15 Common HR Mistakes UAE SMEs Make and How to Avoid Them 2025

Company X paid AED 10,000 per month in cash allowances to 5 employees. After a complaint: WPS violation fine AED 50,000, back payment claims AED 120,000, legal fees AED 15,000. Total cost AED 185,000.

Beyond direct fines, mistakes lead to file suspensions preventing new hires, reputation damage affecting recruitment, management time spent on disputes, and operational disruptions during investigations.

Many SME owners pay part or all salaries in cash to save bank fees, accommodate employee requests, or avoid paperwork. This is a WPS violation with fines starting at AED 50,000, no payment proof means employee can claim non-payment, leads to MOHRE complaints and file suspension, and prevents work permit renewals.

Employers often do not pay overtime at all, pay incorrect rates, do not track hours, or exceed maximum overtime. Normal overtime rate is 125% of hourly rate. Night work from 9PM to 4AM is 150%. Friday or holiday work is 150% plus day off. Hourly rate equals basic salary divided by 30 divided by 8.

Register for WPS with your bank which is free. Pay all salary through WPS with no exceptions. Generate SIF file monthly using HR software or bank tool. Document everything including payslips and bank records. Track all hours worked and calculate overtime correctly.

Some SMEs operate with verbal agreements only, informal offer letters, unregistered contracts, or contracts that do not match reality. Cannot process visas without registered contract, no legal protection if disputes arise, inconsistent terms lead to disputes, and WPS mismatch between contract salary and actual payment.

Employers often do not document probation issues, try to extend beyond 6 months, terminate without proper notice, or do not use probation for assessment. After probation termination is much harder, compensation claims result from incorrect termination, and legal exposure from not following proper process.

Employers do not maintain employee files, policy documents, performance records, or training records. No defense in disputes without proof, cannot demonstrate compliance, inconsistency leads to discrimination claims, and audit failures if inspected.

Use MOHRE standard templates. Register every contract through MOHRE portal. Match contract to reality with actual salary and terms. Keep signed copies for employer and employee. Update when terms change with registered amendments. Maintain files with contract, visa documents, ID copies, performance reviews, warning letters, training records, and leave records.

Common errors include using total salary instead of basic, calculating days incorrectly, not provisioning monthly, and ignoring the 2-year cap. Correct formula for first 5 years is basic salary divided by 30 times 21 times years. After 5 years is basic salary divided by 30 times 30 times years. Maximum is 2 years total salary. Use BASIC salary only, not housing, transport, or other allowances.

Employers delay paying gratuity, unused annual leave, last month salary, and other dues. Must pay within 14 days by law. Employees can file MOHRE complaints immediately. Results in ban from new hires through file suspension and interest or penalties with additional costs.

Employers terminate verbally, do not follow process, skip notice period, and do not document reasons. Invalid termination means employee can claim unfair dismissal with 3 months salary possible compensation. No defense if dispute arises and MOHRE complications prevent cancellation processing.

Calculate immediately on last working day. Pay within 14 days maximum. Include all components: outstanding salary, unused annual leave, gratuity if eligible, repatriation ticket or allowance, and any contractual dues. Get signed clearance from employee. Process visa cancellation promptly. Document the reason with written notice following 30-90 days per contract.

Some employers delay enrollment after hiring, choose non-compliant plans, do not renew policies, or do not cover all employees. Legal violation as mandatory in UAE with fines AED 500 to 150,000+. Cannot process or renew visas and employer is liable for employee medical costs.

Employers do not track visa expiry dates, Emirates ID expiry, passport expiry, or labour card renewal. Overstay fines are AED 50-100+ per day. Employee cannot work with illegal status. Renewal becomes more complex and ban risk with potential entry bans.

Companies approaching 50 employees do not track headcount, ignore quotas, do not register with Nafis, and fail to plan ahead. Sudden compliance need causes scramble to hire. Heavy penalties of AED 9,000 per month per unfilled position. Work permit blocks prevent hiring more expats. Annual cost is AED 108,000 per position.

Employers do not adjust for reduced working hours, Friday prayers, or cultural sensitivity. Law violation as Ramadan hours are mandatory. During Ramadan reduce working hours by 2 hours per day for all employees not just Muslims.

WPS files submitted on time. All salaries paid through WPS. Leave balances updated. Visa expiries checked with 60-day lookahead. Insurance coverage verified.

Probation reviews completed. Documentation audit. Policy compliance check. Gratuity provisions updated. Headcount versus Emiratisation threshold monitored.

Contract renewals processed. Health insurance renewed. Policy updates made. Training records current. Full compliance audit conducted.