UAE SME HR Compliance Essentials: Complete Guide for Small Businesses 2025

Micro businesses have 1-9 employees. Small businesses have 10-49 employees. Medium businesses have 50-249 employees. Each category has different compliance considerations and resources.

Required for every employee: written contract, registered with MOHRE, Arabic version with bilingual accepted, and fixed-term only since February 2022. Use MOHRE template downloaded from portal, register through Tasheel or MOHRE app, and keep copies in employee file plus digital backup. Common SME mistake is using verbal agreements or unregistered contracts.

Register with approved WPS agent which is your bank. Pay all salaries through WPS. Submit SIF file monthly. Pay within 15 days of due date. Steps are open corporate bank account with WPS capability, register company with bank WPS system, generate SIF file each month using HR software or bank tool, and transfer salaries before deadline.

Late payment 15+ days results in warning. Late payment 30+ days results in fines and permit freeze. Non-WPS payment results in fines up to AED 50,000+. SME tip: Most UAE banks offer free WPS for SMEs so ask your bank.

Mandatory for all employees in UAE. Employer must provide meeting minimum coverage as per DHA or HAAD requirements. Covers employee with dependents optional. Costs: Basic compliant AED 600-1,200 annually, Standard AED 1,500-3,000, Enhanced AED 3,000-6,000. SME tip: Group policies of 5+ employees get better rates.

Process is apply for work permit through MOHRE, entry permit issued, employee enters UAE, medical test, Emirates ID application, and visa stamping. Costs: Work permit AED 300-500, entry permit AED 500-1,000, medical test AED 300-500, Emirates ID AED 370, visa stamping AED 500-1,000. Total AED 2,000-3,500. SME tip: Use PRO services at AED 500-1,000 per visa if you lack in-house expertise.

Annual leave after 1 year is 30 calendar days. Annual leave for 6-12 months is 2 days per month. Sick leave is 90 days total with 15 full pay, 30 half pay, 45 unpaid. Maternity is 60 days with 45 full pay and 15 half pay. Parental for fathers is 5 working days. Compassionate is 3-5 days. SME tip: Track leave accurately as unused leave must be paid on termination.

Daily hours maximum 8 hours. Weekly hours maximum 48 hours. Overtime maximum 2 hours per day. Ramadan reduction 2 hours per day. Overtime rates: Normal overtime 125% of hourly rate, night or holiday overtime 150% of hourly rate. Calculation: Hourly rate equals basic salary divided by 30 divided by 8, OT pay equals hourly rate times 1.25 or 1.5 times OT hours. SME mistake: Not paying overtime or miscalculating rates.

Maximum 6 months, must be in contract, can terminate with 14 days notice, no gratuity if under 1 year. Best practice: Use full 6 months for assessment, document performance issues, give written notice for termination, pay all dues within 14 days.

Who qualifies: Employees with 1+ year service. Calculation: 1-5 years is 21 days per year, 5+ years is 30 days per year. Formula: Gratuity equals basic salary divided by 30 times days times years. Maximum is 2 years total salary. Example for 5 years at AED 8,000 basic: 8,000 divided by 30 times 21 times 5 equals AED 28,000. SME tip: Provision monthly at about 5.8% of basic salary to avoid cash flow shock.

Notice periods: During probation 14 days, after probation 30-90 days as per contract. Final settlement within 14 days includes outstanding salary, unused annual leave, gratuity if eligible, repatriation ticket, and any contractual dues. SME mistake: Delayed final settlements lead to MOHRE complaints.

Employment contracts retained for duration plus 2 years. Payroll records for 5 years. Leave records for 5 years. Visa documents for duration plus 2 years. Medical records for 5 years. SME tip: Digital storage is acceptable using HR software or cloud storage.

Under 50 skilled employees has no quota currently. 50+ skilled employees requires 8% Emiratis by end of 2025. What counts as skilled: Skill levels 1-5 in MOHRE classification including managers, professionals, technicians, clerical workers, and service or sales workers. Not included: Laborers, domestic workers, agriculture.

Per unfilled position AED 9,000 per month. Annual cost per position AED 108,000.

If approaching 50 employees: Monitor headcount carefully, start Emirati recruitment early, register with Nafis platform, consider Nafis subsidies up to AED 8,000 per month.