EVERYTHING YOU NEED TO KNOW ABOUT PAYSLIPS FOR EMPLOYEES

Payroll is responsible for paying employees accurately and on time, in compliance with the national labour laws, and all that these responsibilities relate to. Payslip management is therefore an important part of payroll.

What is a payslip?

A payslip is the record of payment to an employee for a period of work. It is a document that lists details about the employees’ pay before tax and other deductions or benefits.

Employees need payslips to have proof of employment and income for various reasons. In turn, payslips ensure accurate payroll accounting for the company. A payroll management system means all the information and processes pertaining to payroll are automated, ensuring a high degree of compliance and accuracy.

What information should a payslip include?

Payslips in the UAE typically contain all information relating to payment of an employee. This includes gross and net pay, payroll number, loan and other deductions, tax code, sich pay and other types of leave, pension contributions and other benefits, like bonuses or overtime.

Gross and net earnings

The gross pay is an employee’s earnings before any deductions like tax. In the UAE, the gross pay may be the same as the net pay because most employees are tax exempt.

Net pay is the employee’s pay once tax is deducted, where applicable.

Date of payment and pay run period

The payslip would include the date of payment. In the UAE, salary and wage payments all have to be authorised by the Wage Protection System (WPS). This must happen within a prescribed timeframe, or the employer could face penalties.

The payslip would also include the pay run period, which is the period of time that the pay represents. For example, if an employee earns a weekly wage, the pay run period is defined in weeks, while a monthly salaried employee would have a monthly pay run period.

Leave days due

Leave days include annual leave, sick and parental leave entitlement, all of which can be represented separately on a payslip. The annual leave entitlement balance normally reflects the employee’s current number of annual leave days still available to take within a financial year.

Overtime paid

The payslip would also contain information about overtime worked and the money due to the employee for those hours. A payroll management system easily manages overtime calculations because employees log hours worked in the same system as where the payroll calculations are done.

Tax deductions incentive earnings

If an employee pays tax, they would have a tax code on their payslip, determining how much tax is deductible. Generally, individuals currently don’t pay tax in the UAE. However, UAE citizens make social security and pension fund contributions, whereas expat employees don’t qualify for these.

Other deductions

Companies can offer employees benefits like loans or advance salaries, which would be deducted from pay over an agreed period of time. In the UAE, medical insurance is another deduction that is compulsory for every employee, regardless of their nationality. The payslip contains information on these deductions too and ensure careful record keeping for the benefit of employer and employee.

Medical insurance

Health insurance is employers’ responsibility, not employees’. The employer is obliged to bear the cost of the minimum health insurance for each employee. However, for health insurance above that threshold, employers can deduct medical insurance as a benefit provided to employees. This must be reflected in the payslip.  

Pension fund

Pension contributions are compulsory for UAE citizens. Employers are liable to contribute for UAE nationals in their employment. However, some companies can offer pension schemes are part of their benefits packages to employees. These contributions would be deducted from employees’ salaries to be paid to third-party providers, and these are recorded on payslips.

Incentive deductions

Any other benefits or incentives provided to employees are also deducted from their net salaries and must be reflected on the payslips. These can include things like the provision of loans or study grants that employees can pay back over time.

Does every employee need a payslip?

Companies are not mandated to hand employees payslips. However, by law employees are entitled to request payslips as it acts as legal proof of income and deductions. Companies may not refuse employees’ requests to receive printed payslips.

Can you send online payslips?

With the popularity of payroll management systems, the issuance of online payslips is easy. In the UAE, online payslips are allowed. However, there might be a few points to consider.

Will this information be secure?

The sensitive nature of pay information requires more than adequate security measures to protect employees’ confidential information. With payroll software systems and online payslips employees might be concerned about hacking and the safeguarding of their information in the cyber realm. Many payroll management systems operate in the Cloud nowadays, which provides extra layers of security, compared to in-house systems. If anything, electronic payslips are most secure.

Benefits of online payslips

Online payslips have numerous benefits. We investigate what some of these are.

Easier tracking for employees

Employees would access their online payslips on a company platform, which means they can track their earnings and deductions real time, and from anywhere, but securely. This flexibility is a major benefit for employees.

Cost-effectiveness

Online payslips saves postage and printing costs.

Better security for privacy

The privacy issue is the most important one. So we emphasise: online payslips are most secure for the protection of employee privacy.

What is a payroll HRMS system?

A payroll management system allows companies to manage all aspects of payroll with software. It saves time, costs, and it is accurate and compliant with minimum effort. Having a payroll software management system managed by third parties and stored off-site is even more desirable and prevalent nowadays, providing even more security and ease of automation.

Why use an HRMS system for payroll and payslips?

Automated payroll systems have multiple benefits.

Easier calculations

Because the system is automated, leave, deduction, overtime, and all other payroll-related calculations are relatively simple. It happens without much human intervention, which means it’s secure, accurate and automatically updated.

Better historical records

In the UAE companies are required to store payroll records for a minimum of 10 years. Storing payroll records online is easier, more secure and space-friendly, while the historical records are also accurate and auditable.

Accurate data

As mentioned, payroll management systems contain accurate data that is regularly updated according to law changes and requirements, and ensuring the accurate, timeous payment of salaries. In the UAE, this means companies save costly penalties of non-compliance or legal costs.

Eliminates human errors

Accuracy goes hand-in-hand with the elimination of human errors. We’re not machines. Therefore we make mistakes. However, payroll management systems are machines, and they don’t make mistakes.

Quick and easy recalculations should error occur

If mistakes happen, though, the machines easily detects errors, and recalculate and correct these much quicker and easier than if it were done manually.

Better accuracy when large numbers of employees require payslips

Needless to say, that more errors can creep in as the number of payslips increase. With an automated payroll system the benefit is clear, and management of large numbers of employees’ payroll is more accurate and manageable.