Understanding Employer Tax Obligations in the UAE

Navigating the UAE's social security system requires employers to understand several mandatory contributions. These obligations form the foundation of employee benefits in the country.

Employer Contribution Range: 12.5% - 15%

Pension and Social Security: 12.5% - 15%
Health Insurance: Mandatory for private sector employees effective January 1, 2025

These figures represent current requirements, though employers should regularly consult official UAE government sources for policy updates.

Pension and Social Security Framework

The UAE's social security system specifically applies to eligible Emirati nationals and GCC country citizens. Non-GCC expatriates are exempt from these contributions. The Gulf Cooperation Council includes six member states:

Saudi Arabia
United Arab Emirates
Kuwait
Oman
Qatar
Bahrain

Established in 1981, the GCC promotes economic cooperation and political coordination among member nations with shared cultural and economic interests.

According to Federal Law No. 57 of 2023, employers must register Emirati employees with the General Pension and Social Security Authority (GPSSA) from their first month of employment. Monthly contributions provide retirement benefits, end-of-service gratuity, and compensation for work-related disabilities or fatalities.

The new legislation mandates social security contributions calculated at 26% of the employee's total contract salary, with employers covering 15%. For private sector employees earning less than AED 20,000 monthly, the employer contribution reduces to 12.5%, with the government subsidizing the remaining 2.5% to encourage Emirati employment in private enterprises.

Employee registration requires:

UAE nationality
Age between 18 and 60 years
Medical fitness certification approved by GPSSA

Key provisions include increasing the maximum pensionable salary from AED 50,000 to AED 70,000 monthly and allowing pension combination with new employment after 30 years of service.

End-of-Service Benefits in Private Sector

Emirati Nationals: Benefits governed by UAE pension laws
Expatriate Employees: Under Article 51 of UAE Labor Law, expatriates receive gratuity based on basic salary after one year of continuous service, payable within 14 days of contract termination

Gratuity Calculation Methodology

Employees with over one year of service qualify for end-of-service benefits calculated as:

No entitlement for service under one year
21 days' salary per year for service between 1-5 years
30 days' salary per year for service beyond 5 years

The total gratuity cannot exceed two years' salary.

Health Insurance Mandates

Current regulations in Abu Dhabi and Dubai require employer-provided health insurance. Starting January 1, 2025, this extends to all private sector employees and domestic workers. Coverage varies by emirate and employee circumstances, with multiple insurance providers offering conventional and Takaful options.

Employee Tax Responsibilities in the UAE

Employees in the UAE face specific financial obligations including:

Employee Contributions: 11% + (AED 5-10 monthly)

Pension and Social Security: 11%
Unemployment Insurance: AED 5-10 monthly
Income Tax: 0%

Employee Pension Contributions

Emirati employees contribute 11% toward pension and social security. Standard retirement eligibility requires reaching age 60 with 15 years of insured service, though early retirement options exist for those meeting specific age and service criteria.

Unemployment Insurance Scheme

Implemented through Federal Law No. 13 of 2022, the unemployment insurance program provides financial protection for eligible workers in both public and private sectors. The system categorizes participants into two tiers based on basic salary.

Employees must maintain continuous premium payments for 12 months to qualify for benefits. Claims must be filed within 30 days of job loss, with compensation payable for up to three months. Penalties apply for non-compliance, including AED 400 fines for non-subscription and AED 200 penalties for premium delays exceeding three months.

Exempt groups include investors, domestic workers, temporary contract workers, minors, and pensioners joining new employers.

Income Tax Status

The UAE maintains its competitive advantage with zero personal income tax for employees.

UAE Employer and Employee Tax Guide 2024: Social Security, Pension & Insurance