When can private companies deduct salaries in the UAE?

Abu Dhabi: The Ministry of Human Resources and Emiratisation (MoHRE) has clarified that it is permissible to deduct from the wages of employees in the private sector in specific cases, with varying percentages depending on the case.

The ministry emphasised that the labor law and its executive regulations affirm the worker’s right to receive their salary on time and in the agreed-upon amount, provided they fulfil their job duties and comply with legal obligations.

The ministry outlined the limited cases in which deductions can be made from a worker’s wage:

1. Loan repayments granted to the employee, provided they fall within the maximum allowable monthly deduction limit as stated in the law, with the employee’s written consent and without any interest.

2. Recovery of excess payments made to the worker, provided that the deduction does not exceed 20% of the worker’s wage.

3. Contributions to retirement and pension plans or social insurance, as stipulated by applicable national legislation.

4. Employee contributions to savings funds within the organisation or loans owed to such funds, provided they are approved by the ministry.

5. Instalments for any social project, benefits, or other services provided by the employer, subject to the employee’s written consent to participate in such projects.

6. Fines for violations committed by the worker, in accordance with the organization’s disciplinary regulations approved by the ministry, provided the deduction does not exceed 5% of the wage.

7. Debts enforced by court rulings, with a maximum of 25% of the employee’s wage, except for alimony payments, where more than 25% may be deducted. If multiple debts exist, the amounts will be distributed based on the order of priority.

8. Compensation for damages caused by the worker, resulting from errors or violations of employer instructions, leading to the destruction, loss, or damage of tools, equipment, products, or materials owned by the employer. The deduction should not exceed five days’ wages per month unless approved by a competent court.

If multiple reasons for deduction exist, the total percentage of deductions cannot exceed 50% of the worker’s wage in any case.

Every worker and employee in the UAE has the right to receive their full salary on the due date. Private sector employers are responsible for paying salaries on time through the Wage Protection System (WPS) to avoid penalties and violations.

Workers and employees can report any complaints regarding unpaid wages to MoHRE or file a ‘My Salary’ complaint with the ministry.

According to Ministerial Resolution No. 598 of 2022 concerning the Wage Protection System:

• When should salaries be paid?

All entities registered with MOHRE must pay their employees’ wages through the WPS on the due date. Salaries are due starting from the first day of the following month after the payment period specified in the employment contract ends. If the period is not specified in the contract, wages must be paid at least once a month.

An employer is considered late in paying wages if the payment is not made within 15 days of the due date, unless a shorter period is stated in the employment contract.

• Minimum wage

The UAE labour law does not stipulate a minimum wage. However, it requires that salaries meet employees’ basic needs.

• How should wages be paid?

All entities registered with MoHRE must pay wages through the WPS. Salaries are due the day after the payment period specified in the employment contract ends. The WPS facilitates the transfer of salaries through banks, exchange companies, and financial service providers, ensuring compliance with agreed-upon amounts and timelines.

The WPS was developed by the UAE Central Bank to enable MoHRE to establish a database for monitoring private sector salary payments. Salaries must be paid in UAE dirhams or any other currency agreed upon by the employer and employee.

The following workers are exempt from the requirements of compliance with the Wage Protection System:

• Employees who have filed a wage-related labor complaint referred to the judiciary.

• Employees against whom an absconding report has been filed.

• Newly hired employees within the first 30 days of their wage entitlement period.

• Employees on unpaid leave, provided evidence of such leave is submitted.

• Fishing boats owned by individual citizens.

• Public taxis owned by individual citizens.

• Banks and financial institutions.

• Places of worship.