Month: November 2021
UAE Central Bank Launched New Guidance to Re-inforce AML/CFT
Raghunath. T, Director
Phone:- +971 4 327 7775
Mobile:- +971 55 807 4568
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
The global economic downturn, coupled with the COVID-19 pandemic and increasing financial crimes has produced a lethal mixture for financial institutions, which has resulted in a plethora of challenges. Financial Institutions are working relentlessly to adopt new legislation and establish full compliance mechanisms as the regulatory regime evolves and becomes more demanding.
Financial crimes such as money laundering and the financing of terrorism concerns are invading and destabilizing nations’ monetary systems. As a result of this, the Central Bank of UAE (CBUAE) has taken stringent efforts by issuing new guidance to increase the assessment of Anti-money Laundering (AML) and Combating Financing of Terrorism (CFT) controls for Licensed Exchange Houses (LEH) in order to mitigate fraudulent practices. The guideline, which comes into force instantly, will enhance LEH’s awareness of risks and successful execution of their statutory AML/CFT requirements, based on Financial Action Task Force (FATF) recommendations. It is also imperative that within one month, all licensed exchange houses in the UAE must exhibit adherence with the guidance’s standards.
The exchange house sector in the UAE is viewed as having a high degree of risk and materiality, which is aggravated by its sensitivity to cash and cross-border operations. The new standards shall act as vital factors to safeguard these licensed houses, as outlined below.
- Exchange houses must have an adequate AML/CFT Programme in place to prevent their company from being used as enabler for money laundering or terrorism funding, according to the guidelines.
- Exchange houses should adopt a risk-based approach towards AML/CFT by undertaking a comprehensive risk assessment process that includes customers, products and service, delivery channel, new technology, geographic, counterparty, and illicit activity uncertainties.
- To successfully manage risks, the risk assessment conclusions must drive the program’s complete rules, procedures, internal controls, and personnel training.
- Dedicated compliance function, strong customer due diligence, constant transaction monitoring, and full compliance with the UAE’s rules on Targeted Financial Sanctions and Suspicious Transaction Reporting are other critical elements of the AML/CFT program.
“The CBUAE’s new standards and guidelines will undoubtedly guarantee that all regulated exchange houses in the UAE are aware of their AML/CFT duties, and they can serve as a top-level of defense in detecting and mitigating financial crimes,” said Raghunath T, Director- Management Consultancy, HLB HAMT.
The new CBUAE guidelines will assist financial institutions in understanding and effectively executing a comprehensive anti-money laundering and counter-terrorist financing compliance programmes. To counteract the financial crimes that are progressively invading our society, we must keep a close eye on them. AML/CFT policies, when correctly implemented with the help of a professional firm can decrease the negative consequences of illegal economic activity while simultaneously enhancing financial market stability and resilience.
HLB HAMT is a renowned consultancy firm conducting independent assessments of anti-money laundering, counter-terrorism financing, and sanctions compliance frameworks in a variety of industries. Our squad of experts can assist you in creating, implementing, and improving your compliance regime for exchange houses, banking, insurance, and other designated non-financial businesses.
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Types of Employment Contract in UAE
HLB UAE Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
The UAE Employment Contract is an agreement between an employer and an employee that contains fundamental working terms such as the employee’s designation, the commencement date of employment, the type of the contract, remuneration, and the contract’s duration (fixed or unlimited term). The employment contract should be drafted in two versions, one for the employer and one for the employee, and both should be signed.
There are two forms of employment contracts, according to UAE labour legislation No.8 of 1980:
- Limited Contract
- Unlimited Contract
| LIMITED CONTRACT | UNLIMITED CONTRACT |
| A limited contract, often known as a fixed-term contract, specifies the start and end dates of employment or specifies duration of employment. | An unlimited contract also known as open ended contract specifies the start date only with no certain period of time quoted. |
| When does a limited contract come to an end? Any of the following situations will result in the termination of an employment contract:
| When does an unlimited contract come to an end? Any of the following situations will result in the termination of an employment contract:
|
| When a contract is cancelled by the employer, how is compensation handled? If an employer terminates an employee for a cause other than those listed in Article 120 of the UAE Labor Law, the employer must pay the employee three months’ remuneration or remuneration for the remainder of the contract time whichever is less, in addition to their normal End of Service Benefits (EOSB) privilege. | When a contract is cancelled by the employer, how is compensation handled? If an employer terminates an employee under an unlimited contract for a cause other than those listed in Article 120 of the UAE Labor Law, the employee will be entitled for a notice period or compensation in substitution of notice period in compliance with the contract of employment in addition to their End of Service Benefits (EOSB) rights. |
| When a contract is cancelled by the employee, how is compensation handled? If an employee wants to end the limited contract for reasons except that listed in Article 121 of the UAE Labor Law, the employee must pay the employer as compensation a sum equal to half a month’s remuneration for three (3) months or the remainder of the contract duration, whichever is less. | When a contract is cancelled by the employee, how is compensation handled? If an employee wants to end the unlimited contract for reasons except that listed in Article 121 of the UAE labor law, the employee must pay the employer compensation in line with the contract of employment or payment in place of notice period based on final remuneration unless the employee quit in accordance with UAE Labor Law Article 121. |
| Is there a notice period for cancelling a limited contract? A limited contract must include a notice period of at least one month and up to three months. | Is there a notice period for cancelling an unlimited contract? An unlimited contract can be cancelled at any time by either the employer or the employee if the contractual written notice period is met, which is normally not less than 30 calendar days. |
| Calculation of Gratuity at the End of Service For Resignation: When the service of an employee is less than 5 years, there is no eligibility. If his/her service is more than 5 years, then the eligibility factor is considered,
In case of completed contract, Employee is eligible for full Gratuity. | Calculation of Gratuity at the End of Service For Resignation: If service period is less than one year, No gratuity. When the service time is more than one (1) year but less than three (3) years, he/she is considered eligible for one-third (1/3) of the end of service (1/3 *21). When the service time is more than three (3) years but less than five (5), he/she is considered eligible for two-third (2/3) of the end of service (2/3*21). If his/her service is more than 5 years.
|
For Termination:
When the service is more than 5 years, eligibility factor is as follows:
| For Termination:
When the service is more than 5 years, eligibility factor is as follows:
|
When it comes to hiring employees in the UAE, employment contracts are among the most critical documents to have. Employment contracts vary, and they are based on a two-party agreement. Understanding the many types of employment available in the UAE can help you avoid issues down the road. From the perspective of an employee or employer, it is their obligation to develop knowledge and insight into this subject and to face the problems that come your way with confidence.
UAE 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 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 pay slips, 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 subject to change and is 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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Payroll Process in Dubai Multi Commodities Centre (DMCC)
HLB UAE Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
Dubai Multi Commodities Centre (DMCC) was founded in 2002 by the Government of Dubai to provide the Physical, market and financial infrastructure required to establish a hub for global commodities trade. It is considered one of the flagship free zones of the United Arab Emirates.
In this blog we are trying to answer some of the commonly asked questions related to payroll process in DMCC.
What is the frequency of making salary payments to employees in DMCC?
The law stipulates in Article 56 that employees engaged in yearly or monthly remuneration shall be paid at least once a month. All other employees shall receive their remuneration at least once every two weeks.
Does DMCC have a minimum wage?
Employees at DMCC do not have a set minimum pay. Some nations, meanwhile, have established minimum salaries for their citizens working in the UAE, either through bilateral agreements or as a condition of visa clearance.
What are the statutory pay components included in an employee’s salary?
The Law does not define the components that should make up an employee’s salary; there are no defined statutory components.
Which are the common components of employee compensation?
The law does not define the components that should make up an employee’s salary; there are no statutory components. Commonly, employee compensation components include basic salary, house rent allowance, transport allowance and other allowances that may be defined from one employer to the other. The variable earnings and deductions components may include overtime, sales commission incentives, relocation allowances, vacation pay, mobile allowances and many more components that are payable to employees from one company to another.
Which are the currencies that can be used in making salary payments in UAE? Can a salary be paid in a foreign currency?
The only accepted currency used in making salary payments in DMCC is the country’s national currency which is the AED.
What is the maximum number of working hours per day?
An adult works eight (8) hours per day or forty-eight (48) hours per week (considering a six-day workweek). When an employer works a five (5) day work week, the total weekly working hours must not surpass 40 hours (i.e. 8 hours per day). Working hours may be raised to nine (9) hours per day at commercial businesses, hotels, restaurants, watchmen jobs, and similar operations. Working hours do not include travelling time required to the workplace. During Ramadan, working hours are reduced by two (2) hours each day. Working hours do not include recess times. Employees are not permitted to work continuously for more than five (5) hours without taking a break for rest, food, or prayer, with a total break of at least one (1) hour.
What is the method of calculating overtime?
Overtime is any extra hours worked by an employee beyond the normal working hours. When situations necessitate an employee working longer than normal working hours, overtime is rewarded at normal salary plus at least a 25% increase in salary. If the overtime occurs between the hours of 9.00 p.m. and 4:00 a.m., the overtime is rewarded at the normal salary plus a 50 percent increase. Over time, on the other hand, is limited to two (2) hours a day unless it is required to avoid a significant loss, a severe accident, or to prevent or relieve both. If an employee’s job requires them to work on a public holiday for which they would ordinarily be paid in full or in part, after which:
- The employee should be paid with a substitute day off and a salary rise of at least 50% of the employee’s current salary; or
- If the employee is not granted a substitute day off, the employer shall pay a compensation increase equal to 150 percent of the employee’s basic rate for the days worked.
How is gratuity accrued? When is gratuity paid to an employee?
Gratuity is accrued against the last drawn basic salary and calculated as follows: –
- a) Twenty-one days’ pay for each year of the first five years of service;
- b) Thirty days pay for each additional year;
provided that the entire total remuneration shall not exceed two year’s pay.
The employee, who has completed one year or more in the continuous service, is entitled to the end of service remuneration at the end of his service. Gratuity paid is dependent on the type of separation and the type of contract
For a comprehensive understanding of UAE gratuity accrual and settlement, please refer to our article on UAE gratuity policy and settlement here.
How is UAE pension calculated and deducted from an employee’s salary? Which employees qualify for UAE pension contributions?
UAE nationals are subject to mandatory national pension plan contributions. Monthly pension deductions are made on UAE nationals’ total fixed salaries to a maximum limit of AED 50,000/-. Employee makes a 5% contribution, employer contributes 12.5% and the government contributes 2.5%.
What are the different types of employment contracts in DMCC?
There are two types of employment contract: Limited and Unlimited Contract.
When is an employment contract considered terminated?
An employment contract is terminated in any of the following cases:
- Mutual consent by both parties to terminate the contract, provided that the employee’s consent is in writing
- On the expiry of the specified period in respect of limited contracts, unless the contract is explicitly or implicitly extended
- At the option of either party in respect of unlimited contracts, provided that the correct notice is given and the grounds for termination are not arbitrary; or
- if the employee dies or is completely incapacitated from working as evidenced by a medical certificate.
Which are the statutory leaves available in DMCC?
A. Annual leave
If the service period is less than 6 months, the employee is not eligible for any leave. An employee is eligible for 2 days per month if their service period is less than one year but more than six months. According to article 75 of the UAE labour law, annual leave is granted for 30 days per year, where the worker’s period of service is more than one year. Annual leave is based on calendar days, and any public holidays and weekends that fall within annual leave is considered as Annual leave.B. Sick leave
According to article 83, a worker will not be entitled to any paid sick leave during the probationary period. A worker who contracts illness following the probationary period, in the continuous service of an employer shall be entitled to a sick leave not exceeding 90 days, successive or otherwise, in respect of each year of service, to be calculated as follows-- The first 15 days: with full pay
- The next 30 days: with half pay.
- Next 45 Days: Without pay
C. Maternity leave
A female worker shall be entitled to maternity leave with full pay for a period of forty-five days, including both pre-and post-natal periods if she has completed not less than one year of continuous service with her employer. A female worker who has not completed one year of service shall be entitled to maternity leave with half pay. On the expiry of the maternity leave, may discontinue work without pay for a maximum period of one hundred consecutive or intermittent days if such absence is due to illness which does not enable her to resume workD. Hajj Leave
Hajj leave is taken by Muslims to go perform pilgrimage. Article 87 states that ‘Each worker shall be entitled, once in the course of entire service, to special leave without pay for performing pilgrimage’. Hajj leaves shall not exceed 30 days and is granted once in the entire employment tenure.E. Paternity Leave
Both Male and Female employees shall be entitled to five days of paid leave to take care of their infants, and this has to be availed of within the first 6 months of the baby’s birth.For a comprehensive understanding of the UAE leave policy, please read our article on the UAE leave policy here.
What is WPS? Is it applicable in DMCC?
WPS is an electronic salary transfer system that allows institutions and organizations in the private sector to pay their employees through banks, exchange bureaus and financial institutions approved by the UAE Central Bank. DMCC initiated WPS with effect from February 2023. It is mandatory to all the entities registered under DMCC to process their employee salary through WPS with effect from January 2024. Currently, Jebel Ali Free Zone Authority (JAFZA) is the only other free zone that has fully adopted the use of WPS.
Please read our detailed article on UAE WPS for more information
What are the items included in the End of Service Benefits calculation in the UAE?
The employee is entitled to the following end-of-service benefits.
- Gratuity, if applicable
- Repatriation ticket if applicable
- Notice period pay if applicable
- Any unutilized leave (Vacation) pay
- Remuneration until the employee’s last day of employment
- Any other outstanding payment or deduction
- Any other benefit or compensation mentioned in Employment Contract
Is it necessary to give employees a payslip?
No. Even if it is not compulsory, It is recommended that employers provide payslips to their workers as a document of the elements of the remuneration received every month.
Is it possible for a DMCC employee to be barred from working in the UAE?
Yes. A DMCC employee can be banned in two (2) situations. The Immigration Department issues bans in response to a DMCC NOC. The following submissions can result in DMCC issuing a NOC:
- An employee’s criminal history as indicated by a police report; or
- A hospital certificate stating that the employee has tested positive for a sickness that is not tolerated in the UAE. The individual who has been barred from entering the UAE would be unable to do so until the ban term has expired.
A cost-effective, efficient, and timely payroll process of wage payment is critical to a business’s success, be it a company in DMCC or anywhere in the GCC. The payroll function’s responsibility is not confined to computing employee wages; it also includes the effective administration of a variety of additional components such as leave, travel expenses, accruals, and other HR activities. The process of payments for employees is simplified and processed by payroll providers who provide accurate and timely service to companies.
Payroll Process
The process of payroll in UAE is a little complicated and time-consuming; hence it is always recommended to outsource your company’s payroll function. Outsourcing payroll in UAE 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. HLB HAMT provides payroll in UAE, Bahrain, Qatar, Saudi Arabia, Kuwait, and Oman.
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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Termination of Employment Contract in UAE
HLB UAE Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
An employment contract is an agreement with a limited or unlimited period, between an employer and an employee whereby the employee commits to work for the employer and agrees to work under the employer’s management and supervision, for which the employee receives remuneration from the employer. There are two types of employment contract in UAE, one is limited and other one is unlimited.
Here in this blog, we are trying to answer some of the questions related to termination of employment contract.
When is a limited employment contract considered terminated?
Limited contract is considered terminated in any of the following cases;
- On expiry of the specified period in respect of limited contracts, unless the contract is explicitly or implicitly extended.
- Mutual consent by both parties to terminate the contract, provided that the employee’s consent is in writing.
- If the employee dies or is completely incapacitated from working as evidenced by a medical certificate.
When is an unlimited employment contract considered terminated?
- At the option of either party in respect of unlimited contracts provided that the correct notice is given and the grounds for termination are not arbitrary; or
- Mutual consent by both parties to terminate the contract, provided that the employee’s consent is in writing.
- If the employee dies or is completely incapacitated from working as evidenced by a medical certificate.
Can an employer terminate an employee during their leave?
With the exception of cases where the employer has the right to dismiss the employee without notice and without the end-of-service benefit, the employer cannot dismiss an employee or serve notice of dismissal during the employee’s leave.
When can an employer terminate an employee without notice?
The UAE Labour Law states that an employer may dismiss the employee without notice in the following cases.
- If the employee adopts a false identity or nationality or submits forged documents or certificates.
- If the employee is under probation.
- If the employee commits an error causing substantial material loss to the employer.
- If the employee violates safety instructions at the place of business, provided that such instructions are displayed in writing at conspicuous places and, in case of an illiterate employee, the employee has been informed verbally of the same.
- If the employee fails to perform their main duties under the contract of employment and does not remedy them despite formal investigation and warning of dismissal if repeated.
- If an employee divulges any secrets of the establishment where employed.
- If the employee is convicted by a competent court, in a crime of honour, honesty or public morals.
- If the employee is found drunk or under the influence of drugs during working hours.
- If, in the course of work, the employee commits an assault on the employer, the manager or any colleague.
- If the employee is absent without valid cause, for more than twenty intermittent days or for more than seven successive days, during any year.
- If the employee works for another employer during annual or sick leave.
The UAE Labour Law contains a minimum statutory disciplinary process which employers should follow prior to termination, where appropriate. Please note that termination under Article 120 of the Labour Law is difficult in practice, as it is a very high hurdle to satisfy and may involve referrals to the police and/or other third parties for independent confirmation of the allegations prior to termination. We therefore recommend that prior to terminating under Article 120, an employer seeks independent legal advice.
Can an employer terminate the employee because that employee has a dispute against the employer?
If an employer terminates an employee’s employment because the employee has lodged a complaint or claim against the employer, the termination shall be deemed arbitrary. The same applies where the reason for the termination of the employee’s employment has nothing to do with the employee’s work. If an employee is arbitrarily dismissed, they may raise a claim and, if successful, may be entitled to compensation up to a maximum of three (3) months’ remuneration.
When can an employee resign without notice?
An employee may resign without notice in the following cases:
- If the employer does not fulfil their obligations towards the employee as provided for in the contract or under UAE Labour Law; or
- If the employer or its legal representative has committed an act of assault against the employee.
Can an employer terminate a contract during the probation period?
Yes, the employer may terminate the services of the employee without notice and without payment of end-of-service benefit during the probation period.
Can an employee terminate an employment contract without notice during the probation period?
Article 37 of the UAE Labour Law only provides the employer with the right to terminate the services of an employee without notice during the probation period. However, if the contract provides for mutual termination without notice or on reduced notice by both employer and employee during the probation period (i.e. something which is more favourable to the employee than the position under the UAE Labour Law) then the employee will also be able to terminate the contract without notice or on reduced notice during the probation period.
Can the employer terminate an employee who cannot return to work due to illness?
Yes, the employer may terminate the services of an employee, in accordance with the notice provisions, if the employee is unable to resume their duties following 90 calendar days’ sick leave in any year of service. The employer must allow the employee to take the full sick leave entitlement before terminating.
How much notice period is required to terminate an unlimited contract?
Both the employer and the employee may terminate an unlimited contract by giving not less than 30 calendar days’ written notice.For employees working on a daily basis the notice is less as follows:
- One week if the employee has been employed for more than six months but less than one year.
- Two weeks if the employee has been employed for not less than one year; and
- One month if the employee has been employed for not less than five years.
What are the entitlements of a party if the other party fails to serve notice?
If the employer or the employee has failed to serve notice to the other party for termination of the contract or has reduced the notice period, the party obliged to serve the notice shall pay to the other party compensation in lieu of notice.The amount of compensation in lieu of notice is an amount equal to the employee’s remuneration for the notice period in full or in proportion to the diminished part.
Who bears the repatriation costs on termination of employment?
Expenses for repatriation of a non-UAE national employee (to their place of origin or other agreed place) are covered by the employer regardless of the place of recruitment and whether termination takes place during or after the probation period. The visa status of the employee is also irrelevant for the purposes of whether a repatriation ticket should be provided. However, if the employee takes up employment somewhere else in the UAE, repatriation expenses upon the termination of their service shall be paid by the new employer. Updating yourself on the rules pertaining to employment contracts before signing the contract will help in avoiding any conflicts of interest later on. One must be aware of the termination rules, reasons that can lead to termination, the duration of notice period and everything related to employment termination.
Payroll Service in UAE
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 preparation of payroll reports, processing salary payments with WPS compliance, accrual management including Gratuity, and 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 subject to change and is 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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Overtime Calculation based on labor law in Oman
HLB Oman Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
When an employee works extra hours than the normal hours, those extra hours are considered as overtime and the payment made for the extra hours worked is known as overtime payment.
Please see the below Article 68 (Working Hours) and Article 70 (Overtime) from Oman labor law.
Article (68):
An employee may not be required to work for more than nine hours a day and up to a maximum of 45 hours a week with at least half an hour of breaks for taking food and rest. The maximum work hours during Ramadan shall be six hours a day or 30 hours a week for Muslim employees. A decision by the Ministry may determine the timing of the work hours.
Article (70):
An employee may be required to work for more hours than those provided in Article (68) if the interest of work so dictates, provided that the total original and extra work hours do not exceed 12 (twelve) hours a day. The employer shall pay the employee overtime equal to his basic salary for the extra work hours, plus at least 25% for day-time work and 50% for night work, or grant the employee permission for the extra hours he has worked, provided that the employee agrees in writing to the extra work and the return.
With regard to the work that takes place at ports, airports, on vessels, ships, or aircraft, the employer and the employee may, after obtaining the approval of the Ministry, agree on the payment of a fixed allowance for the employees in lieu of the overtime payments provided that the approval from the Ministry is obtained. However, the minister may include any other works of a similar nature.
In this article, we are trying to answer some of the frequently asked questions related to overtime in Oman.
What are the maximum working hours in Oman?
As per Article 68 of the Omani Labor Law, an employee may not be required to work for more than nine hours per day and 45 hours per week, with at least a half-hour break for taking food and rest. The maximum work hours during Ramadan shall be six hours a day or 30 hours a week for Muslim employees.
What are the types of overtime in Oman?
There are 3 types of overtime as mentioned below;
- 125% for additional daytime working hours
- 150% for nighttime working hours. The time between 9 PM and 4 AM is considered as night working hours.
- 200 % if such work is performed during the weekly day of rest or during the official holidays, the employee shall, unless compensated with another day, be entitled to double the gross salary for such a day.
Is there any exception for overtime payment in Oman?
As per Article 70, the employer may not comply with the provisions set out in Sections [68] and [69] of this law in the following cases:
- At the time of annual inventory, preparation of the balance sheet, liquidation, closing of accounts, and preparation for sale at a discount. Provided that in such cases the number of working days in which the worker works for more than the prescribed period of a working day shall not exceed fifteen days in a year, unless the relevant directorate approves longer periods.
- If the work is for the prevention of an accident or reparation of the results thereof or the avoidance of a definite loss of perishable materials.
- If the work is intended to meet an unusual pressure.
- The notification of the relevant directorate within twenty-four hours is conditional in the last two cases, and in emergency, the additional work and the period required for completion of the work shall be stated.
- The Seasonal works are defined by a ministerial decision.
Are there any exempted roles from getting paid overtime?
The Ministry of Manpower, by way of Ministerial Decision 1 1976, states that overtime payment will not apply to senior private-sector employees, such as professionals including “doctors, engineers and those of similar standard” or those persons who undertake dual roles involving “administrative and supervisory work.”
Can any allowance be paid as an alternative to overtime?
The Omani Labor Law provides that those employers engaged in work carried out at ports and airports or on-board ships, vessels, or aircraft may agree to pay employees an allowance in lieu of overtime, subject to the approval of the Ministry of Manpower.
How is overtime payment applied during Ramadan?
The maximum working hours for a Muslim worker during Ramadan is six hours per day or thirty hours per week, irrespective of whether the work is undertaken during the night or during the day. Any additional hours that a Muslim employee will be required to work will be considered as overtime.
What is the maximum number of working hours in Oman, including overtime?
As per Article 70, the maximum working hours, including overtime, during a day is 12 hours.
What is the Formula to Calculate OT in Oman?
Please see the below formula to calculate overtime.(Basic salary per month/Standard Monthly Hours* OT hours* OT Type)
Please see the below example for a better understanding.
Basic Salary:400
Standard monthly hours: 240
- An employee worked 10 extra hours during daytime hours
Type: 125% (overtime hours belong to daytime hours)Over time amount= 20.833i.e.400/240*10*125%
- Employees worked for 15 extra hours during the night (i.e., 9 PM to 4 AM)
OT Type: 150% (overtime hours belong to nighttime hours)Overtime amount=37.500i.e.400/240*15*150% - Employee worked 10 hours during the weekly day of rest, and no compensatory off was provided
OT Type: 200% (overtime hours belong to weekly holidays)Overtime amount=30.333i.e.400/240*10*200%
Note- There are no defined standard monthly hours in labor law, so we considered 240 hours as standard monthly working hours for our calculation.
- An employee worked 10 extra hours during daytime hours
There are numerous factors that are taken into account while calculating overtime payment and the calculation criteria will not be the same for all countries. Even though there might be variations in the overtime payment calculation, every company considers overtime payment to be the right of an employee, be it in Oman or any other GCC country.
Payroll Service in Oman
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 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 oman 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 subject to change and is 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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