An Employer of Record UAE offers complete company recruitment, HR, and payroll services efficiently. With this solution, your business can be busy expanding and improving other aspects, while all these details are handled by professionals.
Employer of Record UAE acts as a legal entity that hires employees on behalf of your business, Therefore, assuming the responsibility for all associated legal and administrative tasks. So, this includes managing payroll, taxes, benefits, and compliance with employment laws and regulations.
In this article, we will explain all matter related to employer of record UAE, such as: what an employer of record UAE is, the PEO service, PEO vs EOR, what is PEO service Dubai, Emiratization in the private sector, mass hiring solution, as well as other concepts topic related.
In this article, you will be able to see the details that make these organizations an excellent option. Let us see:
- What is an Employer of Record UAE?
- Employer of Record Dubai payroll services
- Other important aspects handled by the Employer of Record services
- KinzaHR is your best EOR solution
What is an Employer of Record UAE?
This is a third-party organization in Dubai, United Arab Emirates, and it works by recruiting employees for other companies. It also works for immigration and tax purposes, even though the employee they hire works for another company. On the other hand, the Employer of Record services complies with normal work tasks and duties, including administrative staff occupations.
Employer of Record UAE streamline the process of hiring and managing staff. It does so, by serving as the legal employer on behalf of your business. Therefore, this arrangement offers several advantages and conveniences for your company.
Below, all matter related to employer of record UAE it is explained.
On the other hand, this entity allows you to hire people from another country quickly and without the intervention of legal entities. In addition, EOR hires personnel, being the legal employer of the worker, while your company manages the activities of its personnel. Thus, the company will be more efficient and with better organization, the EOR will manage the payroll, benefits, risk reduction, and support for workers.
Breaking Down the Role of an EOR
An Employer of Record UAE is a service offered by third-party firms. Therefore, facilitating the hiring of personnel in foreign countries by serving as the official local employer on behalf of your organization.
Also, by engaging an EOR UAE, you delegate all legal and compliance responsibilities to them, while maintaining the direct operational relationship with your team members as usual. Thereby, the role of an employer involves different factors and functions, such as:
- Although primarily utilized for international hiring, the employer of record services can also be beneficial domestically. So, in other regions, varying taxation and employment regulations exist across different states or provinces.
- Moreover, employers of record UAE typically undertake a range of HR administrative tasks. Like payroll management, provision of compliant benefits, and adherence to taxation obligations for instance. So, partnering with an EOR eliminates the need for establishing a legal presence where your hires are located.
- Furthermore, engaging an EOR saves your organization the effort, expenses, and resources required to develop in-house expertise on international employment regulations. So, top EORs provide guidance leveraging their localized knowledge and compliance measures.
By teaming up with a reputable EOR partner, you can efficiently and securely recruit and compensate workers on a global scale, without the complexities and risks associated with navigating unfamiliar legal frameworks and compliance requirements independently.
Exploring the Options of an EOR in Detail
An employer of record UAE enables businesses to expand their workforce. Also, an employer of record UAE ventures into new markets without the burden of navigating intricate employment laws and regulations themselves.
So, by leveraging the services of an EOR UAE, businesses can focus on their core operations and growth strategies. As a result, leaving the complexities of employment administration to the experts.
Due to this arrangement, an employer of record offers several advantages and conveniences for your company:
- Comprehensive Legal Support: Firstly, the EOR assumes responsibility for all legal aspects of employment, including drafting contracts and ensuring compliance with labor laws and regulations.
- Efficient HR Management: EOR services encompass various HR tasks, such as payroll processing, tax filings, benefits administration, and employee onboarding and offboarding. This comprehensive support system alleviates the administrative burden on your internal HR team.
- Retained Control and Flexibility: While the employer of record UAE handles the backend tasks related to employment, your company retains full control over day-to-day operations and decision-making processes for your team.
- Enhanced Focus on Growth: By entrusting employment-related responsibilities to an EOR, your business can redirect its resources and attention towards growth-oriented initiatives and operational efficiencies.
As a result
- Comprehensive Legal Support: Ensures that your business operates within the confines of the law. Plus, it mitigates the risk of legal issues arising from employment-related matters.
- Efficient HR Management: Allows them to focus on strategic initiatives and employee development rather than mundane paperwork.
- Retained Control and Flexibility: Offers the flexibility to scale your workforce up or down as needed while maintaining control over your company’s direction and objectives.
- Enhanced Focus on Growth: Makes the complexities of direct employment managed by a professional service provider, so your company can pursue expansion opportunities with confidence and agility.
What Does An Employer of Record Do?
While specific responsibilities may vary, an employer of record UAE typically offer the following key services:
Key Managing Payroll, Benefits, and HR Compliance
- Onboarding: EORs oversee the seamless integration of new hires into the workforce by managing essential tasks. Such as: contract preparation, background screenings, and payroll setup.
- Payroll in Local Currency: EORs simplify the complexities of managing payroll across multiple currencies, mitigating exchange rate risks and administrative burdens for businesses with geographically dispersed teams.
- Benefits Administration: EORs design and administer compliant benefits packages tailored to meet the diverse needs of employees while adhering to local regulations.
- Tax Withholding and Filing: EORs assume responsibility for managing tax obligations, including withholding taxes and filing requisite forms, in accordance with local tax laws.
- Government Program Contributions: EORs oversee contributions to government-mandated programs such as social security and unemployment insurance, maintaining meticulous records to safeguard both employer and employee interests.
- Compliance with Labor Laws: EORs remain vigilant in monitoring and adhering to evolving labor laws and regulations across different jurisdictions.
In Addition to the Points Mentioned
- The onboarding process not only ensures legal compliance but also fosters a positive employee experience from day one, reinforcing the employer’s brand reputation.
- Plus, by facilitating payments in local currencies, EORs ensure timely and accurate compensation for employees worldwide, enhancing operational efficiency and employee satisfaction.
- From healthcare coverage to retirement plans, EORs provide comprehensive benefits solutions that contribute to talent attraction, retention, and overall employee well-being.
- Moreover, ensuring accurate and timely tax compliance, EORs help businesses minimize financial risks, avoid penalties, and maintain regulatory compliance.
- Also, managing these contributions efficiently, EORs help mitigate legal risks and ensure compliance with statutory requirements.
- At last, staying abreast of legislative changes and implementing proactive compliance measures, EORs enable businesses to navigate complex regulatory landscapes with confidence, reducing legal risks and ensuring ethical and responsible business practices.
Employment Contracts in UAE
In the UAE, employment contracts outline the terms of employment, including compensation, benefits, job responsibilities, and termination protocols. Below, there are key points to consider in UAE employment contracts:
- Fixed-term Contracts: These contracts have a maximum duration of 3 years and can be renewed indefinitely. Thereby, they are subject to specific regulations regarding probationary periods, termination notice periods, and severance pay.
- Probationary Period: Typically, it lasts for 3 months unless otherwise specified. Hence why the probationary period allows employers to evaluate the suitability of an employee for the role.
- Termination Notice Period: As a rule, the maximum notice period for terminating an employment contract is 6 months. Therefore, employers are required to provide advance notice or payment in lieu of notice to employees.
- Severance Pay: Employees are entitled to end-of-service gratuity, which is calculated based on the duration of service. For example, employees with one year of service receive 21 days’ salary per year. In contrast, those with five years of service receive 30 days’ salary per year.
In cases of early dismissal, severance pay may vary, with employees potentially receiving up to 1.5 months’ salary in total.
As for the Indefinite contracts:
They are no longer permitted in the UAE. Also, they do not include probationary periods, termination notice periods, or severance pay provisions. Therefore, it is essential for businesses operating in the UAE to align their employment contracts with these regulations to ensure legal compliance and protect the rights of both employers and employees.
Partnering with a PEO service Dubai can greatly assist in ensuring contract compliance with UAE labor regulations. In this manner, collaborating with a reputable PEO can provide invaluable support in navigating the intricacies of UAE employment contracts. As well as ensuring compliance with local laws and the Emiratisation in the private sector.
What are the Benefits of Using an Employer of Record in UAE?
An employer of record Dubai (UAE) can help businesses navigate the complexities of international hiring with confidence, ensuring legal compliance, protecting intellectual property, and providing a positive experience for employees. Below, key employer of record EOR benefits are listed.
Employee Benefits and Paid Leave in UAE
Employer Contributions:
- Employers in the UAE must make social security contributions for workers. Therefore, this vary depending on the emirate.
- Contributions range from 12.5% to 15% of the employee’s gross monthly salary.
Leave Entitlements:
- Annually, employees are entitled to almost a month of paid vacation. But, after completing three continuous months of service.
- Additionally, there are 14 official public holidays.
Sick Leave:
- Employees with three months of continuous service are entitled to sick leave.
- The entitlement is 90 days per year. Although, with varying payment percentages based on the duration of leave.
Maternity Leave:
- Maternity leave ranges from 45 days at full pay to 45 days at half pay. But, depending on the length of service.
- Women facing medical complications can claim an additional 100 days of unpaid leave.
Parental Leave:
- Private sector employees are entitled to five days of parental leave within six months of the child’s birth.
Pension Plans and Retirement Contributions:
- UAE citizens can join the federal employment scheme for pension benefits.
- Expatriates receive an “end of service” payment, known as gratuity, instead of monthly pension payments.
Minimum Wage:
- A three-tiered minimum monthly wage structure exists for UAE nationals based on education levels.
- Expatriates do not have a mandatory minimum wage.
Overtime:
- Maximum working hours are capped at 8 hours per day and 48 hours per week.
- Overtime pay varies based on timing and ranges from 125% to 150% of the standard wage.
Health Insurance:
- Health insurance is mandatory in Abu Dhabi and Dubai for employees and their families.
- Employers failing to meet insurance requirements may face penalties.
Severance Pay:
- Severance pay is compulsory and based on length of service. Also, it ranges from 21 days’ salary to 30 days’ salary per year.
- The total severance pay cannot exceed more than two years’ salary.
Legal and Compliance Risks for UAE Employers
Misclassifying Employees:
- Misclassifying employees to avoid providing benefits can lead to fines, penalties, and legal sanctions.
- While Emirati employment law does not specify penalties for misclassification. On the other hand, legal consequences can arise, and laws may change.
- Ensuring correct classification of workers is crucial to avoid legal liability.
Potential Legal Liability:
- Employers may face legal liability for failing to classify workers correctly under UAE law.
- Changes in legislation or enforcement practices can impact legal risks associated with misclassification.
Need for Compliance:
- Employers must comply with Emirati labor laws regarding worker classification to mitigate legal and compliance risks.
- Compliance with regulations ensures fair treatment of employees and protects employers from legal challenges.
Role of Employer of Record (EOR):
- Partnering with a trusted EOR can help mitigate misclassification risks by ensuring workers are correctly classified under UAE laws.
- EORs, like Kinza HR, have employment experts with knowledge of local laws to ensure compliance and minimize legal exposure for employers.
Importance of Expert Guidance:
- Working with professionals who understand Emirati employment laws is crucial for employers to navigate legal and compliance risks effectively.
- Expert guidance can help employers avoid costly legal disputes and maintain compliance with evolving regulations.
Continuous Monitoring:
- Employers should continuously monitor changes in Emirati labor laws and regulations to adapt their classification practices accordingly.
- Regular review of classification policies can help mitigate legal and compliance risks associated with misclassification.
How Does an EOR Differ from a Staffing Agency?
An Employer of Record Dubai or in the UAE, differs from a staffing agency, despite their related functions. Below, we delve into more details about these differences.
Employer of Record Service Staffing Agency (Differentiate)
Key Differences and Considerations:
Relationship Establishment
- EOR: Establishes a legal employment relationship between the employer of record services and the employee, handling all employment-related obligations.
- Staffing Agency: Establishes the employment relationship between the client company and the employee, acting as a third-party intermediary.
Legal and Administrative Responsibilities
- EOR: Assumes full legal and administrative responsibilities, ensuring compliance with local labor laws, taxes, and social security contributions.
- Staffing Agency: This one, it is centered in both candidate recruitment and placement. Although, it has limited involvement when it comes to legal and administrative matters.
Long-term vs Temporary Staffing
- EOR: Suited for long-term, permanent employment solutions in foreign markets, ideal for establishing a legal presence and managing a dedicated workforce.
- Staffing Agency: Ideal for short-term or temporary staffing needs, such as project-based positions or seasonal demands.
Flexibility and Scalability
- EOR: Offers flexibility and scalability, enabling quick expansion of the workforce in new markets, adapting to changing needs.
- Staffing Agency: Provides flexibility but is more focused on fulfilling immediate staffing needs rather than long-term workforce management.
Also, it is important to make the question, What is the difference between a PEO vs EOR?
Similarity: Employer of Record EOR and Professional Employer Organization (PEO) partners assist companies in overseeing global teams.
Difference: The primary distinction is that PEO service, functions as a co-employer, whereas an EOR assumes the role of the legal employer for an organization’s dispersed workforce.
Permanent Recruitment Temporary Staffing (Differentiate)
Hiring permanent recruitment and temporary staffing employees serve distinct purposes within an organization, each contributing differently to its objectives and goals.
Permanent Recruitment:
- Firstly, permanent recruitment focuses on long-term investment in talent acquisition, aiming to support the organization’s growth and prosperity over time. Also, this process involves hiring experienced professionals with the skills and expertise necessary to fill permanent positions.
- Second, the goal of permanent recruitment is to build a dedicated team of employees. But who will contribute to the organization’s long-term goals and objectives. Also, employers prioritize retaining these employees, investing in their development, and fostering a sense of loyalty and commitment.
- Third, permanent recruitment services enable organizations and their long-term workforce to cultivate shared values and goals. As a result, fostering a strong and cohesive company culture.
Temporary Staffing:
- Firstly, temporary staffing, on the other hand, addresses short-term needs and fluctuations in workforce demand. Also, it involves hiring employees on a contractual or temporary basis to fulfill specific requirements, fill temporary vacancies, or manage seasonal fluctuations in demand.
- Second, temporary staffing provides businesses with flexibility in managing their workforce. As a result, allowing them to quickly scale up or down as needed without the long-term commitment associated with permanent recruitment.
- Third, temporary staffing employees are typically hired to address immediate needs or overcome shortfalls during emergencies or peak periods of activity. While they contribute to the organization’s operations, their tenure is limited to the duration of the temporary assignment.
What is the Cost of an Employer of Record in the UAE?
When evaluating the costs associated with using an Employer of Record (EOR) service, several factors come into play, including the services provided, the number of workers to be hired, and their geographic location. Below, these points will be discussed in further detail.
Exploring the Cost Components of Employer of Record in the UAE
Employer of Record (EOR) services in the UAE typically employ either a flat fee or a variable pricing model. Each model has its pros and cons, impacting the overall cost and flexibility for businesses.
Flat Fee EOR Pricing:
- In a flat fee model, businesses pay a fixed fee per employee, usually on a monthly or annual basis. Opting for annual payments often proves more cost-effective, although monthly payments offer greater flexibility.
- Flat fee pricing offers several advantages. For instance, companies can hire any number of employees at any salary level, knowing that their bill remains consistent regardless of the employees’ salaries or chosen benefits.
- Due to this simplicity and predictability, it is the preferred choice for many businesses.
Variable EOR Pricing:
- Conversely, a variable pricing model involves charging a percentage of each employee’s salary.
- Also, in this model, the cost fluctuates based on the employee’s earnings. While this might be more economical for businesses with lower-paid employees initially, it becomes costlier as employee salaries increase.
- Moreover, variable pricing can inadvertently discourage wage increases, potentially impacting the company’s ability to attract top talent in the market.
It is important to note that variable pricing introduces unpredictability, as fees are subject to change based on the EOR provider’s discretion.
Moreover, this lack of transparency and stability makes it a less favorable option compared to flat fee pricing for many businesses. Particularly, those seeking cost predictability and control over their budget.
Evaluating Costs in Relation to Benefits for Businesses
For businesses, it is essential to carefully assess these costs in relation to the benefits offered by the EOR. Therefore, the next key points are of great relevance.
Cost Factors:
- Service Requirements: EOR costs vary based on needed services. Such as payroll processing, benefits administration, compliance with local labor laws, data security, and IP protection.
- Number of Workers: Hiring scale affects costs; larger-scale hiring may result in volume discounts, while smaller-scale hiring may incur standard rates.
- Geographic Location: Worker location impacts costs due to regulatory differences, tax structures, and living costs. Hiring in regions with complex legal frameworks or higher living costs may increase EOR fees.
Cost-Benefit Analysis:
- Traditional EOR Providers: Older providers often charge high enterprise rates, up to $2,000 per employee per month. While offering comprehensive services, these costs may not suit smaller businesses. Thereby, some traditional providers lack agility and responsiveness.
- Kinza HR EOR Solution: Kinza HR provides a cost-effective alternative. Therefore, bundling services like payroll, benefits, data security, and IP protection, Kinza HR offers businesses an affordable solution for global expansion.
- At last, transparent pricing and strong security/compliance measures make Kinza HR attractive for international growth.
Mass Hiring Solution:
For businesses requiring mass hiring solutions, such as scaling up operations rapidly or expanding into new markets, the cost-effectiveness of the EOR becomes even more critical. So, traditional providers with high per-employee fees may impose significant financial burdens on businesses seeking to hire large numbers of workers.
For businesses requiring mass hiring solutions, such as scaling up operations rapidly or expanding into new markets, the cost-effectiveness of the EOR becomes even more critical. So, traditional providers with high per-employee fees may impose significant financial burdens on businesses seeking to hire large numbers of workers.
Characteristics of the Best Employer of Record Dubai
In general, the Employer of Record UAE complies with the characteristics that you will see below:
- With an Employer of Record, you can outsource employees internationally and regularly manage HR departments.
- You can enter the market more efficiently and hire employees 90% faster, who can start work in 48 hours.
- It complies with and keeps labor laws up to date and allows you to maintain better control over the company.
- It has flexibility in new markets, using multiple alternatives, provided that in the long term, it does not require a responsibility.
Employer of Record Dubai Payroll Services
There are rules in the UAE for the management of payroll and taxes, which depend on the hiring of foreign or national employees. In this case, EOR services are preferred by companies in the country, to manage payroll outsourcing in UAE. In addition, this employment entity complies with immigration and tax regulations.
Likewise, contracting the services of an EOR allows for optimizing and facilitating the performance of the worker within a company. Also, this service allows your company to be more profitable while providing security and confidentiality. The EOR service covers the following:
- Preparation of offer letters.
- Issues the no objection certificate (NOC).
- Plan and manage paid employee leave, paid vacations, and sick leave.
- Help with applying for and choosing the right medical or health insurance.
- Contributes to setting up the salary protection system.
- Manages the calculation of legal tip payments under UAE labor law.
- Prepare and deliver to employees the salary certificate, salary receipts, and bank transfer letters.
- Manage settlement calculations, and completion of trial periods, during or after this period, endorsed by UAE legislation.
Employer of Record Services Handles other Important Aspects
If you are planning to employ workers in the UAE, there are some regulations that you need to be aware of to draw up a compliant contract. Also, the benefit that an Employer of Record Dubai offers to important HR needs.
- Working hours. Work hours must not exceed 8 hours per day or 48 hours per 6-day work week.
- Overtime pay. Overtime is paid at 125% of the minimum wage. In addition, for working between 9 pm and 4 am the employer must pay them 150% of their standard salary. Additionally, overtime cannot exceed 2 hours per day.
- The trial period. You can hire an employee for a trial period but it must not exceed 6 months. In addition, you can fire him without prior notice in this period and not pay the right to compensation.
- Dismissal and compensation. You can fire the permanent worker at any time but you must apply a 30-day written notice. Likewise, it can dismiss a worker immediately without compensation and notice, for justified reasons. Also, the terms to end a work contract vary depending on the cause of it.
Therefore, it can be terminated in a limited or unlimited contract, for an initiative of the employee or employer, reasons, or excess years of service. In general, employers provide compensation for service in the company, unless it is for justified dismissal.
Employee Benefits
An Employer of Record UAE negotiates the terms of the employment contract with employees in Dubai. Likewise, it includes the legal benefits and paid leave requirements as you will see below:
- Maternity leave. Pregnant employees get 45 days of maternity leave before and after birth. In addition, the employee with 1 year of service, receives the full salary and those with less time half the salary.
- Employee vacations. Workers with around 6 months of service but not more than 1 year, can receive 2 vacation days per month. Otherwise, an employee with more than 1 year of service will receive 30 days of paid leave per year.
- Holidays. Employees receive 10 paid days off annually for holidays.
- Sick leave. The employee can receive 90 days of sick leave after 3 months of work (not counting the probationary period). Likewise, the first 15 days of leave are full pay and 30 days is half pay. However, when the sick leave exceeds more than 45 days, the remaining time is not paid.
KinzaHR is your best EOR solution
KinzaHR is the best Employer of Record Dubai and we can offer you the recruitment and payroll benefits that your business needs. We have even been independently judged one of the top Dubai EORs by RemotePad.com. Contacting us is simple, our phone number is +971 43 316 688 or write to contact@kinzahr.com.