects: Employers may deduct premiums for social projects or other benefits and services, but only if the employee agrees in writing to participate in such projects.
  1. Penalties for Violations: In cases where employees commit violations, according to the list of penalties in force in the company and approved by the Ministry, deductions may be made, provided they do not exceed 5% of the remuneration.
  1. Debts in Accordance with Judicial Decisions: When an employee has debts due as a result of a judicial decision, deductions may be made, with a maximum of a quarter of the remuneration, except for alimony debt, which may exceed this limit. In case of multiple debts, the amounts are distributed according to priority.
  1. Damage Compensation: Employers may deduct amounts required to repair damage caused by the employee’s fault or violation of the employer’s instructions, which led to the destruction, damage, or loss of tools, machines, products, or materials owned by the employer. However, the deduction should not exceed the equivalent of 5 days of salary per month, and any amount exceeding this limit requires approval from a competent court.
  1. Cumulative Deductions: If multiple reasons for deduction exist, the total deductions from the salary should not exceed 50%.

Disciplinary Penalties: Article 39 may allow employers to impose various disciplinary penalties on employees who violate labour laws. These penalties range from written notices and warnings to suspension and dismissal while preserving the worker’s end-of-service gratuity.

Temporary Suspension from Work: Under Article 40, employers can temporarily suspend employees from work for disciplinary investigations, but not exceeding 30 days. Half of the worker’s salary is suspended during this period, with the suspended amount paid if the investigation ends favourably for the worker.

Specific Rules for Imposing Disciplinary Penalties: A disciplinary penalty may only be imposed for an act related to work, and only one penalty may be imposed for a single violation, as per Article 41.

Furthermore, Article 29 of Cabinet Decision No. 1/2022 also addresses deductions from end-of-service benefits. Employers may deduct from an employee’s end-of-service benefits for specific reasons, such as recovering loans or excess payments, calculating rewards, retirement pensions, and insurance contributions. The employer must adhere to specific procedures and timelines for these deductions.

As per Ministerial Resolutions No. 598/2022 regarding the Wage Protection System, employers must ensure that employees receive their wages following agreed-upon terms. To comply with these regulations, more than 80% of the total wages must be transferred to employees. Additionally, if any legal deductions are made, employees are considered wage recipients if they receive 80% or more of their registered wage.

Recent updates within the Wage Protection System, have strengthened workers’ rights. The resolution specifies that employees should receive a minimum of 80% or 90% of their wages, depending on the circumstances. Legal deductions, if made, require proof to be provided upon request, ensuring greater protection for workers’ rights.

In summary, employers in the UAE must follow specific rules when deducting an employee’s salary, as outlined in various laws and regulations. Both employers and employees should be aware of these rules to ensure they are followed appropriately and to address any disputes related to salary deductions.

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