Setting up payroll for a new UAE company
Reviewed by Mellow Editorial Team, HR & payroll content team
Running payroll for a new UAE company requires registering with the Ministry of Human Resources and Emiratisation (MOHRE), setting up a Wage Protection System (WPS) account, and — for UAE and GCC nationals — enrolling in the relevant pension scheme. Get these foundations right before you make your first salary payment.
Understand the regulatory landscape first
The UAE has no personal income tax on salaries. That removes one layer of complexity, but it does not mean payroll is simple. You are still accountable to MOHRE for how and when you pay staff, and to the relevant pension authority if you employ UAE or GCC nationals.
Federal Decree-Law No. 33/2021 governs employment relationships in the private sector. It sets out leave entitlements, end-of-service gratuity rules, and the framework for employment contracts. Before you run a single payroll, read the basics of that law or take qualified legal advice on it.
Register your company and employment contracts with MOHRE
Your company needs to be registered with MOHRE as an employer. This is typically done through MOHRE's online portal (tas.mohre.gov.ae) once you have your commercial licence.
Every employee must have a written, MOHRE-registered employment contract. The contract must state the basic wage separately from allowances — this distinction matters because end-of-service gratuity is calculated on basic wage alone, not total remuneration. Getting this wrong at the contract stage creates headaches later.
Employees should also be registered with the General Authority for Pensions and Social Security (GPSSA) if they hold UAE or GCC nationality. Expatriate employees are not enrolled in GPSSA and do not receive pension contributions; their long-term benefit is the end-of-service gratuity instead.
Set up WPS before paying salaries
The Wage Protection System is a Central Bank of UAE initiative that verifies salaries are paid accurately and on time. Most private-sector employers in the UAE are required to pay salaries through WPS.
Here is how it works in practice:
1. Open a corporate bank account with a UAE bank or use a MOHRE-approved exchange house or payroll card provider.
2. Register as an employer on WPS through your chosen financial institution.
3. Each month, upload a Salary Information File (SIF) — a standardised file that maps each employee's Emirates ID or work permit number to the amount you are paying them.
4. Your bank or payment provider sends that data to the Central Bank, which confirms wages have been paid.
Late or non-compliant WPS payments can result in fines and a block on new work permit applications. Build your payroll calendar around the WPS deadline rather than treating it as an afterthought.
Calculate end-of-service gratuity correctly from day one
End-of-service gratuity is not optional and it is not a bonus. It is a statutory liability that accrues from an employee's first day. Under Federal Decree-Law No. 33/2021, the calculation is:
- First five years of service: 21 days' basic wage per completed year
- Beyond five years: 30 days' basic wage per completed year
- Overall cap: two years' total basic wage
Because gratuity is based on basic wage, the way you structure an employment contract — how much of total remuneration sits in basic wage versus housing or transport allowances — directly affects this liability. There is no legal requirement to provision for gratuity in a separate fund, but many finance teams choose to accrue it on the balance sheet monthly so the liability does not arrive as a surprise.
Annual leave and other statutory entitlements
Once an employee completes one year of service, they are entitled to 30 calendar days of paid annual leave. During the first year, leave accrues pro-rata.
This is relevant to payroll because unused leave must be paid out on termination, calculated on the employee's full wage for the leave period. If your HR system does not track leave balances accurately, you can understate a termination payment — which creates both a legal risk and a disgruntled former employee.
Make sure your payroll or HR software captures leave accrual, leave taken, and leave balances automatically from the point of hire.
Keep records and stay current
MOHRE conducts inspections and can request payroll records at any time. Keep payroll runs, SIF files, employment contracts, and leave records for at least five years.
UAE employment law is also not static. How Mellow runs payroll across six countries on one platform illustrates why keeping up with regulatory changes matters whether you operate locally or across borders. Assign someone — internally or externally — to monitor MOHRE and Central Bank circulars so your process stays compliant as the rules evolve.
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