Mastering Employer of Record in Dubai: A Comprehensive UAE Handbook

Mastering Employer of Record in Dubai: A Comprehensive UAE Handbook

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An Employer of Record in the UAE offers comprehensive recruitment, HR, and payroll services, allowing businesses to focus on expansion and improvement in other areas while relying on experts for these functions.

An Employer of Record in the UAE is a legally recognized entity that hires employees on behalf of your company and assumes all associated legal and administrative responsibilities. This includes managing payroll, taxes, and benefits and ensuring that your company complies with all relevant employment laws and regulations.

This article aims to provide a complete guide about the Employer of Record (EOR) in the United Arab Emirates (UAE). It will cover the definition of EOR, Professional Employer Organization (PEO) services, the differences between PEO and EOR, PEO services in Dubai, Emiratization in the private sector, solutions for mass hiring, and other relevant topics.

In this article, you will discover why these organizations are an excellent choice.

We will discuss:

What is an Employer of Record in the UAE?

An EOR is a third-party organization in Dubai, United Arab Emirates that, specializes in hiring employees on behalf of other companies for various purposes, including immigration and taxation, even though the employees hired perform work for different organizations. Employer of Record services ensures compliance with regular employment tasks and administrative roles.

Employer of Record in the UAE simplifies the processes of employee recruitment and management by acting as the legal employer for your business. This setup offers numerous benefits and conveniences to your company.

The following sections detail everything concerning Employer of Record services in the UAE.

Additionally, this service enables rapid international hiring without the need for legal entities. Moreover, while the Employer of Record assumes legal responsibility for the employees, your company oversees their day-to-day activities. This arrangement enhances efficiency and organization, with the Employer of Record managing payroll, benefits, risk mitigation, and worker support.

Understanding the Function of an EOR

An Employer of Record (EOR) in the UAE is a third-party organization that acts as the formal employer within the local jurisdiction, facilitating international employment for your company.

By utilizing an EOR in the UAE, you transfer all legal and compliance duties to them while still managing your team’s operational activities directly. The role of an Employer of Record involves various responsibilities and functions, including:

Global EOR services are advantageous domestically, in addition to their primary use for international staffing, because of differing tax and employment laws in different regions.

Employers of Record in the UAE generally handle numerous HR administrative tasks, such as managing payroll, ensuring compliant benefits, and fulfilling tax obligations. Partnering with an EOR negates the need to establish a legal entity in the location of your hires.

Partnering with an EOR saves the time, costs, and effort needed to learn international employment laws. EORs provide expertise with local compliance and regulations.

Collaborating with a trusted EOR partner allows you to hire and pay employees globally, bypassing the complexities and risks of navigating unfamiliar legal systems and compliance issues on your own effectively and safely.

Delving into Employer of Record Services in Detail

An Employer of Record (EOR) in the UAE empowers companies to expand their workforce and enter new markets without the hassle of managing complex employment laws and regulations on their own.

By utilizing an EOR in the UAE, businesses can concentrate on their primary activities and growth strategies, entrusting the intricacies of employment management to skilled professionals.

This setup provides numerous benefits and conveniences for your company:

Effective HR Management

EOR services include a range of HR responsibilities like payroll, tax filings, benefits administration, and the onboarding and offboarding of employees. This full spectrum of services reduces the administrative load on your internal HR team.

Enhanced Focus on Growth

By delegating employment-related duties to an EOR, your business can reallocate resources and focus on initiatives that promote growth and operational efficiency.

Broad Legal Support

The EOR takes charge of all legal employment aspects, from drafting contracts to ensuring compliance with labor laws and regulations.

Retained Control and Flexibility

While the EOR in the UAE manages the backend employment tasks, your company maintains complete control over daily operations and the decision-making processes for your team.

Comprehensive Legal Support

Ensures your business remains within legal boundaries, minimizing the risk of employment-related legal issues.

Retained Control and Flexibility

It provides the ability to adjust your workforce size as needed while keeping control over your company’s strategic direction.

Enhanced Focus on Growth

Manages the complexities of direct employment through a professional service, enabling your company to pursue expansion confidently and with agility.

Efficient HR Management

It frees up your team to focus on strategic initiatives and employee development instead of routine paperwork.

Responsibilities of an Employer of Record

While specific duties can vary, a typical EOR in the UAE generally offers these essential services: Key Payroll, Benefits, and HR Compliance Management

Onboarding

EORs manage the seamless integration of new hires by handling crucial tasks such as contract preparation, background checks, and payroll setup.

Benefits Administration

EORs design and manage compliant benefits packages that meet the diverse needs of employees while adhering to local regulations.

Tax Withholding and Filing

EORs take responsibility for tax obligations, including tax withholdings and submissions, in compliance with local tax laws.

Government Program Contributions

EORs manage contributions to government programs like social security and unemployment insurance, ensuring accurate and compliant record-keeping.

Payroll in Local Currency

EORs simplify payroll management across different currencies, reducing exchange rate risks and administrative challenges for globally dispersed teams.

Compliance with Labor Laws

EORs monitor and adhere to evolving labor laws and regulations across various jurisdictions.

Additional insights include:

  • The onboarding process not only ensures compliance but also enhances the employee experience from the start, bolstering the employer’s reputation.
  • Employees worldwide can receive timely and accurate compensation through local currency payments, improving employee satisfaction and operational efficiency.
  • From healthcare to retirement plans, EORs offer comprehensive benefits solutions that enhance talent attraction, retention, and overall employee well-being.
  • By ensuring accurate and timely tax compliance, EORs help companies minimize financial risks, avoid penalties, and stay compliant with regulations.
  • Efficient management of government program contributions helps mitigate legal risks and ensures compliance with statutory requirements.
  • Staying updated on legislative changes and implementing proactive compliance measures, EORs help businesses confidently navigate complex regulatory environments, reducing legal risks and promoting ethical business practices.

Employment Contracts in the UAE

In the UAE, employment contracts specify the conditions of employment, including pay, benefits, duties, and procedures for ending employment. Here are essential considerations for UAE employment contracts:

  • Fixed-term Contracts: These agreements are valid for up to three years and may be renewed multiple times. They are governed by specific rules concerning probation periods, notice periods for termination, and severance benefits.
  • Probationary Period: This period usually spans three months unless stated otherwise. It allows employers to assess an employee’s fit for the position.
  • Termination Notice Period: Generally, the longest notice period for ending an employment contract is six months. Employers must either give advance notice or compensate with payment in lieu of notice.
  • Severance Pay: Employees qualify for a service gratuity based on their length of employment. For instance, those with a year of service get 21 days’ salary for each year, while those with five years get 30 days’ salary.
In instances of early termination, severance compensation might differ, with employees possibly receiving up to 1.5 months’ salary in total.

Regarding Indefinite Contracts

These are no longer allowed in the UAE. Such contracts do not include probationary periods, termination notice periods, or severance provisions. It is crucial for businesses in the UAE to ensure their employment contracts comply with these rules to maintain legal adherence and safeguard the rights of both parties.

Working with a PEO service in Dubai can be extremely helpful in aligning contracts with UAE labor laws. Partnering with a reputable PEO can offer significant assistance in managing the complexities of UAE employment contracts, ensuring adherence to local regulations, and supporting Emiratisation in the private sector.

What are the Advantages of Engaging an Employer of Record in the UAE?

An employer of record in Dubai (UAE) assists companies in effectively handling the challenges of international recruitment, ensuring adherence to legal standards, safeguarding intellectual property, and enhancing the employee experience. Below are the primary employee benefits solutions associated with using an employer of record (EOR).

Employee Benefits and Paid Leave in the UAE

Employer Contributions

Employers are required to contribute to social security for their employees, with rates varying by emirate, typically between 12.5% and 15% of an employee’s gross monthly income.

Leave Entitlements

  • Employees earn nearly a month of paid vacation annually after completing three months of continuous service
  • Additionally, employees enjoy 14 recognized public holidays

Sick Leave

Employees qualify for sick leave after three continuous months of employment, with an annual entitlement of 90 days, though payment percentages vary with the leave duration.

Maternity Leave

Maternity leave entitlement ranges from 45 days at full pay to 45 days at half pay, based on service duration, with the possibility of an extra 100 days of unpaid leave for medical complications.

Parental Leave

Employees in the private sector can take five days of parental leave within the first six months following a child’s birth.

Pension Plans and Retirement Contributions

  • UAE nationals are eligible for the federal employment pension scheme
  • Expatriates receive a gratuity, an “end of service” payment, rather than monthly pension contributions

Minimum Wage

  • UAE nationals have a three-tiered minimum wage system based on educational attainment
  • There is no mandated minimum wage for expatriates

Overtime

Normal working hours are limited to 8 hours per day and 48 hours per week, with overtime compensation ranging from 125% to 150% of the regular wage.

Health Insurance

In Abu Dhabi and Dubai, health insurance for employees and their dependents is mandatory, with penalties for employers who fail to comply.

Severance Pay

Severance pay, based on service length, is mandatory, ranging from 21 to 30 days’ salary per year of service, with a cap of two years’ salary.

Legal and Compliance Challenges for Employers in the UAE

Role of the Employer of Record (EOR)
  • Collaborating with a reliable EOR can alleviate risks of misclassification by ensuring proper classification of workers according to UAE laws.
  • EORs employ experts in local employment laws to help employers comply and reduce legal risks.
The Value of Expert Advice
  • Employers benefit from consulting with experts familiar with Emirati employment laws to effectively manage legal and compliance challenges.
  • Professional advice can prevent expensive legal issues and ensure adherence to changing laws.
Ongoing Monitoring
  • Employers should consistently monitor updates in Emirati labor laws and regulations to adjust their worker classification practices.
  • Regularly updating classification policies helps manage legal and compliance risks linked to misclassification.
Misclassification of Employees
  • Misclassifying employees to evade benefits obligations can result in penalties, fines, and legal repercussions.
  • While specific penalties for misclassification aren’t outlined in Emirati employment law, legal issues can still occur, and laws are subject to change.
  • It is essential to accurately classify workers to prevent legal repercussions.
Potential Legal Implications
  • Employers in the UAE could be legally liable for inaccurately classifying workers.
  • Modifications in laws or enforcement can affect the legal risks tied to misclassification.
Compliance Necessities
  • Employers need to adhere to Emirati labor laws concerning worker classification to reduce legal and compliance risks.
  • Following these regulations helps ensure fair employee treatment and shields employers from legal problems.
Employer of Record vs. Staffing Agency
An Employer of Record in Dubai or elsewhere in the UAE is distinct from a staffing agency, though they perform similar functions. Here we explore their differences in more detail.
Key Differences and Considerations
Legal and Administrative Duties
  • EOR: Takes on complete legal and administrative duties, ensuring adherence to local labor laws, tax, and social security requirements.
  • Staffing Agency: Focuses on recruitment and placement, with limited involvement in legal and administrative issues.
Long-term vs Temporary Employment
  • EOR: Ideal for long-term, permanent employment in foreign markets, perfect for establishing a legal presence and managing a stable workforce.
  • Staffing Agency: Best suited for short-term or temporary employment needs, such as project-specific roles or seasonal requirements.
Flexibility and Scalability
  • EOR: Provides the ability to scale and adapt the workforce in new markets quickly.
  • Staffing Agency: Offers flexibility, primarily aimed at meeting immediate, short-term staffing needs rather than ongoing workforce management.
Establishing Relationships
  • EOR: Forms a legal employment bond between the employer of record services and the employee, managing all employment-related responsibilities.
  • Staffing Agency: Forms an employment bond between the client company and the employee, serving as an intermediary.

Additionally, it’s important to ask what the difference is between a PEO and an EOR.

  • Similarity: Employer of Record (EOR) and Professional Employer Organization (PEO) assist firms in managing global teams.
  • Difference: While a PEO acts as a co-employer, an EOR becomes the legal employer for a company’s dispersed workforce.
Permanent Recruitment vs. Temporary Staffing: Serving Distinct Organizational Purposes
Permanent Recruitment
Permanent recruitment prioritizes long-term investment in talent to support organizational growth and success over time. This involves hiring experienced professionals with the requisite skills and expertise for permanent roles. The primary aim is to establish a committed team that will advance the organization’s long-term objectives. Employers focus on employee retention, development, and fostering loyalty and commitment. Permanent recruitment also promotes the cultivation of a unified company culture through shared values and goals.
Temporary Staffing
Conversely, temporary staffing caters to immediate, short-term needs and adjusts to workforce fluctuations. It involves hiring employees on a contractual basis to meet specific needs, fill temporary gaps, or handle seasonal demand variations. This approach offers businesses the flexibility to adapt their workforce size swiftly without the obligations of permanent hiring. Temporary employees are engaged primarily for short-term projects or during peak periods, contributing to the organization while their assignment lasts.
Cost Considerations for Employer of Record in the UAE
Understanding the Costs of Employer of Record Services in the UAE
Employer of Record (EOR) services in the UAE can follow a flat fee or variable pricing structure, each affecting the overall cost and flexibility differently.
Flat Fee EOR Pricing
In a flat fee arrangement, businesses pay a consistent fee per employee, which could be billed monthly or annually, with annual payments generally being more economical. This model ensures cost predictability and is preferred for its simplicity, allowing companies to budget effectively without concerns about fluctuating costs based on employee salaries or benefits.
Variable EOR Pricing
Variable pricing, however, is based on a percentage of each employee’s salary, making costs variable and dependent on employee earnings. While potentially more affordable for lower-salaried employees, it can become more expensive as salaries rise and may discourage wage increases.
Evaluating Costs and Benefits
When selecting an EOR provider, businesses must consider various factors, including the scope of services needed, the number of workers to be hired, and their geographic location. The choice between traditional EOR providers and more flexible solutions should be based on a cost-benefit analysis, considering service requirements, hiring scale, and regulatory environments. EOR companies offer an affordable and comprehensive solution, especially suitable for businesses aiming for global expansion and needing robust security and compliance measures.
Service Requirements
The cost of EOR services depends on the required services including payroll processing, benefits administration, compliance with local labor laws, data security, and intellectual property protection.
Number of Workers
The scale of hiring influences costs; large-scale hiring might offer volume discounts, whereas smaller operations often face standard rates.
Geographic Location
The cost of EOR services is affected by the geographic location of workers due to variations in regulations, tax systems, and living expenses. Hiring in areas with complex legal structures or high living costs can increase EOR expenses.
Traditional EOR Providers
Established providers typically charge premium enterprise fees, potentially reaching up to $2,000 per employee monthly. While they provide extensive services, these costs can be prohibitive for smaller businesses and may lack flexibility and promptness.
EOR Solution
Our Global EOR solutions offer an economical alternative by integrating services such as payroll, benefits, data security, and IP protection. This makes it a viable option for businesses aiming for global expansion due to its affordable rates, transparent pricing, and robust security and compliance measures.
Mass Hiring Solution
For companies needing mass hiring solutions, like rapidly scaling operations or entering new markets, the affordability of EOR services is paramount. Traditional providers with high per-employee costs can place substantial financial strains on businesses planning to hire extensively.
Characteristics of the Top Employer of Record in Dubai

Typically, the Employer of Record in the UAE meets the following characteristics:

  • An Employer of Record allows you to outsource employees globally and effectively manage HR operations.
  • This service enables you to enter the market more efficiently and hire employees 90% faster, with workers being able to start in just 48 hours.
  • It ensures compliance with labor laws, keeps them updated, and helps you maintain better company control.
  • It offers flexibility in penetrating new markets, providing multiple options without long-term obligations.
Employer of Record Dubai Payroll Services
In the UAE, payroll and tax management depend on whether employees are foreign or local. Companies in the region often prefer EOR services for handling payroll. These services adhere to immigration and tax laws.
Furthermore, using an EOR can optimize and simplify an employee’s role, enhancing profitability while ensuring security and confidentiality. EOR services include:
  • Drafting offer letters
  • Issuing no objection certificates (NOC)
  • Planning and managing paid employee leave, vacations, and sick days
  • Assisting with medical or health insurance selections
  • Implementing the salary protection system
  • Calculating legal end-of-service gratuities as per UAE labor laws
  • Prepared and distributed salary certificates, payslips, and bank transfer letters
  • Handling settlement calculations and trial period completions in line with UAE law
  • Other Critical Aspects Managed by Employer of Record Services
Other Aspects of Employer of Record in Dubai, UAE

When employing in the UAE, it’s essential to understand the regulations to create compliant employment contracts. An Employer of Record in Dubai addresses vital HR requirements such as:

  • Working hours: Employees should not work more than 8 hours per day or 48 hours per six-day week.
  • Overtime compensation: Overtime is compensated at 125% of the wage, and work between 9 PM and 4 AM at 150%. Additionally, overtime hours are capped at 2 hours daily.
  • Trial periods: Employers may hire an employee on a trial basis for up to six months, during which termination can occur without notice or severance pay.
  • Termination and severance: Employers may terminate a permanent employee with 30 days’ notice or immediately without notice or severance for justified reasons, depending on the termination cause and contract type.
Employee Benefits Managed by an Employer of Record in Dubai

An Employer of Record in Dubai negotiates employment terms, ensuring legal benefits and paid leave are included, as outlined below:

  • Maternity leave: Eligible employees receive 45 days of maternity leave, with full pay after a year of service and half pay otherwise.
  • Annual leave: Employees earn two days of vacation per month after six months of service but less than a year; those with more than a year of service receive 30 days per year.
  • Public holidays: Employees are entitled to 10 paid public holidays each year.
  • Sick leave: After three months of employment, excluding the probationary period, employees are eligible for up to 90 days of sick leave—fully paid for the first 15 days, half paid for the next 30 days, and unpaid if the leave extends beyond 45 days.
IMC Group: Your Premier Employer of Record in Dubai
At IMC Group, we provide top-tier Employer of Record services, offering comprehensive recruitment and payroll solutions tailored to your business needs.

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