Payroll Administration in the UAE

For majority of the companies in the UAE, the challenge of the payroll administration is not on how to calculate the personal income tax (PIT) and social security contribution correctly but on keeping track whether the payroll processing is as prescribed by the relevant authorities granting the work permit to the employees (e.g. the Ministry of Human Resources and Emiratisation, free zone authorities).

Subsidiaries or branches of foreign entities often face difficulties in “localizing” the foreign employee benefit packages, which have been tailor-made to that specific jurisdiction, to the UAE regulatory landscape. The local managers responsible for the payroll and HR administration of the local entity may face challenges explaining to their counterpart elsewhere. This is always the case due to the assumption that the absence of PIT and social security for majority or even all employees shall simplify the payroll administration. As a result to this circumstances, the UAE subsidiaries or branches may end up with less competitive or attractive preposition to their current and future employees in comparison to their peers or even competitors.

Due to the organization structure, it is not uncommon to have the payroll administration of a local representative in the UAE managed from outside the UAE. In such case, the personnel information is not to be disclosed to any of the staff member in the UAE, including the legal representative of the entity. In addition, certain parts of the payroll administration shall be done locally to be in compliance with the UAE laws and regulations. Hiring a local payroll administrator cannot guarantee such compliance as this profession is not as regulated in the UAE as in the other jurisdictions. This is a typical dilemma of multinational groups with the matrix organizational structure.

Some organizations may take the decision to have an in-house finance team in the UAE and embed the payroll administration within this department. Due to the confidential nature of the payroll and HR information, both statutorily and self-imposed company policies, the in-house finance team may not be sufficiently privileged. This is despite such information is required to manage the payroll correctly. An independent third-party administration is required to process the payroll information and the supply the finance team with the necessary information for their management and statutory reporting purpose.

The payroll administration team in Crowe UAE will be able to support UAE companies in dealing with these hurdles starting from providing the advice during the pre-employment stages, managing the payroll administration in the normal course of business, and in the restructuring phase.

The scope of our payroll administration includes:

• Advice on best-practice of benefit structure, payroll system, and governance.
• Provide and manage the end-to-end payroll solution for UAE companies, based on the local laws and self-imposed company policies, including being the local knowledge partner acting as a bridge between HR and Finance departments.
• Keeping clients updated with the changes of local regulations and statutory procedures in relation to the payroll administration.