Before running the payroll in an organization, managers must keep important points in mind just to ensure that employees receive the correct payout. One such key pointer is overtime calculation in UAE. This blog helps you to understand every aspect of the overtime calculation in UAE.Â
Things You Need to Know About Overtime Calculation in UAE
Overtime calculation in UAE refers to the extra time that workers devote to their jobs besides their regular working hours. Employees are also paid for overtime. Therefore, it is a normal practice not only in the UAE but also in other countries also.Â
The normal working hours of an employee are 8 hours per day or 48 hours per week. If an employee works more than their normal working hours, the employer considers it overtime and pays for the overtime.
It is necessary for employers to abide by the UAE labour law to avoid any fines and penalties. If you wish to learn more about how overtime calculation in UAE, then stay till the end of the blog. We will discuss formulas of overtime calculation in UAE in vivid situations including the public holidays.
What are the Key Rules Related to Overtime Calculation in UAE?
The UAE has made certain key rules related to working overtime :
1. Employers may ask their employees to work overtime but the number of extra working hours must not exceed 2 hours per day.
2. In case the employees are required to work beyond their normal working hours they are entitled to receive compensation which is a normal payout of a day plus 25% extra and this can go up to 50% if employees are required to work between 10 PM and 4 AM. This rule is not applicable to those employees who are working on a shift basis.
3. In case employees in UAE are required to work on their off days the employer should provide a rest day as a substitute and if the employer is not able to provide so he can provide normal compensation and additional 50% remuneration.
4. If an employee works for continuous 5 hours as overtime he should be provided with a break and this break must not be less than one hour.
5. The time spent by the employees to commute to their workplace for overtime must not be included in the overtime and the breaks provided between the overtime hours are not included in the overtime.
6. As previously stated the normal working hours in a day are 8 hours but during Ramadan, employees only work 6 hours a day.Â
In addition, it is necessary to keep in mind that overtime is not always applicable. For example – Overtime is not applicable to senior positions and administrative positions. Moreover, overtime calculation in UAE does not apply to naval ships and marine employees.
Furthermore, one must understand that time spent on commuting, resting and food breaks will not be included for the overtime calculation in UAE.
Overtime Calculation in UAE on a Normal Working Day
The overtime calculation in UAE on a normal working day, you can use the following formula:
Per Day Salary – Basic Salary x 12/365
Per Hour Salary – Per Day Salary/8
Overtime Amount – Number of overtime hours x Per Hour Salary x 1.25
Let’s understand how to calculate overtime in UAE. Suppose an employee earns a basic salary of 3,650 AED and works 100 hours in a month.
3650 x 12/365/9 = 15 normal hour payment
15 + 25% of 15 = 18.75 per hour payment
Let us calculate the total overtime hours x Per hour overtime pay:
18.75 x 100 = 1875 total overtime pay
Now calculate the total salary = Basic Salary + Overtime Pay
AED 3650 + AED 1875 = AED 5525
Avoid legal implications in your business!
Overtime Calculation in UAE -Pay During Public Holidays?
It is necessary to calculate the overtime pay during the public holidays. In this case, the formula isÂ
Basic Salary x 12/365/8 x Total overtime hours x 1.5 = Total Overtime Pay
There must be a day off provided additionally. But if employers are not able to provide so, they must receive a bonus equal to 150% of basic pay.Â
Using the previous example, an employee has a salary of AED 3,650 and does 8 hours of overtime. In this case, the public holiday overtime calculation in UAE goes like this:
3650 x 12/365/8 x 8 x 1.5= 180Â
In case the employer does not provide additional off, the employee receives a 150% bonus. This is how overtime calculation in UAE
3650 x 12/365/8 x 8 x 2.5= 300Â
Wrong Formulas that Companies Should Avoid for Overtime Calculation in UAE
When it comes to complying with UAE Labour Law regarding overtime most companies follow the rule but some fail to do so which can result in legal implications.
Most companies use the correct formula to calculate the overtime which is:
Per Day Salary Basic Salary/30 days
Another correct formula that companies use is:Â
Per Hour Basic Salary/ 30 days/ 8 hours
On the other hand, some UAE companies use the wrong formula for overtime calculation in UAE. They may use the wrong formula i.e.
Per day salary x 12/365 or per hour salary Basic Salary x 12/365/8 hours
FAQs (Frequently Asked Questions)
The formula to calculate the overtime in UAE is:
Per Day Salary– Basic Salary*12/365
Per Hour Salary– Per Day Salary/8
Overtime Amount– Number of overtime hours* Per Hour Salary* 1.25
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1.25 overtime refers to normal payout of rate+ 25% extra renumeration paid to an employee. It can be 1.5 or 2.0 in some cases which means normal payout+ 50% or 100% overtime.
Divide the weekly salary by the total number of hours the employee worked. Then calculate the overtime hourly rate. You have already calculated for the overtime hours once in the regular hourly rate. Because of this, you will multiply the regular hourly rate by 0.5 (instead of 1.5) to get the overtime hourly rate.
Calculating overtime for those employees who are paid on hourly basis is usually easiest. Multiply regular pay by 1.5 and multiply rest by total number of hours worked.Â