Payroll management in GCC countries involves complex regulations, strict deadlines, and heavy penalties for non-compliance. Each country's unique payroll requirements create challenges for businesses that must maintain accurate records and meet legal obligations.
Businesses must manage multiple systems, such as WPS and end-of-service payments, and ensure proper general social insurance contributions. The rules cover everything from post-termination gratuity calculations to monthly salary transfers, and each GCC nation has its specific compliance requirements.
This comprehensive resource outlines payroll compliance requirements across the UAE, Qatar, Saudi Arabia, Kuwait, and Oman. You'll discover key regulations, deadlines, and proven practices to maintain full compliance in each country.
Payroll Compliance in the UAE
The UAE payroll compliance trip begins with Federal Decree Law No. 33 of 2021, which governs employment relationships in the private sector. Companies must process all salary payments through the UAE Wage Protection System (WPS), implemented since last 10 years.
The core compliance obligations include:
- Salary payments within 15 days of the due date
- Payment processing through WPS-authorized banks
- Record keeping of payments for at least 2 years
- Accurate calculation of end-of-service benefits
End-of-service benefits require 21 days’ salary for each year of the first five years of service and 30 days’ salary for each additional year. All end-of-service entitlements must be settled within 14 days from the contract's end date.
Monthly Contribution payable to the Authorities
- In the government sector: ×
The insured's share: (11%) of the contribution account salary ×
The employer's share: (15%) of the contribution account salary
- The private sector, regional and international missions, and political missions operating in the country: ×
The insured's share: (11%) of the contribution account salary ×
The employer's share for the insured whose contribution account salary is AED 20,000 or more: (15%) of the contribution account salary ×
The employer's share for the insured whose contribution account salary is less than AED 20,000: (12.5%) of the contribution account salary ×
The government's share for the insured whose contribution account salary is less than AED 20,000: (2.5%) of the contribution account salary
Missing salary payments leads to serious penalties. Electronic monitoring starts immediately, and work permit suspensions follow by day 17. Companies with 50 or more workers face mandatory inspections and potential legal action for continued violations.
Payroll Compliance in Qatar
Businesses in Qatar must implement the Wage Protection System (WPS), an electronic salary transfer system that monitors all private sector wage payments. Organizations must transfer salaries through Qatari banks.
Salary payments must be processed at least once per month for monthly-paid employees. The minimum wage stands at QAR 1,000 per month, with allowances of QAR 500 and QAR 300 for accommodation and food respectively.
Your compliance obligations include several requirements. You need to provide itemized pay statements that show wages and deductions with their purposes. Payroll records must be kept for at least five years. All payments should go through WPS-authorized financial institutions. Workers are entitled to overtime pay for hours worked beyond the regular working hours, which should be at most 48 hours per week.
The salary subject to contributing is the basic salary plus the social allowance, “if any”.
Employer provides the device of civil retirement/ social insurance in the workplace country with the amendments that affect (the basic salary, social allowance ‘if any”) to be sent to GRSIA in Qatar by the mentioned device.
Fourth: Rates of Contributions
- Employer bears the monthly contribution rate by (10%) of the employee’s/ worker’s contributable salary.
- Employee / worker bears the monthly contribution rate by (5%) of the contributable salary.
Employee / worker bears the difference between the two rates if the employer’s proportion is less than (10%) if State of Qatar does not decide to bear that difference instead of its citizens.
Wages in Qatar must be paid through the Wage Protection System (WPS) in Qatari Riyals (QAR) into a bank registered in Qatar within seven days of the due date. Failure to comply may result in fines ranging from QAR 2,000 ($545) to QAR 10,000 ($2,726) and other penalties, including the potential suspension of work permit issuance.
Employers are also required to maintain records of all employee remuneration.
Payroll Compliance in Saudi Arabia
In Saudi Arabia, the Wage Protection System (WPS) is compulsory for all private sector companies regardless of their size; meaning even companies with just one employee must register with the WPS and pay salaries electronically through the system
Until late-2020, all private-sector companies with more than 10 employees had to register with the payroll system that their banks provide. The WPS is an electronic system used in Saudi Arabia to create a database of salary payments of workers in the private sector.
These simple compliance elements need your attention:
- Monthly salary payments in Saudi Riyals through accredited banks
- Social insurance contributions for Saudi employees
- End-of-service benefits calculations
- Accurate payroll record maintenance
Your social insurance obligations depend on your employee's nationality. Saudi employees contribute 9.75% and employers contribute 11.75% of the monthly salary, up to a maximum of SAR 45,000. Non-Saudi employees have a 2% employer-paid occupational hazard fee.
The end-of-service benefits (ESB) are accrued by Saudi employees after two years of continuous service. For the first five years, the rate is half a month's wage per year, and for subsequent years, it's a full month's wage. Full ESB is payable upon retirement, dismissal without cause, termination due to force majeure, or for female employees who leave within six months of marriage or three months of childbirth. If an employee resigns, the ESB entitlement is reduced.
Saudi nationals must receive a minimum wage of 4,000 SAR per month. Employees who work beyond 8 hours deserve overtime pay at 150% of their regular rate, and daily work hours cannot exceed 12.
Breaking these rules can lead to severe penalties. The Ministry of Human Resources and Social Development (HRSD) regularly checks businesses to enforce labor laws. Companies making unauthorized salary deductions face fines.
Payroll Compliance in Kuwait
Payroll compliance in Kuwait needs close attention to statutory filings and social security obligations. The Public Institution for Social Security (PIFSS) serves as your compliance partner and requires several important reports:
- Report 55: Annual salary details of insured employees (due by January)
- Report 103: New hire and termination details for Kuwaiti citizens
- Report 166: Monthly social security contributions
- Report 168: Updates on newly hired employees, salary changes of existing employees, and terminated employees
Social security contributions need careful management for Kuwaiti employees. Employers must contribute 11.5% of the monthly salary, and employees contribute 8%. These contributions have a cap of 2,750 KWD. Employees must also pay 2.5% of their monthly salary under the Social Security Law, with a limit of 1,500 KWD.
The Wage Protection System (WPS) processes all salary payments through Kuwait-based bank accounts in local currency. Monthly-paid employees should receive their payments at least once per month. Other employee categories need payment every two weeks minimum.
Kuwait stands apart from other GCC countries with no payroll taxes. The Ministry of Social Affairs and Labor (MSAL) requires monthly transfer receipts and detailed records to prevent penalties and blacklisting.
Standard workday overtime pays 125% of regular wages, while weekend work pays 150%. Working hours during Ramadan should be six hours per day.
Payroll Compliance in Oman
Oman has reinforced its payroll compliance framework with the introduction of the Wage Protection System (WPS) in July 2023. Businesses operating in Oman must register with this electronic salary transfer system and process employee payments through approved banks to ensure compliance with government regulations.
Social security contributions in Oman vary significantly between Omani nationals and expatriate workers. Employees contribute 7% of their salary, while employers cover 10.5%. Additionally, employers must allocate an extra 1% of the employee’s salary for insurance covering work-related injuries. Furthermore, employers are required to contribute 1% of each employee's wage per month to the Social Protection Fund.
The updated Labour Law also enhances benefits for expatriate employees by entitling them to an end-of-service gratuity, calculated as one month's basic salary for each year of service. Employees hired before July 2023 will have their gratuity computed in two parts, aligning with both previous and new regulations.
Conclusion
Ensuring payroll compliance in GCC requires a thorough understanding of the specific regulations in each country. Businesses must stay up to date with local labor laws, taxation policies, and statutory requirements to avoid legal risks and financial penalties. Utilizing Wage Protection System (WPS) platforms, where applicable, ensures timely and accurate salary disbursement in compliance with government regulations. Additionally, accurate calculation of social security contributions and end-of-service benefits is essential to meet legal obligations and maintain employee satisfaction. By implementing robust payroll management practices and leveraging technology, businesses can streamline operations, ensure compliance, and foster a positive work environment.
