The UAE has its own set of rules, aligned with the best international practices, for overtime payment. These rules help calculate overtime. Especially for those employees who are eligible for overtime. Companies must stay compliant with the rules and regulations when calculating overtime during holidays and Ramadan. An employee can complain with MOHRE if overtime is not paid correctly. There are some common mistakes to avoid in overtime calculation.
What Does Overtime Mean in UAE Labour Law?
In the UAE, overtime refers to the time or hours worked beyond the legal standard working hours. As per the Federal Decree Law No. 33 of 2021 of the UAE Labour Law, normal working hours are 8 hours per day or 48 hours per week. An employee works “overtime” if they work more than these hours. This regulation ensures fair pay for additional work and discourages excessive working hours.
What Are the Rules and Regulations for Overtime in UAE?
The UAE Labour Law regulates when and how overtime should be applied. Employers can request employees to work overtime. But there are limits to that for the workers. An employee cannot be made to work more than 2 hours of overtime in a single day, as per Article 19 of the new UAE Labour Law.
How Is the Overtime Rate Calculated in UAE?
Overtime pay rate in the UAE is calculated as the normal hourly wage plus a percentage extra. On a working day, the employee receives their regular pay for the overtime hours plus an additional 25% of that amount. This makes it 125% of the normal hourly wage for overtime hours.
For example, if an employee’s normal hourly rate is AED 20, their overtime hourly rate would be AED 25:
AED 20 + 25% of AED 20 = AED 20 + AED 5 = AED 25.
However, if the Overtime is during late night hours (10:00 PM – 4:00 AM) then the employee is entitled to their normal pay plus 50% extra for those overtime hours, effectively 150% of the normal hourly wage. Or one and a half times the regular rate.
Which Employees Are Eligible or Exempt From Overtime Pay?
The labour law of the UAE provides exemptions from overtime based on job position and nature of work. Most employees in the private sector are eligible for overtime pay when they work extra hours. However, certain categories of senior or special workers are exempt from overtime entitlements under Clause 4 of Article 15.
| Eligible for Overtime Pay | Exempt from Overtime Pay |
|---|---|
All workers covered under the UAE Labour Law who do not fall into the exempt categories are entitled to overtime pay.
| Employees in high-level positions with decision-making or employer authority are not subject to overtime rules. This includes:
|
What Is the Maximum Overtime Hours Allowed in UAE?
Generally, an employer may not require an employee to work more than 2 hours of overtime in a single day. This means a normal workday of 8 hours can only be extended by up to 2 extra hours of overtime, making a maximum of 10 working hours in a day. Also, there can’t be more than 144 hours of overtime over any three weeks. This roughly averages to the legal limit of 2 hours per day (2 hours * 21 days = 42 hours in 3 weeks).
What Is the Formula of Overtime Calculation in UAE? (With Examples)
Calculating overtime pay in the UAE is done on an hourly wage basis, derived from the monthly basic pay. The standard formula for overtime on a normal working day is as follows:
- First, determine the employee’s wage per day and per hour. The UAE Labour Law for overtime assumes a 30-day month and an 8-hour workday. So, Per Day Salary = Basic Monthly Salary ÷ 30. Then, Hourly Wage = Per Day Salary ÷ 8. This gives the regular hourly rate based on the basic salary.
- Then, for normal overtime hours, the pay rate is 1.25 times the normal rate. So, Overtime Pay = Hourly Wage × 1.25 × Number of overtime hours. This 1.25 factor represents the 25% extra compensation for overtime. If the overtime hours fall under the late-night period (10 PM – 4 AM) or on a holiday/off-day, the factor would be 1.50 (for 50% extra) instead, as discussed earlier.
Suppose an employee’s basic salary is AED 3,200 per month. Their per-day salary would be 3200 ÷ 30 = AED 106.67 (approximately). The hourly wage would then be 106.67 ÷ 8 ≈ AED 13.33.
If an employee worked 10 hours of overtime in a given month, all during normal hours (not late night). The overtime pay for those 10 hours would be calculated as: 10 × 13.33 × 1.25 = AED 166.63 (approximately). This means the employee earns an extra AED 166.63 for the 10 overtime hours, on top of their regular monthly salary.
How Is Overtime Calculated on Public Holidays?
The UAE Labour Law (Article 81) provides two options when an employee works on a holiday or rest day.
Option 1: The employer should grant a substitute day off (a full day of rest on another day) and pay the employee for the hours worked on the holiday at the overtime rate (which is 50% extra in this case). This means the employee gets their normal wage for the holiday hours plus 50% of that wage as a bonus, and later they also take an extra day off.
Option 2: If the employer cannot give a day off in lieu, then the law says the employee must be paid a higher bonus for working that holiday. In total, the employee would get 150% extra pay for the hours worked (instead of 50%). This amounts to 250% of the normal hourly wage for the holiday hours.
Example: Suppose an employee’s hourly rate is AED 15. If they work 8 hours on a public holiday and will get a compensatory day off later, they should be paid 8 × 15 × 1.5 = AED 180 for those hours, and also get an extra day off later. If the employer cannot give a day off, then the pay should be 8 × 15 × 2.5 = AED 300 for those 8 hours.
How Is Overtime Calculated During Ramadan?
During Ramadan, UAE law requires that working hours be reduced by 2 hours per day for all employees in the private sector. This means the workday is reduced to 6 hours. So, any work beyond the 6th hour in a day during Ramadan is considered overtime.
Those extra hours must be paid as overtime at the normal overtime rate (25% extra, or 50% extra if it’s late night). For example, if an employee continues to work 8 hours per day in Ramadan (perhaps due to business requirements), they are effectively working 2 hours of overtime each day, and those 2 hours should be paid at overtime rates.
Is Overtime Calculated on Basic or Gross Salary?
In the UAE, overtime pay is calculated based on the employee’s basic salary, not the gross salary. The basic salary is the core wage of the employee, excluding additional allowances (such as housing, transport, or other benefits).
For example, if an employee’s contract states a gross salary of AED 10,000, of which AED 7,000 is basic and AED 3,000 is allowances, overtime would be calculated on the AED 7,000 figure.
What Are Common Mistakes in Overtime Calculation?
Overtime calculation errors happen frequently, especially when done manually. Employers must use the correct formulas to avoid legal issues and penalties.
- Using the wrong formula or base for calculations. For instance, some companies mistakenly use an annualized 365-day formula (Basic salary × 12 / 365) to derive a daily rate.
- Applying the incorrect overtime rate. Employers might pay a flat overtime rate (like only 125%) for all overtime, overlooking scenarios that require 150%.
- Neglecting special rules. A prime example is overtime calculation during Ramadan when the workday is legally shorter.
- Including exempt employees in overtime. For instance, paying overtime to a high-level manager. Conversely, not paying overtime to a non-exempt junior employee.
- Not accounting for compensatory leave on holidays. When employees work on holidays or weekly offs, employers sometimes pay the overtime premium but forget to give a day off in lieu, or vice versa.
What Can Employees Do if Overtime Is Not Paid Correctly?
If an employee in the UAE finds that overtime has not been compensated according to the law or company policy, the following recourse options are available:
- Raise the Issue Internally: They can talk to the employer or the HR department.
- File a Complaint With MOHRE: If internal discussions don’t resolve the issue, the employee has the right to lodge a complaint with the Ministry of Human Resources and Emiratisation (MOHRE).
- Seek MOHRE Mediation: Once a complaint is filed, MOHRE will typically call both the employer and employee for a mediation process. The goal is to reach an amicable settlement.
- Pursue Legal Action (Labour Court): In case the mediation fails or the employer refuses to comply with MOHRE’s directives, the employee can take the case to the UAE Labour Court. The labour court will then formally hear the case and issue a binding judgment on the matter
As an employer, you cannot lawfully terminate or penalize an employee for filing a serious complaint to MOHRE about overtime or any labour law violation. Retaliatory dismissal for seeking your owed wages would itself be illegal and subject to penalty.
How Can Employers Automate Overtime Calculation?
Struggling to keep overtime tracking error-free and compliant in the UAE? This is where automation and HR software come into play. Employers can use modern HR automation systems to improve and automate overtime calculation, ensuring accuracy and compliance with UAE labour laws.
Using a dedicated HR or payroll software can drastically reduce the errors associated with manual calculations. By using the best HR software solutions available, employers can configure local overtime rules and let the system handle the calculations in the background. This way, HR teams can focus more on strategic tasks rather than number-crunching.
Final Words
HR management in the UAE requires knowing the law and carefully figuring out overtime. Companies can follow the rules for 2025 and treat their workers properly if they know about overtime and stick to them, like only working two hours a day and paying 125% or 150% of the regular rate. They should also take into account things like holidays and Ramadan, as well as common mistakes.
It is also important to set up reliable methods or processes, like automated HR software, for figuring out overtime. Remember, paying overtime accordingly will boost happiness and trust in the workplace. So, you must have the right knowledge and tools for it!
