New guidelines for UAE overtime calculation

Last Updated on November 29, 2024

The UAE labour law states that individuals can work 8 hours a day, 48 hours a week, and 26 days a month. If a company requires employees to work beyond 8 hours, they must pay a higher wage for the additional hours. This extra work is called overtime, and the UAE overtime calculation must strictly comply with the regulations outlined in the UAE labor law.

Key Points on UAE Overtime Calculation Under Labour Law

The UAE labour law provides clear guidelines regarding overtime calculation, which every worker should be familiar with. Here are the important points:

1. Maximum Working Hours
   Workers can legally work a maximum of 8 hours a day or 48 hours a week.
2. Travel Time
   Travel time from residence to the workplace is generally not counted as working hours. However, exceptions may apply for certain worker categories if the Ministry introduces new rules in the future.
3. Reduced Hours During Ramadan
   During Ramadan, regular working hours are reduced to 6 hours per day instead of the standard 8 hours.
4. Overtime Consent
   Employers cannot force employees to work overtime without their agreement.
5. Overtime Limitations
   Workers are allowed a maximum of 2 hours of overtime per day as per UAE labor law.

Understanding UAE Overtime Rules and Compensation Rates

Following the UAE labour law is essential for ensuring fair overtime practices. The law not only sets guidelines for overtime limits but also specifies compensation rates based on the type and timing of work. Here’s a breakdown of the overtime compensation rates:

1. Regular Overtime (Daytime Work)
   • Employees working overtime during regular hours are entitled to 25% more than their standard hourly wage.
2. Night Overtime (Between 10:00 PM and 4:00 AM)
   • Overtime during nighttime hours is compensated with a 50% increase over the regular hourly wage.
3. Overtime on Rest Days or Holidays
   • When employees work on their designated rest days or public holidays, they should receive their regular wage plus a 50% bonus.
   • Additionally, if employees work extra hours on holidays, they are entitled to a compensatory day off.

The formula for UAE overtime calculation

1. Regular Overtime (Between 4:00 AM and 10:00 PM):

• Calculation:
  • Determine the employee’s basic hourly wage.
  • Multiply the basic hourly wage by 1.25 (to account for the 25% increase).
  • Multiply the result by the number of overtime hours worked.
• Formula: Overtime Pay=(Basic Hourly Wage×1.25)×Overtime Hours
• Example:
  • Basic Monthly Salary: AED 3,000
  • Overtime Hours: 10
  • Basic Hourly Wage: (3000×12)/(365×8)=AED12.33
  • Overtime Hourly Rate: 12.33×1.25=AED15.41
  • Total Overtime Pay: 15.41×10=AED154.10

2. Night Overtime (Between 10:00 PM and 4:00 AM):

• Calculation:
  • Determine the employee’s basic hourly wage.
  • Multiply the basic hourly wage by 1.50 (to account for the 50% increase).
  • Multiply the result by the number of overtime hours worked during this period.
• Formula: Overtime Pay=(Basic Hourly Wage×1.50)×Overtime Hours
• Example:
  • Basic monthly Salary: AED 3,000
  • Overtime Hours: 10
  • Basic Hourly Wage: (3000×12)/(365×8)=AED12.33
  • Overtime Hourly Rate: 12.33×1.50=AED18.49
  • Total Overtime Pay for 10 hours: 18.49×10=AED184.90

3. Overtime on Rest Days:

• Calculation:
  • If an employee works on a rest day without being given a compensatory day off, the employer is required to pay 150% of the employee’s basic hourly wage for the hours worked, by labor law.
• Formula: Overtime Pay=(Basic Hourly Wage×1.50)×Overtime Hours
• Example:
  • Basic monthly Salary: AED 3,000
  • Overtime Hours: 10
  • Basic Hourly Wage: (3000×12)/(365×8)=AED12.33
  • Overtime Hourly Rate: 12.33×1.50=AED18.49
  • Total Overtime Pay for 10 hours: 18.49×10=AED184.90

4. Overtime on public holidays;

• Calculation:

  • If an employee works on a public holiday, the employer must pay 150% of the regular hourly wage for the hours worked and provide one compensatory 1 day off on a later date.

• Formula: Overtime Pay=(Basic Hourly Wage×1.50)×Overtime Hours
• Example:
  • Basic monthly Salary: AED 3,000
  • Overtime Hours: 5
  • Basic Hourly Wage: (3000×12)/(365×8)=AED12.33
  • Overtime Hourly Rate: 12.33×1.50=AED18.49
  • Total Overtime Pay for 5 hours: 18.49×5 =AED 92.45 + 1 day off

If an employer fails to provide an employee with one compensatory day off after working on a public holiday, the overtime pay increases to 250% of the regular hourly wage. Here’s how the calculation works:

Example Calculation:

• Basic Monthly Salary: AED 3,000
• Overtime Hours: 5
• Basic Hourly Wage: (3,000×12)/(365×8)=AED12.33
• Overtime Hourly Rate: 12.33×2.50=AED30.8212.33
• Total Overtime Pay for 5 Hours: 30.82×5=AED154.12

In this case, the total overtime pay for 5 hours would be AED 154.12.

Previously, employers in the UAE calculated overtime with a 50% bonus for work done between 9 PM and 4 AM. However, the new amendment has shifted this timeframe from 10 PM to 4 AM. Under this rule, employees are entitled to a 50% bonus in addition to their regular working wages.

Many people mistakenly believe that overtime should be calculated based on gross salary instead of basic wage. However, the current UAE labor law amendment from 2021 does not include any such provision. As a result, employers are not required to adopt this approach.

Example:

• Basic monthly Salary: AED 3,000
• Overtime Hours: 5
• Basic Hourly Wage: (3000×12)/(365×8)=AED12.33
• Overtime Hourly Rate: 12.33×1.50=AED18.49
• Total Overtime Pay for 5 hours: 18.49×5 =AED 92.45 + 1 day off

If an employer fails to provide an employee with one compensatory day off after working on a public holiday, the overtime pay increases to 250% of the regular hourly wage. Here’s how the calculation works:

Example Calculation:

• Basic Monthly Salary: AED 3,000
• Overtime Hours: 5
• Basic Hourly Wage: (3,000×12)/(365×8)=AED12.33
• Overtime Hourly Rate: 12.33×2.50=AED30.8212.33
• Total Overtime Pay for 5 Hours: 30.82×5=AED154.12

In this case, the total overtime pay for 5 hours would be AED 154.12.

Previously, employers in the UAE calculated overtime with a 50% bonus for work done between 9 PM and 4 AM. However, the new amendment has shifted this timeframe from 10 PM to 4 AM. Under this rule, employees are entitled to a 50% bonus in addition to their regular working wages.

Many people mistakenly believe that overtime should be calculated based on gross salary instead of basic wage. However, the current UAE labor law amendment from 2021 does not include any such provision. As a result, employers are not required to adopt this approach.