Recently, the United Arab Emirates (UAE) has made some major changes to its pension and social security rules, with the onset of Decree Law 57 of 2023. Being a responsible employer, you must understand how it affects your payroll and how to stay compliant with the new regulations.

This article will explain intricately UAE Social Security System and provide you with some helpful information on how to take care of your payroll with regard to the rules of the new social security.

UAE Social Security System

UAE’s social security is administered by the General Pensions and Social Security Authority (GPSSA). The main purpose of the system is to protect financially insured persons and their families if they retire, become disabled, or die. Law No. 57 of 2023 is intended to improve the rights and benefits of insured individuals and the entire social security system. Some key provisions of Decree Law 57 of 2023 are:

1.     Registration Requirements

Any Emirati employee joining date must be registered by UAE federal, government and private sector entities within one month. Employees whose service ends within 15 days of their date of termination shall be informed by them to the General Pension and Social Security Authority (GPSSA). A Dh200 fine per day for each uninsured employee is incurred for non compliance.

2.     Eligibility Criteria

To participate in GPSSA, one must be a UAE national between the ages of 18 and 60 and approved by medical report to work. In order to register and renew your age, documentation of such from a UAE based authority is required and you have to report any change to your age within 12 months of the contribution date.

3.     Contributions

Now, instead of the total salary, contributions are calculated based on the salary from the contribution account. Under the new law, it is set at 26% with workers contributing 11% and employers 15%. For workdays when Emiratis earn salaries below Dh20,000, the government will contribute 2.5% of their salaries in contribution account. Contributions are due by the 1st of the following month with a grace period until the 15th of the month. The charges for overdue payments are 0.1% per day, not exceeding the contribution value.

4.     Non-compliance Penalties

Insured individuals may be held responsible for paying an additional 10 percent of the contributions that should have been paid based on real salaries if they do not pay the corresponding contributions. Entities will need to submit to GPSSA statements, data and/or documents within 10 working days to verify contribution rates. Failure to do so attracts a Dh100 fine per day of delay for each insured person.

5.     Shourak – Enhancing Flexibility

Since the launch of the Shourak program on July 1st, 2023, the GPSSA has given insured Emiratis more flexibility when submitting merge requests in the Shourak program, as it allows merging requests to be submitted between three months back to when the new program was introduced.

Table 1: Contribution rates under Decree Law 57 of 2023

How UAE’s Social Security System Affects Your Payroll

1.     Contributions accurately calculated

Make sure that your payroll system adds the contributions based on a contribution account salary instead of a salary total. Updating your payroll software or consulting with payroll service provider will be required in most cases in this change.

2.     Timely Contributions

Make sure that when you process your payroll you make timely payments to GPSSA of the 1st of the following month with a grace period until the 15th of the month. Additional charges will apply if payments are not made by the due date.

3.     Employee Eligibility

Check your Emirati employees’ eligibility for registration with GPSSA, and make sure you have the documents and medical fitness reports that you are required to provide.

4.     De-Registration and Registration

Within one month following the Emirati employee joining date, register new employees with GPSSA, and within 15 days from the end service date, notify GPSSA of employees whose service concludes in 15 days.

5.     Non Compliance Penalties Compliance

Make sure that your payroll processing follows the non compliance penalties mentioned in decree law 57 of 2023, that is, making sure to provide the needed statements, data or documents to GPSSA within ten working days.

FAQs

1.When must eligible employees be registered with GPSSA?

Eligible employees should be registered with GPSSA by employers within one month of joining date.

2.What is the calculation of the new social security contributions?

The contribution account salary is used to calculate contributions as opposed to the total salary.

3.What are contribution rates under Decree Law 57 of 2023?

26% is given as the contribution rate, employees pay 11% and employers pay 15%.

4.If employers do not contribute to GPSSA in a timely manner, what does happen?

There is also an extra 0.1% charged on an overdue payment per day, not exceeding the contribution value.

5.How can an employer make sure that they comply with the new social security law?

Employers should register eligible employees, calculate contribution on the basis of salary in contribution account and new contribution rates, make timely contribution to GPSSA and supply GPSSA by way of statement, data or documents within 10 working days to verify contribution rates.

In conclusion, employers and employees must understand the UAE’s Social Security system to assure itself of both compliance as well as financial security in the future. Outsourcing payroll services in UAE will help companies stay updated with these changes, in turn, making it easy for companies to run the payroll process smoothly and efficiently in UAE.