Depending on the differences between outsourced or computerized payroll processing solutions, and organizational rules, the salary calculation process may vary from the method mentioned below. However, the basic procedure about how to calculate salary in Dubai is mentioned below with the responsibilities.
Steps involved in salary calculation
Organize Employee Details
It is the responsibility of the payroll clerk or employer to manage the basic details of all the employees. The details include employee name, their basic salary, designation, allowance amount with payable allowance type.
Keep a record of advances or cash given to employees and the payroll records must be updated regularly. Several payroll management softwares are available, but you can also maintain spreadsheet records, as it deems fit.
However, software is more efficient and reduces the time required for updating or modifying details in case of wage increment or changes.
Calculate the gross salary
You need to perform gross salary calculation for each employee separately at the end of a payroll period. The allowances, if any, add to the employee's basic salary. This takes time, if done manually, as allowances differ for each employee. Calculate Overtime amount
The overtime amount always varies for each payroll period and from employee to employee. The overtime hours are divided into two categories - The normal overtime and weekend or Friday overtime. The calculation formulas are different for each category as mentioned below:
To calculate normal overtime rate
(Salary/30 days/ 8 hours) * 1.25
To calculate weekend or Friday overtime rate
(Salary/30 days/8 hours) * 1.5
This is further multiplied by the number of overtime hours to get the overtime amount for each category. The separate overtime amounts from each category are added to get the total overtime amount for a particular month. This calculation takes time; hence, using a software is advisable.
Add variable allowances
Some employees are liable to receive variable allowances. These extra allowances include car expenses, bonuses, or sales commission, reimbursements for stationery work, etc. These add to the employee's salary for a particular month.
Make deductions, if any
Some deductions are made from an employee's salary for reasons such as absents, fines or violations, etc. To calculate the deductions, use the formula mentioned below:
(Salary/Days in a month) * Absent days
Depending on the company rules, you can decide if the deductions should be made from basic salary or gross salary.
Create salary reports and Payslips
This step is very important to eliminate any confusion between the employee or employer. Create salary reports for each employee where basic salary, overtime hours, allowances, absent days, are mentioned. This also helps the employer to keep records of payouts each month. It is created in the form of a document for each month mentioning all the components of an employee's salary.
Create sif file
The Sif file is known as the salary transfer file. It is used to transfer salary to an employee's bank account or exchange accounts for expats. All banks and exchanges in UAE follow WPS Sif file format as defined by MOL.
Knowing the calculation and process followed is important and helps the employee and the employer identify any errors made by the company. This is very important for expats as the payroll calculation and taxes differ from country to country.