Complete Guide about How To Calculate Overtime As Per UAE Labour Law

Overtime calculation in UAE is a topic of interest to both employers and employees. According to the new labor law of the United Arab Emirates, the calculation of overtime follows the basic salary in all cases. However, not all private sector workers can access overtime pay. Additionally, there are different rates and rules for different types of overtime. For instance, the hours on Fridays, holidays, or days of rest.

In this article, we offer you a complete guide on how to do the overtime calculation in UAE according to labor law. We will explain the basic concepts, exemptions, examples, and the entire process of calculating overtime. This way, you will be able to know your rights and obligations as an employer or as a worker in the United Arab Emirates.

Understanding Overtime Calculation in UAE

The first thing you need to know is that overtime calculation in UAE is the calculation for an additional payment that employees can receive for working overtime. Companies must accurately calculate overtime to ensure compliance with UAE regulations. This includes understanding how EOR UAE services can simplify payroll management and ensure employees are compensated correctly.

If you require an employee to work additional hours, that is, hours beyond their normal schedule, the overtime calculation in UAE must be performed. However, among the employee questions that employers need to know this is essential. That is, employers have to know everything about labor law regarding this important element of payroll. The overtime calculation in UAE as per labor law has clear rules for paying overtime of the corresponding employees.

All employers in the UAE have to comply with the country's labor laws. This way, you can avoid receiving certain sanctions for the company. For instance, fines or temporary closures. Furthermore, the UAE overtime calculation is intended to prevent employers from forcing employees to work excessively. However, if necessary, they will receive compensation for their hard work, with overtime pay.

If you want to learn how to proceed with the calculation of overtime in the United Arab Emirates, you will see more information below. We will explain how to calculate overtime in UAE with their respective formulas according to different events. For example, Ramadan and holidays. Before that, you have to learn about overtime calculation in UAE according to labor law.

How to Calculate Overtime as per the UAE Labor Law

The labor law in the UAE regulates the working hours that all employees must comply with. Specifically, work hours cannot exceed 8 hours per day or 48 hours per week. However, if the employer needs an employee to work beyond their hours, they have to consider overtime calculation in UAE.

Also, you have to know that depending on the laws, the formula for calculating overtime in the United Arab Emirates may vary. Specifically, depending on the circumstances under which the employee worked overtime.

For instance, if an employee worked during the holy month of Ramadan, the overtime calculation in UAE has to be applied. There is an important rule when calculating overtime in the United Arab Emirates during Ramadan. During this month, employees cannot work 8 hours, they can only work 6 hours a day. If you work more than 6 hours during Ramadan it will be part of the overtime.

You have to know that the time taken by employees to get to work will not be considered overtime. That is, the time you spend traveling from your place of residence to your place of work. Furthermore, the law also does not consider your 1-hour break as overtime.

Additionally, employers cannot force their employees to work overtime. That is, employees do not have to work more than the hours specified in the employment contract. However, if there is the possibility of working beyond your schedule, you should accept it in writing. Additionally, if an employee works more than 5 consecutive hours, they must have one or more breaks. These breaks have to be at least 1 hour or more. However, breaks are not part of the work day.

On the other hand, if an employee requests to perform work remotely, the employer has to specify the work schedule.

Overtime calculation in the UAE

If the type of work requires the employee's presence beyond the normal work day, they will receive compensation. This compensation is equivalent to your salary for the ordinary work day, but an extra 25% is added for the overtime period. Below you will see the formula to perform overtime calculation in UAE on a normal business day.

• ·      Daily Salary: Basic salary * 12/365
• ·      Normal hourly pay: Basic salary ÷ 8 (i.e. normal working hours in a day).
• ·      Overtime pay: Overtime numbers * per hour * 1.25.

Now, to understand everything better, we will use an example. Suppose an employee's basic salary is AED 3,200 per month and he works 100 hours per month. Its overtime calculation in UAE is as follows

• ·      Daily: (3200 * 12)/365 = 105.20 AED
• ·      Normal hourly pay: 105.20/8 = AED 13.15.
• ·      Overtime calculation in UAE: 13.15 + 13.15 * 25% = 16.43 AED.

Now, with this, we can calculate the total overtime payment:

• ·      Total overtime pay: Total overtime * overtime pay per hour = 100 * 16.43 = 1643 AED.

Therefore, according to this example, the monthly payment would be:

• ·      Total salary: Basic salary + overtime pay = AED 3,200 + AED 1,643 = AED 4,843.

However, if the employee works overtime between 10:00 p.m. and 4:00 a.m., he must receive a higher remuneration. This remuneration will be equivalent to the remuneration for the normal day according to the base salary. That is the base salary plus 50% of that day. It is important to note that this rule does not apply to workers who work shifts.

If we continue with the previous example, the overtime calculation in UAE for this case would be:

• ·      Overtime per hour: 13.15 + 13.15 * 50% = 19.72 AED.

Holiday overtime calculation in the UAE

The overtime calculation in UAE during public holidays in the UAE may differ a little from the above cases. According to article 81 of the UAE labor law, if employment circumstances cause an employee to work on holidays, he or she must be paid full or partial salary. That is, the employee will receive compensatory leave for those days with a bonus. This bonus is equivalent to 50% of your remuneration.

If the employee does not have leave compensation on these days, the employer has to pay a bonus. The total bonus is 150% of the basic remuneration for the days of work. Below, you will see the formula to be able to do the overtime calculation in UAE if you work on a rest day or holiday.

• ·      Total overtime pay: (Base salary * 12)/365/8 * total overtime * 1.5 plus a compensatory day off.

If we use the above example of an employee with a basic salary of AED 3,200 and working 8 hours of overtime on a holiday; The overtime calculation in UAE has to be done as follows:

• ·      Total overtime pay: 3200 * 12/365/8 * 8 * 1.5 = AED 157 (8 hours paid + 1 day off).

On the other hand, if the employer does not grant the employee compensatory leave, it must make an additional payment to the employee. This additional payment is equivalent to 150% of your remuneration for each day of work. That is, the overtime calculation in UAE for this case is the following:

• ·      Total payment for unlicensed overtime: 3200 * 12/365/8 * 8 * 2.5 = 263 (payment for 8 hours of overtime + 1 day off).

100% of regular daily pay + bonuses + 150% of base pay

The first thing you have to know is what the basic salary is. The basic salary is the amount that appears in the employment contract with a prior agreement between the employer and the employee. It is important to mention that this amount is before any allowances, benefits, or expenses.

• ·      Basic salary: It is the basic remuneration that appears in the employee's employment contract.
• ·      Gross salary: Basic salary + benefits and allowances.
• ·      Net salary: That is, the amount paid after deducting the gross salary.

You should know that there is no requirement for the base salary to be a specific percentage of the gross salary. Additionally, the law restricts all deductions to 50% of gross salary.

It is important to keep in mind that you cannot work more than two overtime hours in a day. Specifically, for workers with a maximum of 144 hours per 3 weeks.

On the other hand, if employees have to work overtime between 10:00 p.m. and 4:00 a.m., overtime pay will be different. They must have a salary for overtime hours of 150% of the basic salary plus the bonuses that are normally paid.

To illustrate this better, we will use the example of the previous cases. That is an employee with a salary of 3200 AED and works an additional 8 hours. Now, let us see what the employee's total salary will be if he works that specific work schedule:

• ·      Daily Salary: (3200 * 12)/365 = 105 AED
• ·      Normal hourly pay: 105/8 = AED 13.12.
• ·      Overtime per hour: 13.15 + 13.15 * 50% = 19.72 AED.

If the employee works for a total of 100 hours in the month, his salary would be:

• ·      Total overtime pay: Total overtime * overtime pay per hour = 100 * 19.72 = 1972 AED.

UAE Labour Law and Overtime Calculation

You have to know that working hours in the UAE are governed by the labor law in the UAE. Many jobs typically require an employee to work overtime. This may be even though overtime pay is not available. It is essential to know that the overtime calculation in UAE is calculated based on the basic salary.

Everything can vary depending on the role of the employee and the working hours that each company has. Each employee has the obligation and the right to know normal working hours. In addition, the number of additional hours you want or need to request.

On the other hand, you should know that the overtime provision does not apply to the following positions:

• ·      Management positions.
• ·      Administrative supervision functions.
• ·      Navy employees and warship crews.

According to the labor law in the UAE, the normal working hours of an employee must not exceed 48 hours per week. In addition, an employer can ask an employee for a maximum of 2 hours of additional work. These two additional hours will be part of overtime. However, the working day can be extended to nine hours a day for employees in commerce, cafeterias, and hotel guards.

Finally, it is established that the following hours are not part of the overtime calculation in UAE:

• ·      Travel time to get to and from work.
• ·      Breaks for food or breaks.

What are working hours and overtime in the United Arab Emirates?

Federal Law Number 8 of 1980 and the UAE Labor Law are the sources of working hours in the UAE. In addition, other parts of labor law apply at certain times. In this way, the labor law working hours apply to all employees who live in the UAE. However, we found exceptions such as the following jobs.

• ·      Municipal and government workers.
• ·      The police and the army.
• ·      Domestic servants.
• ·      Agricultural workers.

In addition, the laws are also applied to the different free zones that exist within the regions. For this reason, you must be aware of the working hours and overtime that exist in the UAE.

Hours of work

Currently, we can find that the working hours in the private sector in the UAE are 8 hours a day maximum and 48 hours a week maximum. In addition, these schedules are established in Article 17 of federal decree law number 33 of 2021. This talks about the regulation of labor relations in the private sector.

However, daily work hours may decrease or increase in specific industries. Furthermore, the Executive Regulations of the Labor Law specify this. Generally, the sectors included are where it would be impossible to work 8 hours a day without putting the employee at risk or where it is not safe to reduce the workday to 8 hours.

Additionally, employees can have one or more breaks if they work for 5 consecutive hours. In this way, breaks cannot be less than one hour. On the other hand, for the UAE public sector, working hours are very different. In this case, the UAE government uses a 4-and-a-half-day work week.

Therefore, employees in this sector work 8 hours from Monday to Thursday and only 4 and a half hours on Fridays. Additionally, the official days off for government employees are Saturdays and Sundays. In this way, the rules are applied to public sector employees of local government entities in all emirates except Sharjah.

Overtime

One of the most common concerns employees have is about the need to work overtime and what compensation they will receive. For this reason, the overtime law in UAE establishes the hours that employers in the sector can ask their employees to work overtime. In this way, employers can ask the employee to work more, but without exceeding two hours in a day.

In this way, it is vital to know that employers cannot impose overtime on the employee. However, an agreement with the employee is necessary and this can be set out in the UAE employment contract. In addition, if it is necessary for the employee to work extra hours beyond their normal day, they will receive compensation.

Therefore, you should know that remuneration for overtime is equivalent to the regular working day. So, how to calculate overtime, is very simple. In this case, the base salary will increase by 20 or 50% if the overtime is performed between 10:00 p.m. and 4:00 a.m. Additionally, these rules do not apply to shift employees such as nurses or doctors.

Another thing to keep in mind is if your employer asks you to work on a day off, you must receive a substitute day off. In addition, they must receive a salary that is equivalent to the remuneration for normal working hours plus 50% of the salary.

Key Rules related to working overtime in the UAE

The UAE labor law overtime calculation is important. For this reason, we will present you the key rules that are related to these hours in the UAE.

• ·      All employers can require their employees to work overtime. However, the number of overtime hours cannot exceed 2 hours per day.
• ·      If the nature of the work requires the employee to work beyond official hours, they must receive compensation. In this way, you will receive your normal remuneration plus 25% of that salary. On the other hand, if overtime is between 10:00 p.m. and 4:00 a.m. the figure can increase up to 50%. However, this does not apply to shift employees.
• ·      When the employer needs the employee to work on their day off, they must provide a substitute day of rest. On the other hand, if the employee does not enjoy this substitute day of rest, he must receive a payment equivalent to his normal working day plus 50% of this salary.

It is important to keep in mind that overtime is not always applicable. An example is that these do not apply to administrative supervisors or senior officials. Furthermore, these hour calculations do not apply to warship crews or maritime employees. You can even make use of the Overtime calculation in UAE MoHRE.

How can Connect Legal help you calculate overtime to accurately pay your employees?

Choosing a law firm in Dubai can be very useful. In this way, Connect Legal specializes in offering legal and human resources solutions to companies in the UAE.

In addition, it offers a wide range of services including payroll management, preparation of limited and unlimited contracts in the UAE, etc. For this reason, to help you calculate overtime, Connect Legal uses advanced payroll software. This takes into account different factors such as the employee's base salary, hours worked, and all corresponding top-ups.

This software can generate reports that are detailed and show the number of overtime hours the employee worked and the total amount of their compensation. Additionally, this helps companies calculate overtime more easily.

On the other hand, by providing legal solutions on labor regulations in the UAE to companies, you can help companies that are not familiar with them. This way, each company can ensure that it is complying with all UAE regulations. Therefore, do not hesitate and log on to Connect Legal and learn more about overtime in the UAE.

Conclusion

The UAE labor law establishes working hours for the public and private sectors. Furthermore, the calculation of overtime in the UAE is based on the employee's basic salary. In this way, overtime is calculated based on your salary and can be paid 25 or 50% more.

On the other hand, you should keep in mind that not all employees are eligible to receive these overtime hours. Thus, employees in high-level positions, ship crews, and administrative supervision are not covered by these overtime regulations.

It is important to note that employers have to provide accommodation, transportation, and health insurance to all their employees. Therefore, employers need to follow all regulations regarding overtime. This way, you can ensure compliance with UAE labor laws and ensure that all your employees are compensated for working overtime.

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