Month: October 2020
Dubai announces new stimulus package of AED 500 million
Jay Krishnan, Partner
Phone:- +971 4 327 7775
Mobile:- +971 55 160 1291
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
Dubai has come up with yet another economic stimulus package to support the economy and people. The new package amounts to AED 500 million and with this, the total stimulus announced this year sums up to be AED 6.8 billion.
“Our goal is to help the businesses overcome the challenges caused due to the outbreak of the pandemic and to recover faster to establish a new phase of economic growth”, said Sheikh Hamdan.
Sheikh Hamdan added, “The private sector is a major partner in Dubai’s progress, and considering the struggles of the different sectors, the stimulus package includes a set of fee exemptions and rent reductions as well as the extension of previous relaxations.”
He also said, “We are working as a single integrated entity and our prime focus is accelerated recovery. It is important to have a consistent work plan to support all the sectors to help maintain the continuity of businesses, especially for the SMEs. We have to create a more flexible economic environment that can adapt to global changes.”
According to the new stimulus package, advertising companies have been exempted from advertising permit fees imposed by the Dubai Municipality for 3 months, with a retroactive effect from March 15 to June 16.
Private nurseries of the Emirate have been exempted from commercial license renewal fees; the clinics in nurseries are also provided with extended licenses. The license of the health professionals working in the nurseries has also been extended for a period of 6 months from the date of expiration. A 50% reduction in rents till the end of the year is given to the nurseries functioning in the premises of the ‘Knowledge Fund Establishment.’
Sheikh Hamdan has also included amendments to calculate the franchise fee for the taxi sector to enhance the liquidity of operating companies.
The new stimulus package has extended the validity of some of the initiatives which were announced during the previous stimulus package for an additional three months. The extension includes the 2.5% freeze on market fee and cancellation of all fines charged due to late payment for government services. The payment of penalties will not require the renewal of commercial licenses also (during this period).
In addition, commercial licenses can be renewed without the mandatory lease contract renewal. 25% of the down payment for paying government fees in installments has been cancelled. The fee for sales and special offers has also been exempted.
The initiative where the bank or cash guarantee AED 500 for the customs clearance activity will continue to be waived. The bank or cash guarantees which were already paid by the customs clearance companies will be refunded. The fees for the customs documents continue to be AED 5 which was AED 50 for each transaction and the customs complaints processing will be hastened.
The relaxations for the tourism, entertainment, and events sectors will be extended till the end of the year. The freeze on fees for hotel rating, ticket sales, issuing permits, and the other government fees will all be extended.
As in the education sector, private schools are being exempted from commercial and educational licenses until the end of the year.
The temporary entry permit of the artworks loaned from institutions outside the Emirate has been extended till the end of 2020; the artworks which came in by the fourth quarter of 2019 which still remains here are also allowed extension till the end of the year.
For the tourism and entertainment sector, the initiative to refund hotel establishments and restaurants 50% of the 7% municipality fees charged on sales has been extended till the end of 2020. The “Tourism Dirham Fees” has also been halved for the rest of the year.
In the international sector, the exemptions of docking fees at Dubai port and Hamriya port for traditional commercial vessels that are registered locally in the UAE have been extended.
The new stimulus package announced by Sheikh Hamdan has included relaxations for numerous sectors. The aim is to help the economy recover faster. The stimulus packages focus on lending a hand to the struggling businesses, especially the small and medium-sized businesses.
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Economic Substance Reassessment in UAE
Jay Krishnan, Partner
Phone:- +971 4 327 7775
Mobile:- +971 50 677 5860
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
UAE businesses, including the ones that had already filed ESR notification, are required to file or re-file ESR notification through MoF’s dedicated portal. It is mandatory to file the ES report within 12 months following the end of the licensee’s financial year.
The UAE Ministry of Finance (MoF) has published templates for filing notifications and reports. According to the ES notification template, additional details must be provided for the following;
- All branches of a licensee carrying out relevant activities
- Confirm if the licensee meets the definition of ‘exempted licensee’ under the new ES Regulations
- Parent company, ultimate parent company, and ultimate beneficial owners of the licensee
Below listed are certain key observations about the report;
- Licensees get the opportunity to explain why CIGAs have not been performed in the UAE (if applicable).
- The same CIGAs are currently listed in the template for all activities, but it is expected to be rectified later on.
- Licensees are required to provide the accounting profit/(loss), along with the ‘relevant income’ earned from the relevant activities.
- It is mandatory to attach financial statements along with the report, but there is no clarity on whether these statements need to be audited or not.
- Licensees must determine their primary/ main regulatory authority, which becomes difficult when the licensee is carrying on multiple relevant activities which are governed by different regulatory authorities
- Detailed information must be provided if both the outsourcing providers are involved.
- Details regarding the parent company, the ultimate parent company, and the ultimate beneficial owners of the licensee must be provided.
- Differences in the information provided in the notification along with their reasons must be provided in the report.
- Licensees can also include any additional documentation and information to demonstrate substance if they want to.
The UAE introduced Economic Substance Regulations last year. The Regulations apply to financial years commencing on or from 1 January 2019. Entities that are within the scope of the Regulations are required to submit an annual Notification form to their Regulatory Authority, and complete and submit to the same Regulatory Authority an Economic Substance Report within 12 months from the end of their financial year Failure to comply with the Regulations can result in huge penalties.
There have been certain changes to the rules and regulations pertaining to economic substance regulations in the UAE. The UAE Cabinet of Ministers recently issued Cabinet Resolution No. 57 of 2020 that includes a set of amended regulations and all licensees in the UAE are required to re-assess their current ESR classifications and align them accordingly to the latest regulations. Click here to know more.
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Voluntary VAT Disclosures can Result in Huge Penalties in UAE
Jay Krishnan, Partner
Phone:- +971 4 327 7775
Mobile:- +971 50 677 5860
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
UAE based businesses will have to pay penalties for voluntary disclosures, from the date of the original VAT return in which the error was made to the date of receipt of payment of the VAT. Initially, penalties on voluntary disclosures were treated as admin fines, and heavier penalties were not imposed for late payments. The ruling by UAE Federal Supreme Court comes as a huge shock for businesses, as the penalties can reach up to 300 percent of the dues.
The judgment by the Federal Supreme Court will be the first final and conclusive judgment to be issued on penalties for voluntary disclosure. The judgment may affect upcoming decisions to be issued by the various Tax Dispute Resolution Committees and Federal Courts.
A voluntary disclosure is a form provided by FTA that gives taxpayers an opportunity to voluntarily notify the authority about any error or omission in a previous Tax Return, Tax Assessment or Tax Refund application. A voluntary disclosure must be submitted within 20 business days of the taxpayer identifying an error.
“It is always better to ensure there aren’t any errors or omissions in the VAT return form, rather than worrying about penalties at a later stage or not disclosing prior period errors to the FTA. VAT plays a significant role on the entire business system and penalties that result from voluntary disclosure can affect cash flow adversely. Hence, it is important to have the right procedures in place’, says Jay Krishnan, Partner at HLB HAMT.
It has been almost three years since UAE implemented VAT, but the trend of committing errors while filing for VAT is still prevalent among many businesses. HLB HAMT has an exclusive team of trained VAT Consultants who can assist you to steer your business smoothly through the tax laws.
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End of service gratuity calculation in KSA
Sajin Rasheed, Director
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
Article 84 of the KSA Labor law states as follows regarding end-of-service settlement;
Upon the end of the work relation, the employer shall pay the worker an end-of-service award of a half-month wage for each of the first five years and a one-month wage for each of the following years. The end-of-service award shall be calculated on the basis of the last wage and the worker shall be entitled to an end-of-service award for the portions of the year in proportion to the time spent on the job.
Gratuity is a token of appreciation for all the hard work and commitment an employee has shown towards one’s workplace. It is usually calculated at the time of resignation or termination. In KSA, an employee is entitled to an end of service benefit upon completion of two years of service if he is resigning from work. In the case of termination, the employee is entitled to a full accrual if the service period is more than one year.
Here our payroll experts in KSA, explain in detail the gratuity policy in KSA, along with some sample gratuity calculations.
What is Gratuity?
Gratuity is a monetary payment eligible to an employee as a lump sum at the end of his tenure provided that the period of service exceeds one year. Gratuity payment is a liability to the employer which accrues as the employee service period progresses.
When does the employee become eligible for gratuity accrual?
Gratuity accrues from the first day of employment up to the last working day. The settlement is dependent on some factors as we will see below.
Which workers are eligible for gratuity payment?
Saudi labor law does not specify which workers qualify for gratuity accrual and payment. The law does not say if gratuity should be paid to expatriates only or to both KSA nationals and expats. It is our understanding that gratuity is accrued to all workers in KSA. Please see how gratuity accrual and payment policy in KSA differs from UAE gratuity policy here
What is the limit for gratuity payable?
The law does not limit the amount of gratuity that an employee can receive at end of service settlement.
What is the basis amount that is used to calculate gratuity?
Gratuity is calculated based on the last paid total wage as at the time of final settlement.
How is the accrual period determined in calculating gratuity?
Gratuity calculation is accrued at the following basis
- If the service period is below five years at half month salary per year.
- If the service period is more than five years and above at full month salary per year.
The following simple illustration shows how gratuity accrues in Saudi Arabia.
| Accrual | ||
| Particulars | 0-5 Years | 5 Years and Above |
| Hire Date | 01-Jul-17 | 01-Mar-16 |
| Payroll Month | Mar-22 | Mar-22 |
| Number of days in Service as of 31st March 2022 | 1735.00 | 2222.00 |
| Number of Years in Service | 4.75 | 6.09 |
| Total Salary | 12000 | 12000 |
| One Day salary ( Salary /30) | 400 | 400 |
| Gratuity Days | ||
| First 5Years | 71.30 | 75.00 |
| 6th Year Onwards | 0.00 | 32.63 |
| Gratuity Days in total | 71.30 | 107.63 |
| Gratuity Amount | 28,520.55 | 43,052.05 |
Factors affecting the amount of gratuity payable in Saudi Arabia
Articles 85 and 87 define the payable amount based on the separation type and the length of the period of service as seen below.
Resignation
Article 85 states as follows ‘If the work relation ends due to the worker’s resignation, he shall, in this case, be entitled to one-third of the award after a service of not less than two consecutive years and not more than five years, to two thirds if his service is in excess of five successive years but less than ten years and to the full award if his service amounts to ten or more years.’
Under this separation type, the gratuity accrues at the following rate.
- If the service period is below two years – No gratuity is paid
- If the service period is above two and below five years – one-third of accrual.
- If the service is above five years but less than ten years – two-thirds of accrual.
- If the service period is above ten years – full accrual.
The following table illustrates such a scenario;
| Resignation | ||||
| Particulars | Less than 2 years | 2-5 Years | 5-10 Years | 10 Years and above |
| Hire Date | 14-Aug-20 | 12-May-17 | 10-Feb-15 | 10-Jan-10 |
| Last working day | 15-Mar-22 | 18-Mar-22 | 22-Mar-22 | 25-Mar-22 |
| Number of days in Service | 579.00 | 1772.00 | 2598.00 | 4458.00 |
| Number of Years in Service | 1.59 | 4.85 | 7.12 | 12.21 |
| Total Salary | 12000 | 12000 | 12000 | 12000 |
| One Day salary ( Salary /30) | 400 | 400 | 400 | 400 |
| Gratuity Eligibility | None | 1/3 Of Accrual | 2/3 of Accrual | Full Accrual |
| Gratuity Days | 23.79 | 72.82 | 138.53 | 291.41 |
| First 5Years | 0.00 | 24.27 | 50.00 | 75.00 |
| From 6th Year onwards | 0.00 | 0.00 | 42.36 | 216.41 |
| Gratuity Days in total | 0.00 | 24.27 | 92.36 | 291.41 |
| Gratuity Amount | No Gratuity to be Paid | 9,709.59 | 36,942.47 | 116,564.38 |
Termination
When the separation is by termination, the employee is entitled to full accrual if the employee has completed probation.
Article 87 states as follows; ‘As an exception to the provisions of Article (85) of this Law, the worker shall be entitled to the full award if he leaves the work due to a force majeure beyond his control’.
Under this separation type, the gratuity accrues at the following rate.
- During Probation – no gratuity.
- If the service period is less than five years – half a month’s salary per year.
- If the service period is above five years – full Accrual.
The following table illustrates this scenario.
| Termination | |||
| Particulars | During Probation | Up to 5 Years | Above 5 Years |
| Hire Date | 18-Dec-21 | 12-May-19 | 10-Feb-15 |
| Last working day | 15-Mar-22 | 18-Mar-22 | 22-Mar-22 |
| Number of days in Service as of 31st March 2022 | 88.00 | 1042.00 | 2598.00 |
| Number of Years in Service | 0.24 | 2.85 | 7.12 |
| Total Salary | 12,000 | 12,000 | 12,000 |
| One Day salary ( Salary /30) | 400 | 400 | 400 |
| Gratuity Eligibility | None | Full Accrual | Full Accrual |
| Gratuity Days | 3.62 | 42.82 | 138.53 |
| First 5Years | 0.00 | 42.82 | 75.00 |
| From 6th Year onwards | 0.00 | 0.00 | 63.53 |
| Gratuity Days in total | 0.00 | 42.82 | 138.53 |
| Gratuity Amount | No Gratuity to be Paid | 17,128.77 | 55,413.70 |
Is there a specific provision for female employees relating to gratuity?
Article 87 states that female workers are entitled to full gratuity accrued under the following scenarios.
- If she terminates her contract within six months after her marriage.
- If she terminates her contract three months after giving birth.
When should gratuity payment be done?
Upon end of service, the employer is mandated to settle the employee’s gratuity and other settlements within a period of one week from the date of end of such a relation. If the employee ends the contract the employer shall settle all the employee entitlements within a period not exceeding two weeks. Any debts and deductions due from the employee may be deducted from his end of service.
What is the effect of unpaid leave taken during the period of service?
Any period taken by the employee as unpaid leave is excluded when determining the service period. That means unpaid leave days are excluded when accruing gratuity. The period of service is reduced by the number of days served as unpaid leave.
How is Maternity unpaid leave and sick unpaid leave treated when determining the service period?
The period taken as either maternity unpaid leave or sick unpaid leave do count as part of the service period. The period of service is not affected by any period taken during tenure by employees for these two types of leaves.
Knowing how to calculate gratuity will be highly beneficial to employees and it eradicates any chances of error and confusion. It is equally important to keep yourself updated on any changes in gratuity policies/calculation criteria in KSA.
For information on the payroll process in KSA click on this link
Payroll Service in KSA
The process of payroll is little complicated and time-consuming; hence it is always recommended to outsource your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business.
One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our clients’ entire payroll cycle that includes preparation of payroll reports, processing salary payment with WPS compliance, accrual management including Gratuity, pension funds, an online portal for accessing payslips, and many more. Our leadership team spends the necessary hours in every project, ensuring our clients get refined consulting services to take your business forward.
Disclaimer:
Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subjected to change and not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.
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Ultimate Beneficial Owner(UBO) Declaration in UAE
Lavin Nalinababu, Business Consultancy
Phone:- +971 4 327 7775
Mobile:- +971 50 677 5860
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
UAE recently replaced Cabinet Decision No. 34 of 2020 with Cabinet Resolution No. 58 of 2020 on the Regulation of the Procedures Related to Real Beneficiaries (“Decision”). According to the new resolution, companies licensed or registered in the UAE (excluding in the financial free zones) must create and maintain a register of their ultimate beneficial ownership(“UBO”) and should submit UBO data to the relevant registrar or licensing authority (“Registrar”).
Our consultants can assist you with
- Consultancy related to UBO declaration
- Maintenance of UBO register
- UBO record maintenance
For more details, click here.
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Oman to announce 5% VAT from April
Jay Krishnan, Partner
Phone:- +971 4 327 7775
Mobile:- +971 50 677 5860
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
Oman has been facing severe economic crisis even before the spread of the COVID-19 pandemic and the fall of the crude oil prices. In order to stabilise the economy, Oman has planned to introduce 5% Value Added Tax (VAT) from April 2021.
The tax will be exempt for essential food products, medical care, education and financial services according to the royal decree. The fall of the oil prices has caused serious monetary problems for many countries.
According to the International Monetary Fund, the budget deficit of Oman as a share of gross domestic product is anticipated to be the highest in the region.
UAE and Saudi Arabia had also faced similar economic crisis, which was followed by the introduction of VAT in 2018. Saudi Arabia even tripled their tax this year in order to overcome the situation.
The introduction of VAT will bring in an extra income to the country and will help them to stabilise their economy. The year of 2020, has caused immense trouble to the global economy, and every nation is struggling to meet their ends. Countries are coming up with several initiatives to strengthen the economy and to help its people.
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Bahrain End of Service Gratuity Calculation
HLB Bahrain Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
Article 116 of Bahraini Labor Law states categories of workers to whom the Provisions of the social Insurance Law are not yet applicable, the employer concerned shall pay to such worker, upon the termination of employment, a leaving indemnity for the period of his employment calculated on the basis of 15 days wages for each year of the first three years of service and of one-month wages for each year of service thereafter.
Almost every employee must have heard about gratuity payment, but not many know the terms and conditions involved and how it is calculated. Here, we take you through a set of questions and answers that will help in clearing all your doubts related to end of service gratuity in Bahrain.
What is Gratuity?
Gratuity is a monetary payment eligible to an employee as a lump sum at the end of his tenure provided that the period of service exceeds one year. Gratuity payment is a liability to the employer which accrues as the employee service period progresses.
Who is entitled to a Gratuity?
Expatriate workers are entitled to a gratuity on completion of their contract. Social insurance law applies to nationals employed in Bahrain and they are not entitled to Gratuity.
When does an employee become eligible for his/her gratuity payment?
Employees are eligible for gratuity pay at the end of their service period, upon the death of the worker, by a disability preventing his work performance or by a period of sickness which exceeds his entitlement to sick and annual leave. According to Article 116, the worker shall be entitled to gratuity for the fraction of the year worked.
What is the basic amount that is used to calculate gratuity?
As per Article 47, leaving indemnity shall be calculated on the basis of the worker’s most recent basic wage in addition to social allowance, if any.
What is the number of days used to accrue gratuity?
15 days’ wages for each year of the first three years of service and one-month wage for each year of service thereafter. The following example shows the gratuity accrual at a given time.
Particulars 0-3 Years 3 Years and Above Hire Date 10/Apr/20 01/Mar/18 Payroll Month Mar-22 Mar-22 Number of days in Service as of 31st March 2022 721.00 1492.00 Number of Years in Service 1.98 4.09 Salary 1200 1200 One Day salary ( Salary /30) 40 40 Gratuity Days First 3Years 29.63 45.00 3 years and Above 0.00 32.63 Gratuity Days in total 29.63 77.63 Gratuity Amount 1,185.21 3,105.21 Does type of termination of an employment contract make any difference in gratuity payment?
Termination of an employment contract can be in terms of Resignation, Non-renewal of the contract or termination by the employer. In all these cases, the employer is bound to pay end-of-service benefits. If an employee is terminated as per article 107, the Employer is not liable to pay any Gratuity to the employee
What is the effect of unpaid leave taken during the period of service?
Any period taken by the employee as unpaid leave is excluded when determining the service period. That means unpaid leave days are excluded when accruing gratuity. The period of service is reduced by the number of days served as unpaid leave.
Can an employer withhold gratuity payment?
As per Article 107, the employer may dismiss the worker without compensation in any of the following instances:
- If the worker assumes a false identity or submits false certificates or testimonials.
- If the worker committed a fault that caused serious material loss to the employer-provided that the employer shall report the matter to the competent authorities within two working days of his knowledge of the seriousness of the material loss.
- If the worker, despite a written warning, fails to comply with written instructions which are required to be observed for the safety of workers or the establishment, provided that such instructions are posted up in a prominent place in the workplace
- If the worker absents himself from work, without legitimate cause, for more than twenty(20) intermittent days or for more than ten consecutive days in one year, provided that such dismissal shall be preceded by warning in writing by the employer to the worker after an absence of ten days in the former instance and an absence of five days in the latter instance.
- If the worker fails to perform his essential duties under the contract of employment.
- If the worker discloses, without written permission from the employer, the secrets related to the work.
- If the worker has been finally sentenced for a crime or misdemeanour involving dishonor, dishonesty, or public morals.
- If the worker is found during the hours of work to be under the influence of alcohol or drugs, or if he has committed an immoral act at the place of work.
- If the worker assaults his employer or his responsible manager or commits a serious assault upon any of his supervisors at work during the course of employment or for reasons connected therewith.
- Worker’s failure to comply with the legally prescribed rules concerning the exercise of the right to strike
- If the worker becomes unfit to do his work subject to the contract due to a cause attributed thereto such as cancelling his permit to practice his work or loss of the qualifications authorizing him to do the mutually agreed work.
How Gratuity is calculated during final settlement?
Please see the below example for calculating Gratuity during final settlement.
Total Service period Gratuity calculation Less than3 years 15 days wage for each of the first three years of employment 3 years and Above 15 days wage for each of the first three years, One-month wage for each of the following years in service Please see the below example for calculating Gratuity during the final settlement.
Service period Less than 3 Years 3 years and Above Hire Date 10/Apr/20 01/Mar/18 Payroll Month 14/Mar/22 22/Mar/22 Number of days in Service as of 31st March 2022 704.00 1483.00 Number of years in Service 1.93 4.06 Salary 1200 1200 One Day salary ( Salary /30) 40 40 Gratuity Days First 3Years 28.93 45.00 3 years and Above 0.00 31.89 Gratuity Days in total 28.93 76.89 Gratuity Amount 1,157.26 3,075.62
Whether you are someone who has resigned from work, or has been terminated by the employer, the gratuity that you are eligible to receive at the end of your service can be of great help while transitioning to your next job. Hence, it is important to be aware of the gratuity payment policies and any changes to it.
For information on the payroll process in Bahrain click on this link
Payroll Process in UAE
The process of payroll is little complicated and time-consuming; hence it is always recommended to outsource your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business.
One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our clients’ entire payroll cycle that includes preparation of payroll reports, processing salary payment with WPS compliance, accrual management including Gratuity, pension funds, an online portal for accessing payslips, and many more. Our leadership team spends the necessary hours in every project, ensuring our clients get refined consulting services to take your business forward.
To know more about our payroll process, click here
Disclaimer:
Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subjected to change and not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.
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DIFC Data Protection Law 2020
Jay Krishnan, Partner
Phone:- +971 4 327 7775
Mobile:- +971 55 160 1291
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
Dubai International Financial Center (DIFC) has come up with a new Data Protection Law (DIFC Law No. 5 of 2020), replacing the current regime. The Data Protection Law prescribes rules and regulations regarding the collection, handling, disclosure and use of personal data in the DIFC, the rights of individuals to whom the personal data relates and the power of the Commissioner of Data Protection in performing their duties in respect of matters related to the processing of personal data as well as the administration and application of the Data Protection Law.
Click here to know more about DIFC data protection law.
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Payroll Outsourcing Saudi Arabia :- A brief overview
HLB KSA Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
For a layman, payroll is all about getting your wages paid on a specific date of every month. But it is much more than that. It is a huge responsibility that involves a lot of dedication, knowledge, and resources. Ensuring that all the employees within an organization get paid the correct salary on time with deductions/ allowances if any while complying with all the payroll rules and regulations, is mandatory.
The payroll process will not be the same for all countries; each country has its own tax laws, minimum salary requirements, pension plans, gratuity schemes, leave policies, and many more. Earlier, we covered through a detailed blog, on the payroll process in UAE. Here, our experts in KSA payroll will enlighten you on the payroll process in KSA, through a set of FAQs.
What is the frequency of making salary payments to employees in KSA?
The law stipulates in Article 90 that the intervals for making salary payments to employees should be monthly or weekly depending on the type of contract. Workers paid on a daily basis shall be paid at least once a week. Workers paid on a monthly basis shall be paid once a month. If the work is done by the piece and requires a period of more than two weeks, the worker shall receive a payment each week commensurate with the completed portion of the work. The balance of the wage shall be paid in full during the week following the delivery of the work. In cases other than the above, the worker’s wages shall be paid at least once a week.
Which are the statutory pay components included in employee salary?
The KSA labor law does not define the components that should make up an employee’s salary; there are no defined statutory components.
Which are the common pay components that are normally payable to employees?
Fixed components may include Basic salary, House rent allowance, transport allowance, and other allowances. The variable components may include Overtime, Sales commission, Bonus, Incentives, Relocation allowances, Mobile allowances, etc.
What is the minimum salary payable in KSA?
There is no minimum salary payable in KSA.
How is overtime calculated?
Overtime is any extra hours worked by an employee beyond the normal working hours. Article 107 states that the employee shall be entitled to a remuneration equal to his normal working hours plus an extra of at least 50% of such remuneration. All working hours performed during holidays and Eid’s shall be considered as overtime hours
How is gratuity accrued?
As per article 84 of Saudi Labor Law, the Gratuity calculation is accrued on the following basis.
- If the service period is below five years at half a month salary per year.
- If the service period is more than five years at a full month salary per year.
When is gratuity paid to an employee?
Gratuity is paid at the end of employment. The end-of-service award shall be calculated on the basis of the last wage and the worker shall be entitled to an end-of-service award for the portions of the year in proportion to the time spent on the job. The gratuity paid is not affected by the type of contract, but by the type of separation. There is no EoSB entitlement if an employee is terminated under Article 80 of Saudi Labor LawFor a comprehensive understanding of KSA gratuity accrual and settlement, please refer to our article on KSA gratuity policy and settlement.
What are the statutory deductions that are made to employees in the KSA?
In the KSA, payroll is not subject to income tax, and hence there are no mandated tax deductions. However, KSA nationals are subject to mandatory national pensions plans contributions.
How is KSA pension (Social Insurance) calculated? Which employees qualify for KSA pension contributions?
GOSI, or the General Organization for Social Insurance, is a major government entity in the Kingdom of Saudi Arabia (KSA) that implements the country’s Social Insurance Law.The GOSI percentage for Saudi nationals is 21.50%. Please find the below breakup;
Employer’s Contribution
- Unemployment Contribution = 0.75%
- Retirement Contribution = 9%
- Compensation and Disability Plan = 2%
- Total Employer’s Contribution = 11.75%
Employee’s Contribution
- Unemployment Contribution = 0.75%
- Retirement Contribution = 9%
- Total Employee’s Contribution = 9.75%
The employer is responsible for paying a 2% GOSI contribution for Expat staff. However, there is no GOSI contribution to be paid by an expatriate employee in Saudi Arabia.
SAR 45,000/- is the maximum basic sum utilized in GOSI calculations.
The amount paid effectively adds towards the retirement benefits of the National employees, and for expatriates, it adds towards work-related injuries fund which is limited to a certain amount. They are split into 3 categories:
- Saudi Nationals (private & public sector) – 21.50% of the maximum monthly applicable earnings (9% each for the employee and employer for pension, 0.75% each for unemployment contribution and 2% for occupational hazard which the employer pays)
- GCC Nationals (excluding Saudis) – between 17-22% in total depending on the nationality
- Expatriates – 2% unemployment contribution paid by the employer
What is WPS in Saudi Arabia?
The Wage Protection System (WPS) in Saudi Arabia became mandatory for all Saudi companies operating in the private sector. The objective of the WPS is to minimize any delay and issues in the payment of salaries. Under the WPS, companies are required to submit wage information to the Ministry of Labor via the e-service program. The WPS ensures that employee rights are protected and that salaries are paid according to agreed terms of employment contracts.
Are Employees eligible for Air Ticket Benefits in KSA?
Employers are required to provide return air tickets to the worker’s home country at the end of the relation between the two parties. The right of the air ticket with annual leave is determined by the contract signed by the employee with the employer, Saudi labor law is silent about this. However, many companies provide air tickets to employees annually and some of the companies extend this payout to employees’ dependents as well.
What is the leave policy defined under the labor law?
A. Annual Leave
According to article 109 of the KSA labor law, a worker shall be entitled to a prepaid annual leave of not less than twenty-one days, to be increased to a period of not less than thirty days if the worker spends five consecutive years in the service of the employer. A worker shall enjoy his leave in the year it is due. He may not forgo it or receive cash in lieu during his period of service. The employer may set the dates of such leave according to work requirements or may grant them in rotation to ensure the smooth progress of work. The employer shall notify the worker the date of his leave insufficient time of not less than thirty days.
B. Sick leave
A worker whose illness has been proven shall be eligible for a paid sick leave for the first thirty days, three-quarters of the wage for the next sixty days, and without pay for the following thirty days, during a single year, whether such leaves are continuous or intermittent. A single year shall mean the year which begins from the date of the first sick leave.
- First 30 days: 100%
- 31 to 90 days: 75%
- 91 days to 120 days: unpaid
Is employee Medical Insurance mandatory in KSA?
It is mandatory that an employer provide medical insurance to the employee during the duration of employment
Which are the currencies that can be used while making salary payments in KSA?
The only accepted currency used in making salary payments is the KSA national currency i.e. SAR and the payments should be made within the boundaries of the country.
Is bonus or incentive payment mandatory in KSA?
Bonus and incentives payments are not mandatory in KSA. Many companies in the KSA have bonus or incentive schemes implemented to keep employee motivation and the structures vary from one company to the other based on their policy.
What are the items included in End of Service Benefits calculation in KSA?
The employee is entitled to the following end-of-service benefits.
- End of service Gratuity
- Repatriation ticket if applicable
- Notice period pay if applicable
- Any unutilized leave (Vacation) pay
- Any other outstanding payment or deduction
C. Maternity leave
Female workers shall be entitled to fully paid maternity leave for a period of 10 weeks to be divided at the female worker’s discretion. Such period may start four weeks prior to the expected date of delivery. A woman may not, under any circumstances, work during the six weeks immediately following delivery. She shall be entitled to extend the leave for an additional two months as unpaid leave. In the event of giving birth to a sick child or a child with special needs whose health condition requires a constant companion, a female worker shall be entitled to a one month leave with full pay starting at the end of the maternity leave and she shall be entitled to extend the leave for an additional month as unpaid leave.
D. Hajj Leave
A worker shall be entitled to a paid leave of not less than 10 days and not more than 15 days, including Eid Al-Adha holiday, to perform Hajj only once during his service if he has not performed it before. To be eligible for this leave, the worker must have spent at least two consecutive years of service with the employer.
E. Paternity Leave
Employees are eligible for 3 Days of paid leave up on the the birth of a child.
F. Marriage leave
As per Article 113, For a marriage, an employee is entitled to 5 days of paid leave.
G. Compassionate Leave
Compassionate leave is provided and given for five days for the death of a spouse or one of his ascendants and descendants.
H. Iddah Leave
In the case of a Muslim woman whose spouse has died, the Iddah leave is provided for the full mourning period of four months and 10 days. In the case of a non-Muslim woman, the leave is given for fifteen days.
Please read our article on KSA leaves policy here for a comprehensive understanding.
Employee Benefits in summary:
- Salary
- Gratuity
- Air Ticket
- Annual Leave
- Sick leave
- Maternity Leave
- Paternity Leave
- Marriage Leave
- Compassionate Leave
- Medical Insurance
- Overtime pay if applicable.
Laws and policies are ever-changing. We always ensure that we stay up to date with the payroll legislation, not just in KSA, but the whole of GCC.
Payroll Process
The process of payroll is a little complicated and time-consuming; hence it is always recommended to outsource your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business.
One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our client’s entire payroll cycle that includes the preparation of payroll reports, processing salary payments with WPS compliance, accrual management including Gratuity and pension funds, online portal for accessing payslips, and many more. Our leadership team spends the necessary hours in every project, ensuring our clients get refined consulting services to take your business forward.
To know more about our payroll process, Click here
Disclaimer:
Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subjected to change and not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.
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