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In the UAE, employers are considered late if wages aren’t paid within 15 days of the due date. Every company must use the Wage Protection System (WPS), and penalties for non-payment can escalate quickly.
This guide breaks down the payroll audit UAE process into a clear, monthly framework that any business can follow. It’s fully aligned with current UAE labour regulations, free zone requirements, and draws on Auxilium’s two decades of GCC employment expertise.
By following this process, SMEs can audit their payroll with confidence, reduce compliance risks, and understand when it makes sense to bring in an Employer of Record (EOR) to support growth at scale.
At its core, an internal payroll audit ensures that salaries are paid on time through WPS, benefits and end-of-service entitlements are calculated accurately, and that visa, Emiratisation, and free-zone obligations (such as DIFC or ADGM requirements) are fully met.
Use the 12-step checklist below to review contracts, salary calculations, WPS submissions, health insurance coverage, and EOSB or savings-scheme contributions, then record your findings, assign owners, and set deadlines for any corrective actions.
Why a payroll audit in the UAE is non-negotiable
The UAE enforces on-time wage payment via WPS; an employer is late if salaries aren’t paid within 15 days after the due date. Non-compliance triggers warnings, blocks on new permits, and financial penalties.
Beyond wages, health insurance is mandatory in both Dubai and Abu Dhabi (with different frameworks), and end-of-service obligations apply across the private sector, including an optional national Savings Scheme (alternative to traditional gratuity).
Regulatory nuance matters: free zones such as DIFC replaced gratuity with DEWS (a funded savings scheme), while ADGM’s 2024/2025 updates maintain gratuity but now enable a savings-scheme pathway. Mainland employers follow Federal Decree-Law No. 33/2021 and its implementing regulations.
Finally, Emiratisation targets require companies with 50+ employees to increase skilled Emirati hires by 2% annually (towards 10% by 2026) and extend quotas to firms with 20–49 staff in 14 sectors (1 national in 2024; 2 by 2025).
What to prepare before you start (scope & evidence)
Before you begin your payroll audit, preparation is everything. The goal is to build a complete picture of your payroll environment, one that captures every document, process, and control involved in paying your people. This isn’t just an accounting exercise; it’s about ensuring that every salary, deduction, and benefit aligns with UAE labour law, WPS standards, and, where relevant, free zone regulations. By gathering the right evidence upfront, from contracts and time records to health insurance and WPS files, you’ll make your audit faster, more accurate, and fully defensible in the event of a government inspection or compliance review.
Assemble a 12-month data pack:
- Corporate setup: Trade licence(s), establishment card, mainland vs. free-zone status; for DIFC/ADGM, the applicable employment regulations and scheme enrollment (e.g., DEWS).
- Workforce master: Contracts (fixed-term), amendments, basic salary vs. allowances, grades, visa/work-permit status, Emirati nationals’ pension registration (GPSSA) where applicable.
- Time & pay inputs: Timesheets/rostering, overtime approvals, leave records, approved deductions.
- Payroll outputs: Monthly gross-to-net runs, WPS SIF files and bank receipts, variance logs, EOSB/savings accruals, insurance policy schedules.
- Compliance artefacts: Health-insurance evidence (Dubai/Abu Dhabi), Emiratisation submissions, Midday Break communications for outdoor roles.
Mainland vs. Free Zone
Mainland firms are under MoHRE and WPS; most free zones also integrate with WPS, but DIFC and ADGM run their own labour regimes, payroll rules and EOSB treatment differ. Document which regime applies before auditing.
The 12-step payroll audit UAE process (monthly, repeatable)
Running a payroll audit doesn’t have to be overwhelming, especially when it’s broken into clear, repeatable steps. The following 12-step payroll audit UAE process is designed to help businesses of any size maintain ongoing compliance with MoHRE, WPS, and free zone requirements. By following this checklist each month, you’ll not only verify that payments are accurate and on time, but also spot potential compliance issues before they become costly penalties. Think of it as a simple, structured framework to keep your payroll operations transparent, consistent, and audit-ready all year round.
1) Confirm entity & jurisdiction
Map each employee to the correct legal entity, licence and regulatory regime (Mainland/MoHRE, free zone; DIFC/ADGM if applicable). Note any cross-zone assignments or cost-sharing that could affect WPS submissions, benefits, or dispute forums.
2) Validate employment contracts (structure & terms)
Check fixed-term contracts, probation length, notice rules, non-competes, and leave entitlements against Federal Decree-Law 33/2021 (or zone law). Reconcile basic salary vs. allowances (housing, transport), as gratuity is calculated on basic salary only.
3) Test time, attendance & overtime
Select samples across functions and shifts. Verify timesheets, overtime approvals, and public-holiday pay. For outdoor/field teams, confirm rosters respected the Midday Break (15 June–15 September; 12:30–3:00 pm) and that any exceptions followed the official rule.
4) Recompute gross-to-net
For each sample month, independently recompute earnings, allowances, and statutory deductions. Flag negative net pay or recurring off-cycle corrections. Tie back to contract and policy.
5) Health-insurance compliance (Dubai & Abu Dhabi)
Verify active policies for all employees in the correct emirate (often Dubai for Dubai visas; Abu Dhabi for Abu Dhabi visas), coverage effective dates, and dependents where mandated by local law/policy. Record any lapses or mismatches with visa issuance/renewal timelines.
6) WPS control testing (heart of the audit)
- Due-date test: Confirm wage due date per contract; verify payment occurred by day 15 after due date.
- SIF integrity: Validate SIF header (establishment ID), EDR/EVP fields (person ID, IBAN, routing code), and SCR totals equal the sum of EDR lines. Match the bank receipt to the SIF total.
- Exception review: Confirm WPS-excluded categories (e.g., new joiners in first 30 days, unpaid leave with evidence) were handled correctly.
Tip: Maintain a WPS variance log (reason, amount, approver, resolution) and reconcile it monthly to avoid cumulative discrepancies that can trigger MoHRE alerts.
7) End-of-service benefits (EOSB) or Savings Scheme
- Traditional EOSB: Recompute at least quarterly using 21 days’ basic pay per year for the first five years and 30 days thereafter (cap two years’ wage). Confirm settlement within 14 days of termination.
- Savings Scheme (optional alternative): If the company opted in, test employer 5.83% / 8.33% monthly contributions and reconciliation to fund statements; ensure participation and historic entitlements are preserved per MoHRE guidance.
8) Emiratisation compliance
For 50+ employees, test progress to the 2% annual target (delivered as 1% mid-year and 1% year-end). For 20–49 staff in listed sectors, check hiring of 1 Emirati in 2024 and 2 by 2025; verify GPSSA registrations and WPS payment for nationals.
9) Visa, permits & job titles
Sample employee files for visa validity, occupational classifications, and whether payroll location matches sponsoring entity. Check that job titles in contracts, visas, and WPS are consistent.
10) Payroll controls & segregation of duties
Confirm maker-checker controls on input changes, SIF generation, and bank release. Restrict access to the payroll master. Evidence monthly management sign-off.
11) HSE seasonal rules & pay impact
For outdoor teams, document compliance with Midday Break logistics (shade, water, training) and any premium pay/overtime implications during rescheduling. Reference official MoHRE circulars for the current year.
12) Remediation plan & board reporting
Rate each finding by severity (High/Medium/Low), assign an owner and a due date, and agree root-cause fixes (policy update, system rule, training, or outsourcing to EOR). Track closure monthly and re-test.
Common red flags (and quick fixes)
Even the most diligent payroll teams can miss small details that turn into major compliance risks. In the UAE, where payroll regulations are tightly enforced, these oversights can lead to fines, WPS suspensions, or delays in visa renewals. Recognizing the warning signs early is key. The list below highlights the most common red flags uncovered during internal payroll audits, along with practical fixes you can implement immediately to get back on track. Each issue is drawn from real scenarios Auxilium has helped clients resolve across the GCC, proving that prevention is always easier (and cheaper) than correction.
- Late WPS submissions or partial payments → Introduce a calendar tied to payroll cut-offs and a buffer before day 15; automate SIF validations; escalate exceptions the same day.
- Basic vs. allowance mis-mapping inflating or depressing EOSB → Lock the definition of basic salary in HRIS; audit changes to basic separately; run a quarterly EOSB reconciliation.
- Health-insurance gaps (visa holds, penalties) → Align policy renewals with visa expiry; maintain a live dashboard of policy status by emirate.
- Emiratisation off-track → Add mid-year checkpoints (June 30) and year-end targets, build talent pipelines, and pre-register eligible roles on Nafis.
- DIFC/ADGM mis-application → Where applicable, verify DEWS enrollment in DIFC and follow ADGM guidance on gratuity vs. savings options.
When to use an Employer of Record (EOR)
An EOR becomes strategically valuable when:
- You lack a mainland entity or have visa-quota constraints but must hire locally, now.
- You need error-proof WPS, health-insurance provisioning by emirate, and EOSB/Savings administration across multiple jurisdictions.
- You are expanding into several GCC countries and want one platform for onboarding, payroll, and compliance, without building internal teams in each country.
Auxilium operates exclusively across the GCC with deep, in-market expertise, managing hiring, payroll compliance, and visa processing so leadership teams can focus on growth.
Compliance is not optional, and it scales with your ambition. If your team prefers to focus on revenue while a specialist shoulder-checks WPS, visas, EOSB/Savings, Emiratisation, health insurance, and zone-specific rules, Auxilium can help.
Call to action: As a GCC-focused Employer of Record, Auxilium manages UAE employment end-to-end—payroll, visa processing, health insurance, Emiratisation, and end-of-service obligations—so you can expand faster, with zero red tape. Book a free consultation to map your payroll audit and remediation plan in the UAE.
