The UAE, known for its bustling economy and diverse workforce, boasts a well-defined labour law system that ensures employees’ protection and fair treatment. One crucial aspect of this labour law is overtime calculation. Overtime pay is an additional compensation employees receive for working beyond their regular hours. In this article, we’ll delve into the intricacies of overtime calculation in UAE, covering the legal aspects of working hour regulations and providing practical tips for accurate calculations, including Excel formulas.

Understanding Overtime Calculation in UAE

Overtime pay is common in various countries, including the UAE, where employees are typically expected to work no more than 8 hours a day or 48 hours a week. When employees work beyond these prescribed hours, employers must calculate and compensate them for their additional effort. The UAE labour law has established clear rules for overtime calculation in UAE to ensure fair compensation for employees who put in extra hours.

Compliance with labour laws is essential for all employers in the UAE to avoid penalties and fines. Overtime calculation in UAE labour law aims to prevent employers from exploiting their workers by making them work excessively. In cases where employees work longer hours, they are entitled to receive overtime payments as compensation for their hard work and dedication.

UAE Labour Law and Overtime Calculation

The UAE Labour Law administers the working hours employees must adhere to, setting the standard at 8 hours a day or 48 hours a week. However, overtime calculation becomes necessary when an employer requires an employee to work beyond these standard hours. The overtime calculation formula in the UAE differs based on the specific circumstances under which the employee works overtime.

For example, during the holy month of Ramadan, the UAE labour law mandates a specific approach to overtime calculation. In Ramadan, employees are expected to work only 6 hours a day. Any hours worked beyond this will be considered overtime.

Key Rules Associated with Working Hours in UAE

Before delving into the intricacies of overtime calculation, it’s important to understand the fundamental rules regarding working hours in UAE:

• Employees typically work 8 hours a day or 48 hours a week unless they are employed in specific sectors like trade, hotels, or security, where working hours can extend to a maximum of 9 hours a day.
• Commuting time from home to the workplace is not considered overtime; the 1-hour break during the workday is also not classified as overtime.
• During Ramadan, the standard working hours are reduced to 6 hours daily.
• Employers cannot force their employees to work overtime. Employees should not exceed the agreed-upon working hours specified in their employment contracts unless they willingly agree to work additional hours in writing.
• Employees working remotely must be explicitly defined in their employment agreement.
• Employees working continuously for 5 hours are entitled to one or more breaks, each lasting at least 1 hour. These breaks are not included in the calculation of working hours.

Important Rules Related to Working Overtime in UAE

In addition to the rules governing regular working hours, specific guidelines are in place for working overtime in UAE:

• Employers can request that employees work overtime, but the extra hours should not exceed 2 hours daily.
• Employees are entitled to compensation when required to work beyond their regular hours. This compensation typically includes their regular hourly wage plus 25% of that pay. This percentage can sometimes rise to 50% if workers work overtime between 10 pm and 4 am. However, these rules do not apply to employees working on shift rotations.
• When an employer mandates an employee to work on their scheduled day off, they should receive either a substitute rest day or compensation equal to their regular hourly wage plus 50% of that pay.

It’s crucial to note that overtime rules do not apply to certain categories of employees, such as those in senior positions and administrative supervisors. Additionally, overtime calculation in UAE excludes time spent on commuting, resting, and taking meal breaks.

How to Calculate Overtime on a Normal Day in the UAE?

To accurately calculate overtime on a regular working day in the UAE, follow these formulas:

• Basic Wage × 12/365 days/8 hours = 1-hour payment.
• Normal 1-hour pay + 25% = 1-hour overtime pay.

Let’s illustrate this with an example: Suppose an employee has a basic wage of AED 3,500 and works 120 hours a month. Here’s how to calculate overtime:

• Basic Wage: AED 3,500
• 3500 × 12/365/8 = 14.38 (normal hourly payment)
• 38 + 14.38 × 25% = 17.98 (overtime pay per hour)
• Total Overtime Pay: 120 hours × 17.98 = AED 2,157.60
• Monthly Payment: Basic Wage + Total Overtime Pay
• AED 3,500 + AED 2,157.60 = AED 5,657.60.

Incorrect Formulas to Avoid

While most companies in the UAE adhere to the correct overtime calculation formulas, some might use incorrect approaches, potentially leading to legal issues. Incorrect formulas that should be avoided include:

• Per day wage = basic wage/30 days.
• Per hour wage = basic wage /30 days/8 hours.

Employers must use the correct overtime calculation formulas to ensure compliance with UAE labour laws.

How to Calculate Overtime on a Public Holidays in the UAE?

Calculating overtime on public holidays is a mandatory requirement in the UAE. The formula for this purpose is Basic wage × 12/365/8 × total overtime hours × 1.5 = total overtime pay. Moreover, a day off must be provided, but if the employer fails to do so, the employee is entitled to a bonus equal to 150% of their basic payment.

For example, if an employee with a wage of AED 3,500 worked 8 hours of overtime on a public holiday:

• Basic Wage: AED 3,500
• 3500 × 12/365/8 × 8 × 1.5 = AED 168 (8 hours of pay + 1 day off)

If the employer doesn’t provide the additional day off, the employee should receive a 150% bonus, as follows:

• (3500 × 12/365/8 × 8 × 2.5 = AED 224 (8 hours of overtime pay).

Overtime Calculation for Employees Working on Public Holidays

Employers have two options: when employees must work on public holidays or their scheduled day off. The first option is to provide a substitute rest day; if that is not chosen, the second option must be employed.

The second option uses the formula for public holiday overtime calculation in UAE, which includes paying employees their basic wage plus 50% over normal working hours. The formula follows Basic wage × 12/365/8 × total overtime hours × 1.5 = off day paid.

For example, if an employee with a wage of AED 3,500 worked 12 hours of overtime:

• Basic Wage: AED 3,500
• 3500 × 12/365/8 × 12 × 1.5 = AED 252 (12 hours of overtime payment).

How Can We Assist in Accurate Overtime Calculation in UAE?

Accurate overtime calculation in the UAE is critical for both employers and employees. To ensure compliance with the law and prevent legal issues, companies can seek assistance from specialists. Payroll outsourcing solutions offer reliable support for calculating overtime and other payroll-related processes.

Furthermore, for enhanced efficiency in HR processes, HR outsourcing services can provide a holistic solution. Companies can focus on essential activities by outsourcing various HR tasks to experts and reap numerous benefits.

For further information on overtime calculation in the UAE, don’t hesitate to get in touch with us. We can offer comprehensive guidance on this topic, addressing every detail involved. To speak directly with one of our payroll specialists, you can reach us at +971 54 581 5355.

Conclusion

Understanding and correctly applying overtime calculation in UAE is essential for employers to uphold labour laws and ensure fair treatment of their employees. By adhering to the regulations and using the appropriate formulas, employers can calculate overtime accurately, avoiding legal issues and penalties. Additionally, seeking professional guidance and outsourcing services can further streamline the process, allowing companies to focus on their core activities and maintain compliance with UAE labour laws.

 

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