If your company is registered with the Ministry of Human Resources and Emiratisation (MoHRE), salaries for each month are due on the first day of the next month, and they must be paid through the Wage Protection System (WPS). If they are late, MoHRE starts sending alerts from day 2 and suspends new work permits from day 5. On top of that, every employee with a year or more of service builds up an end of service gratuity you have to pay when they leave.
None of this is complicated, but it is unforgiving. This guide walks through the rules a small employer needs, then shows how payroll should flow into your books.
The payroll calendar at a glance
| When | What happens | Rule |
|---|---|---|
| End of month | Work out salaries, overtime, deductions | Your contracts and the Labour Law |
| 1st of next month | Salaries are due | MoHRE Ministerial Resolution No. 340 of 2026 |
| On the due date | Pay through WPS | At least 85% of wages due must be transferred where lawful deductions apply |
| Day 2 onwards | MoHRE alerts for unpaid salaries | Ministerial Resolution No. 340 of 2026 |
| When someone leaves | Pay final salary and gratuity | Federal Decree-Law No. 33 of 2021 |
This guide covers mainland and free zone employers registered with MoHRE. Some free zones, such as DIFC and ADGM, have their own employment laws, so check those if they apply to you.
When salaries are due
MoHRE's current WPS rules, Ministerial Resolution No. 340 of 2026, say that salaries for the previous month are due on the first day of each Gregorian month. So March salaries are due on 1 April.
Wages can be paid in dirhams or in another currency if the employment contract says so. Either way they go through WPS.
How WPS works
The Wage Protection System is MoHRE's electronic system for tracking salary payments. In practice, employers pay salaries through an approved WPS agent, usually their bank or an exchange house, which reports each payment to MoHRE. That is how the ministry can see, employee by employee, whether everyone was paid.
Almost every MoHRE-registered employer must use it. The exemptions are narrow. On the employer side they cover banks and financial institutions, houses of worship, and UAE nationals who own fishing boats or public taxis. On the employee side they include, for example, workers whose wage complaint has gone to court, workers reported for absconding, and workers on documented unpaid leave.
Where you make lawful deductions, such as a salary advance being repaid, you must still transfer at least 85% of the wages due on time.
What happens if you pay late
MoHRE monitors every establishment electronically from the due date. If salaries are not paid, the government portal sets out this escalation:
| Day after the due date | Measure |
|---|---|
| From day 2 | Notifications and alerts to the establishment |
| Day 5 | New work permits suspended, with a warning |
| Day 11 | Administrative fine. Repeat violations within six months can move you to MoHRE's third (lowest) classification category |
| Day 16 | Labour disputes registered automatically for affected workers. Work permits may be suspended for larger employers or certain sectors |
| Day 21 | Further enforcement depending on size, such as an enforcement order for wages, collective dispute proceedings, attachment of assets, a travel ban on the person in charge, and referral to the Public Prosecution for repeat violations |
A suspended work permit means you cannot hire, even if the late salary was a one-off cash flow problem. If cash is tight, plan payroll first.
End of service gratuity
Under Article 51 of the Labour Law (Federal Decree-Law No. 33 of 2021), a full-time foreign worker with at least one year of continuous service is entitled to a gratuity of:
- 21 days' basic wage for each of the first five years
- 30 days' basic wage for each year after that
It is calculated on the last basic wage, not allowances. The total cannot exceed two years' wage, and days of unpaid absence do not count towards service.
Rough example. An employee on a basic salary of AED 9,000 a month leaves after three years. Using a 30-day month for simplicity, a day's basic wage is AED 300. Gratuity is 21 days x 3 years = 63 days, or about AED 18,900. MoHRE has an online calculator for the exact figure.
The optional savings scheme. Cabinet Resolution No. 96 of 2023 introduced an optional alternative where employers pay monthly contributions into an approved savings fund instead of paying a lump sum at the end. MoHRE describes it as voluntary. Check the current contribution rates and conditions with MoHRE before you sign up.
UAE and GCC national employees are covered by pension rules instead of gratuity, and contributions are made to the relevant pension authority. If you employ nationals, set this up from day one.
What payroll means for your books
Payroll is usually a small business's biggest cost. It needs to be in the books properly, not just as bank transfers marked "salaries".
- Record a payroll journal every month showing gross salary, allowances, overtime and deductions for each person, not one lump sum.
- Accrue gratuity monthly. Gratuity builds up every month an employee works. Booking a monthly provision means a resignation does not hit one month's profit by surprise, and your balance sheet shows what you owe.
- Track leave balances. Unused annual leave can be payable when someone leaves, so keep it on record.
- Reconcile to WPS. The total in your payroll journal should match what went out through WPS each month.
- Keep the paperwork: contracts, salary changes, payroll reports and WPS confirmations.
Payroll, VAT and corporate tax
VAT. Salaries are not a supply for VAT, so there is no VAT on them. Be careful with staff costs on the purchase side: the FTA lists employee-related expenses among the categories where input tax can be blocked. Our VAT compliance checklist covers blocked input tax.
Corporate tax. Salaries and related costs are normally deductible business expenses in your corporate tax return, as long as they are incurred for the business and properly recorded. Clean payroll records make that easy to show. See our corporate tax filing service.
Common payroll mistakes
- Paying a few days late every month because the transfer goes out on the 1st instead of arriving by it.
- Paying some staff outside WPS, for example in cash, which leaves those payments invisible to MoHRE.
- Calculating gratuity on total salary instead of basic wage, or forgetting the two-year cap.
- No gratuity provision in the books until someone resigns.
- Contracts that do not match payroll, such as allowances paid that are not in the contract.
How TaxBox helps
TaxBox includes payroll in our Business Growth plan (for 2 employees) and CEO Advantage plan (for 5 employees), alongside bookkeeping, VAT and corporate tax filing. Each month we calculate salaries and deductions from your contracts, post the payroll journal, keep gratuity and leave balances up to date in your books, and reconcile payroll to what went out through WPS. WPS payments themselves are made through your bank or exchange house, and we work alongside them.
Compare plans on our pricing page, see what our monthly bookkeeping includes, or get an instant quote. To see how payroll affects your fees, read how much accounting and bookkeeping cost in the UAE.
Frequently asked questions
When are salaries due in the UAE? Under MoHRE Ministerial Resolution No. 340 of 2026, salaries for the previous month are due on the first day of each Gregorian month, and must be paid through the Wage Protection System.
What happens if an employer pays salaries late through WPS? MoHRE monitors payments from the due date. Alerts start from day 2, new work permits are suspended on day 5, an administrative fine can apply from day 11, labour disputes are registered automatically on day 16, and further enforcement such as asset attachment or a travel ban can follow from day 21.
How is end of service gratuity calculated in the UAE? A full-time worker with at least one year of continuous service gets 21 days of basic wage for each of the first five years and 30 days for each year after that, based on the last basic wage, capped at two years' wage.
Can I pay salaries in US dollars? Yes, if the employment contract says so. Wages can be paid in dirhams or another currency agreed in the contract, but they still go through WPS.
Do salaries have VAT on them? No. Salaries paid to employees are not a supply for VAT. Some employee-related costs, such as certain staff benefits, have blocked input tax, so check before you claim VAT on them.
Sources
- UAE Government portal: Payment of salaries and wages
- UAE Government portal: End of service benefits for workers in the private sector
- UAE Legislation: Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations
- MoHRE: Awareness guide for new employers
- UAE Government portal: Protection of workers' rights
- Federal Tax Authority: Get to know your tax obligations (blocked input tax)
This article is general information, not legal or tax advice. Employment rules change and some free zones have their own laws, so check MoHRE or your free zone authority before you act. The gratuity example is a simplified illustration.