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?
- Delving into Employer of Record Services in Detail
- Responsibilities of an Employer of Record
- What are the Advantages of Engaging an Employer of Record in the UAE?
- Legal and Compliance Challenges for Employers in the UAE
- Key Differences and Considerations
- Cost Considerations for Employer of Record in the UAE
- Characteristics of the Top Employer of Record in Dubai
- Why IMC is your top choice for Employer of Record solution?
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
Enhanced Focus on Growth
Broad Legal Support
Retained Control and Flexibility
Comprehensive Legal Support
Retained Control and Flexibility
Enhanced Focus on Growth
Efficient HR Management
Responsibilities of an Employer of Record
Onboarding
Benefits Administration
Tax Withholding and Filing
Government Program Contributions
Payroll in Local Currency
Compliance with Labor Laws
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.
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?
Employee Benefits and Paid Leave in the UAE
Employer Contributions
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
Maternity Leave
Parental Leave
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
Health Insurance
Severance Pay
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
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
Temporary Staffing
Cost Considerations for Employer of Record in the UAE
Understanding the Costs of Employer of Record Services in the UAE
Flat Fee EOR Pricing
Variable EOR Pricing
Evaluating Costs and Benefits
Service Requirements
Number of Workers
Geographic Location
Traditional EOR Providers
EOR Solution
Mass Hiring Solution
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
- 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.