Payroll basics for small businesses in the UAE: what every owner should know

UAE employment contracts usually split pay into basic salary and allowances such as housing, transport and other allowances. The split matters. End-of-service gratuity for expatriate employees is calculated on basic salary only, excluding housing, transport, utilities and similar allowances, according to the u.ae summary of Article 51 of the Labour Law.

Our view: set a sensible, consistent split from the start and document it in every offer letter. Re-structuring later to reduce gratuity cost causes employee relations problems that cost more than the saving.

The u.ae guidance on payment of wages says private sector employers should pay salaries through the Wages Protection System, and that salaries for the previous month are due on the first day of each Gregorian month. Payment can be in dirhams, or in another currency if agreed.

The same page sets out what happens when salaries are late: notifications begin on the second day after the due date, new work permits are suspended from the fifth day, and administrative fines can follow from the eleventh day where the violation is repeated within six months. Treat the first of the month as a hard deadline in your cash flow forecast.

• Salary due: first day of the following month
• Paid through WPS via an approved bank or exchange house
• Currency: AED, or another currency if agreed in the contract
• Delays trigger alerts and, if repeated, work permit suspension and fines

A Sharjah services company has eight staff. Total basic salaries: AED 52,000. Housing allowances: AED 21,000. Transport allowances: AED 7,000. Gross pay: AED 80,000. A salary advance recovery of AED 1,500 is deducted from one employee. Net pay through WPS: AED 78,500.

Journal at month-end: debit salaries – basic AED 52,000; debit allowances AED 28,000; credit salary advances AED 1,500; credit salaries payable AED 78,500. When the WPS transfer leaves the bank: debit salaries payable AED 78,500; credit bank AED 78,500. Separately, accrue the month’s end-of-service gratuity: if eligible employees have accrued 21 days a year on AED 52,000 of basic, the monthly accrual is roughly AED 3,000 (using basic ÷ 30 as the daily rate: 52,000 ÷ 30 × 21 ÷ 12, rounded). Accrue leave and air tickets where contracts include them.

UAE national employees are covered by pension and social security legislation rather than the expatriate gratuity rules, and contributions are due to the relevant pension authority. GCC nationals may fall under their home country’s scheme. Check the current contribution rates and registration steps with the pension authority before hiring.

Beyond salary, employers usually carry visa and Emirates ID costs, medical insurance and, for many roles, annual leave tickets. These belong in staff costs in the books, not in general admin, so the true cost per employee is visible.

Payroll in the HelloBooks family runs through HelloTime, which handles salary runs and posts salary journals to HelloBooks. HelloBooks does not generate WPS salary files; you prepare the WPS payment through your bank or exchange house. It also does not calculate end-of-service gratuity automatically, so the accrual is a journal you or your accountant set, often as a recurring entry.

Once salary journals are in the ledger, the AI agent matches the WPS debit on your uploaded bank statement to the salaries payable balance and flags differences. Ask “what did staff cost us per head last quarter, including allowances and gratuity accrual?” and it answers from the ledger.