What is a Professional Employer Organization (PEO)?

A professional employer organization (PEO) acts as an outsourced human resources department, enabling companies, including startups and small businesses, to access services that might otherwise be unavailable. By implementing efficient processes and routines, a PEO becomes a valuable partner in creating a more streamlined and effective company.

In a PEO arrangement, the organization leases employees to a company, sharing both liabilities and responsibilities. This partnership is especially beneficial when hiring remote employees in another country, with the PEO managing crucial HR functions such as recruitment, onboarding, and payroll.

For businesses operating in the UAE and looking to hire remote employees there, engaging a PEO tailored for the UAE offers an ideal solution for payroll and HR needs. This strategic alliance streamlines various functions, including hiring and recruitment, payroll and compensation management, ensuring compliance with UAE labor laws, and administration of benefits.

Choosing a PEO, especially for small businesses, is a strategic and practical decision. It not only enhances operational efficiency but also empowers managers to focus on revenue growth and overall business expansion. This comprehensive support allows companies to enter global markets without the need for a physical presence in each country.

If you are considering whether a PEO in the UAE aligns with your company’s needs, now is the right time to connect with a Marzuna representative. Explore how our specialized PEO services can facilitate a smooth entry into conducting business in the UAE, ensuring a swift and effective launch.

What are the benefits of using a PEO in the UAE?

Utilizing a Professional Employer Organization (PEO) in the United Arab Emirates comes with several advantages, which include:

1. Streamlined Payroll Processing.
2. Assurance of Compliance with Local Labor Laws.
3. Management of Tax Withholding and Payments.
4. Mitigation of Certain Business Risks.
5. Provision of Competitive Compensation Packages.

Engaging with a PEO not only alleviates concerns but also facilitates business expansion. This allows you to recruit top-tier global talent and access benefits typically reserved for larger organizations. Having a reliable HR partner is achievable without the need to establish an entire in-country human resources department.

Additional benefits of partnering with a PEO in the UAE include:

• Local Legal Expertise:
  • Access to legal experts well-versed in local regulations.
  • Enables global expansion without the expenses associated with hiring local legal representation.
• Trusted Compliance Management:
  • Oversight of compliance matters by the PEO.
  • Cost savings for the organization while reducing risks.
  • Enhances process improvement and operational efficiency.
  • Positions the PEO as a strategic partner in supporting the scaling and growth of your company.

What are the differences between an EOR and a PEO?

In contrast to an Employer of Record (EOR) arrangement in the UAE:

1. In the case of a Professional Employer Organization (PEO), both the PEO and the client organization serve as co-employers.
2. With an EOR, the client company assumes the role of the legal employer.
3. PEOs collaborate in sharing Human Resources (HR) responsibilities.
4. EORs take charge of the majority of HR responsibilities, including tasks such as hiring and onboarding.
5. Unlike EORs, PEOs do not take on the responsibility of drafting employee contracts.
6. The client company holds the responsibility of drafting all legal contracts for employees when partnering with a PEO.

Hiring in the UAE with a PEO

When engaging in recruitment across diverse nations, it is imperative to grasp the intricacies of the local culture. This encompasses being mindful of specific religious and secular national holidays that are commonly observed, with certain leaves mandated by law to facilitate employees in their observance.

Here are concise insights into the United Arab Emirates (UAE):

1. The UAE operates as an elective monarchy, comprised of seven emirates.
2. An emirate represents the jurisdiction governed by an emir.
3. Abu Dhabi serves as the capital.
4. Arabic stands as the official language.
5. The official currency is the UAE dirham (AED).
6. The population includes a majority of Muslims (about 3/5), alongside significant minorities of Hindu, Christian, and Buddhist communities.

Prior to initiating the hiring process in the UAE, it is essential to take into account the following considerations:

1. Drafting contracts in adherence to local regulations.
2. Understanding the UAE tax rate, corporate tax implications, and income tax policies.
3. Comprehending labor laws governing employment practices.
4. Navigating the procedures associated with UAE company registration.

This comprehensive awareness of cultural nuances and legal intricacies equips businesses to effectively navigate the hiring landscape in the UAE, fostering a workplace environment that is not only compliant but also attuned to the diverse cultural fabric of the region.

The UAE's corporation tax rate

The UAE does not impose personal income taxes. Oil firms are primarily subject to the progressive corporation tax rate of up to 55% in the United Arab Emirates. Numerous emirates provide tax exemptions for the majority of businesses, hence lowering the tax rate to 0% for both most businesses and personal incomes.

Employment laws of the UAE

Work hours	In the UAE, the workweek runs from Sunday to Thursday. It’s Friday and Saturday this weekend. Labor laws stipulate that Fridays are required off days. Employees who are required to work on Fridays must be given 150% of their regular pay or be granted an additional day off. Some businesses only employ six days a week. There is a 48-hour workweek maximum, with a maximum of eight hours each day. It may be mandatory by municipal legislation for employees to work two hours fewer during the month of Ramadan.
Overtime	Overtime equal to 125% of the regular pay rate is payable for hours worked beyond the standard working hours, up to a maximum of two extra hours each day. Worked overtime from 10 p.m. to 4 a.m. is entitled to 150% of regular salary.
Minimum wage	There isn’t a minimum wage in the United Arab Emirates, but new rules might alter that. This emphasizes how crucial it is to maintain labor law compliance.
Social security	Both employers and employees are required to pay social security. Social security benefits have a 1,000 AED minimum and a 50,000 AED maximum income requirement. Employers are responsible for paying 12.5% of an employee’s monthly social security benefits. Workers’ social security is paid at a rate of 5%.
Paid time off in the UAE	Employees are entitled to a maximum of 30 days of annual leave, in addition to the paid national holidays. The duration of the annual leave is contingent on the length of an individual’s employment with the organization:  Employees who have worked for less than six months are not eligible for any leave entitlement. Those who have completed six to 12 months of employment are entitled to two days of leave per month. Employees with more than a year of service at the company are eligible for 30 days of annual leave.  Furthermore, any unused leave can either be carried over into the following year or be paid out in lieu of taking vacation.  The designated public holidays in the UAE include: New Year’s Day Eid Al Fitr Arafat day Eid Al Adha Islamic New Year The Prophet’s birthday Commemoration Day National Day
Sick leave	Workers who have worked for a corporation for three months or longer are eligible for ninety days of sick leave annually. For the first fifteen days, this is paid at full salary; the following thirty days, it is paid at half salary; the next fifteen days are paid at no pay.
Maternity leave	Employees who have worked for a firm for at least a year are eligible for a 45-day paid maternity leave. Employees who have worked for the firm for less than a year are entitled to a 50% salary maternity leave. If an illness has occurred, a 10-day extension may be given without any salary payment, either continuous or non-continuous. Nursing staff members are allowed to two breaks, totaling thirty minutes per day, for breastfeeding during the first eighteen months after childbirth. Leave for paternity is not required.
Termination in the UAE	Gratuity, also recognized as severance pay, becomes due to employees upon the conclusion of their tenure with a company. The quantum of severance pay is contingent upon the duration of employment with the organization.  For terminated employees:  Individuals who worked between one and five years are entitled to 21 days’ worth of salary. For every year served beyond five years, terminated employees are owed 30 days’ worth of salary. For employees who resign:  Those employed for one to three years are eligible for 1/3 of the salary equivalent to 21 days. Employees with three to five years of service are entitled to 2/3 of the salary equivalent to 21 days. Individuals who have dedicated over five years to the company are owed the full salary equivalent to 21 days. This structure ensures a fair and calculated approach to severance pay based on the varying lengths of employment, both for terminated and resigning employees.

Payroll in the UAE is challenging. It’s easy when you use a PEO.

Although it takes a lot of time and effort, processing payroll is a crucial procedure for any business. Taking into consideration all of the components of pay structures might be daunting for a business handling its own payroll. Paystubs, allowances, deductions, bonuses, and net and gross salaries are some of the components that make up an employee’s income. While certain parts are not taxed, others are. Certain components, such certain perks, donations, and severance compensation, are mandated by law.

Maintaining compliance might be difficult. For example, the UAE does not currently have a minimum wage, but new legislation may soon change that. It’s critical to keep up with these sorts of labor law developments. Speak with our professionals right now to find out how Marzuna can handle your payroll.

 

What a PEO in the UAE can and cannot do

A Professional Employer Organization (PEO) does not possess the authority to:

1. Assume complete control over your organization.
2. Function as the exclusive legal employer.
3. Solely dictate hiring and termination decisions for your workforce.

Conversely, a PEO can serve in the following capacities:

1. Assist in the hiring process.
2. Facilitate the onboarding of new employees.
3. Provide valuable support in maintaining compliance to mitigate risks.
4. Contribute to cost reduction related to employment.
5. Ensure the accurate processing of payroll.
6. Handle the proper withholding and remittance of taxes.

By understanding these distinctions, organizations can leverage the beneficial aspects of a PEO while retaining essential elements of control and decision-making within their operations.

Businesses big and small can find value in partnering with a PEO in the UAE.

Embarking on a business venture in the UAE comes with its challenges and potential expenses, particularly when navigating the complexities of hiring and ensuring compliance with local laws and regulations. In addressing these concerns, a strategic partnership with Marzuna proves to be the key, offering a cost-effective and time-saving solution through the initiation of PEO services in the UAE. Dive into Marzuna’s pricing structure to understand how each package can significantly benefit your company, detailed comprehensively on our pricing page.

Marzuna provides viable options for expanding your business in the UAE without the need to establish a legal entity, a potentially expensive endeavor that might exceed your current budget constraints. With Marzuna, compliance with local regulations is guaranteed across more than 160 countries, all while safeguarding your data privacy through our secure systems. Collaborating with Marzuna could be the catalyst your business needs to thrive and prosper.

Ready to embark on a PEO journey in the UAE with Marzuna? Connect with us today. Interested in learning more? Schedule a demo to witness firsthand how our platform operates and engage with one of our team members to explore how Marzuna can elevate your company’s success with a PEO in the UAE.