Payroll Calculation in UAE

How to Calculate Payroll Manually?

The actual payroll calculation process may vary somewhat from the flow mentioned below, since there may be differences between organizational rules, computerized, or outsourced payroll processing solutions. The most likely procedure and responsibilities of handling payroll process follows below-mentioned:

1. Organize Employee Master Details:

The Employer or payroll clerk should main all basic details of employees like employee name, designation, their basic salary, payable allowance types with allowance amount. Keep this information up to date whenever any worker’s wages are incremented or changed. One should also take care of given cash advance to employees. You need to maintain updated payroll records for each employee. While some companies keep spreadsheet records, you can operate more efficiently by using payroll software.

2. Calculate gross salaries for each employee:

When you reach the end of a pay period, compute the gross wages owed for all of your employees. You need to take Basic Salary of an employee, add allowances amount assigned to the employee. This calculation need to perform for each employee under your payroll.

3. Calculate Overtime Amount:

Calculate the total over time hours, each employee worked in the month. This Overtime hours are generally divided into two categories. Normal over time and Friday overtime (weekend). The general formulas to calculate overtime rate for normal days is (Salary/30 days/8 hours) * 1.25 and for weekend (Salary/30 days/8 hours)*1.5. You should further multiple number of OT hours to the respective formula to get OT Amount for normal days and Fridays to add into Gross Salary for each employee. You may further consider OT rate calculation based on basic salary or gross salary. Calculating OT salary amount is a tedious task when you are calculating manually, better to use a software which offers different overtime formulas and calculate everything automatically. Read article on how to calculate overtime in UAE.

4. Variable Allowances:

For many employees, you may need to pay extra allowances for the month. For example, sales commission for the month, car expenses or bonus etc. So add any extra allowances to employee’s salary for that particular month.

5. Payroll Deductions:

There might be various kinds of deductions you may need to make from employee salaries. There might be absents taken by employees or any kind of fines/violations, you may need to deduct from employee’s salaries. You can calculate absent deduction amount from the salary as (Salary/Days in Month) * absent days. You may choose here salary to be basic or gross, depends upon the rule followed by your company.

6. Create Payslips and Salary Reports:

You should prepare a summary report called salary statement with all the salary components like basic salary, allowance, deductions, overtime and absents etc. This report helps you to maintain record of paid salaries for each month. You need to prepare payslips for all employees. Payslip is a document which describes all the calculations of salary for the employee which can be given to employee for his record and clarification. Creating manual payslips is a difficult and very time-consuming task.

7. Create WPS Sif File:

You are almost done with payroll calculations but an important task is still pending and that is to create a salary transfer file called sif file or wps sif file. Wps sif file format is defined by MOL and followed by almost all banks and exchanges in UAE. However, some exchanges ask to present their custom defined format. This SIF file is used to transfer salaries employee’s bank or exchange accounts. We have another separate article on how to create a wps sif file.

Here is the HR Software to calculate payroll for UAE.

HR software UAE to manage employee records, track leaves, calculate gratuity, payroll calculation and create wps sif file.