UAE Salary Rules Are Changing on June 1. Here's What to Do

Understanding the New UAE Payroll Rules Under MOHRE Resolution 340

From June 1, 2026, salary payments in the UAE will follow a much stricter timeline. Earlier, many companies had some flexibility with payroll processing. Salaries were often credited on the 5th, 7th, or even later in the month without creating major compliance issues. That flexibility is now gone.
Under the new MOHRE Resolution 340 of 2026, three things are now clearly mandatory:

• Salaries for the previous month must be paid on the first day of every Gregorian month.
• Payments must go through the Wage Protection System (WPS) or another MOHRE-approved channel, such as approved banks, exchange houses, or licensed financial institutions.
• Employers must keep proper records showing that salaries were paid correctly and on time and submit those records if MOHRE requests them.

This change is especially important for businesses that still rely on delayed internal payroll cycles or last-minute processing. Under the revised framework, it is not enough to initiate the payment late and assume it will clear later. Salaries are expected to reach employees on time.
Resolution 340 also replaces the older Resolution 598 of 2022 completely. Another important point for business owners is this: even if payroll processing is outsourced to a third-party provider, the legal responsibility still remains with the employer. If salaries are delayed, MOHRE will hold the company accountable, not the payroll vendor.

Understanding the 85% Salary Compliance Rule

One part of the new resolution that many businesses are overlooking is the 85% compliance rule. This is especially important for companies that manage payroll carefully around cash flow.
Under the new framework, a company can still be considered compliant if at least 85% of total salaries are paid on time. Similarly, an employee is treated as “paid” if they receive at least 85% of their salary by the due date, as long as the remaining amount relates to legally allowed deductions.
These deductions may include:

• Approved deductions mentioned in the employment contract
• Repayment of a documented employee loan
• Salary deductions for unauthorised absences
• Other deductions permitted under UAE labour law

However, this should not be treated as a loophole. Employees still have the right to claim any unpaid amount, and employers must keep proper documents supporting every deduction made.
If MOHRE asks for proof and the company cannot provide it, those deductions may be rejected. Once that happens, the company’s compliance level can fall below the required 85%, and penalties may begin.
For example, if a company has 45 employees and a total monthly salary payout of AED 450,000, at least AED 382,500 must be paid on time to stay compliant under the new rule. The remaining amount can only be deducted if the company has proper documents to support it. Otherwise, it may be treated as a violation.

What Happens If Salaries Are Delayed

This is the part every business owner should understand clearly. Under the new UAE salary rules, penalties increase step by step if employee salaries are not paid on time.

• From Day 2: MOHRE’s system automatically flags the company. The business starts receiving warning notices and official reminders.
• From Day 5: The company may face a suspension on new work permits. This means hiring new staff, renewing labour contracts, or sponsoring visas can stop until pending salaries are paid.
• From Day 11: Administrative fines may apply, especially for repeated delays within six months. The company could also be moved to a lower business classification category, which can increase MOHRE fees and affect future approvals.
• From Day 16: MOHRE may open labour disputes on behalf of employees automatically. Additional restrictions can apply to companies with 25+ employees and businesses in sectors like construction, transport, cleaning, security, and recruitment.
• From Day 21: The consequences become much more serious. Smaller companies may face direct recovery actions for unpaid wages. Larger companies with repeated violations could face Public Prosecution referral, asset freezes, and travel bans for responsible officials.

One detail many employers miss: if you run multiple companies under common ownership, the Ministry can aggregate the worker count across all your entities. You cannot dodge the larger-employer rules by splitting payroll across affiliated companies.
Need help reviewing your payroll compliance before June 1? Connect with us. Call +971 4256 2001 or email info@efirst.ae

Who Is Exempt From the New Wage Protection Rules?

Not every worker or sector falls inside the new framework. Resolution 340 specifically excludes several categories from the wage protection calculation.

Worker categories excluded:

• Employees with active labour disputes have already been referred to court or under an enforcement order
• Workers with an active absconding report filed against them
• Workers whose liberty is restricted by a competent authority's order
• Employees on approved unpaid leave (provided MOHRE has been notified with supporting documents)
• Foreign workers employed by overseas entities and paid outside the UAE, with worker consent and MOHRE approval
• Holders of mission work permits valid for less than three months

Sectors and permit types fully exempt:

• Fishing boats
• Citizen-owned public taxis
• Banks and licensed financial institutions
• Places of worship
• Seafarers, subject to ministry approval

Setting up a new company, and one of these exemptions might apply? Get it confirmed in writing with MOHRE before June 1. Our team handles these confirmations regularly during client onboarding.

Do the New Salary Rules Apply to Free Zone Companies?

This has been the single most common question from clients these past two weeks. The short answer: Yes, if your free zone company is registered with MOHRE for any employment activity, the WPS rules apply.
If your free zone company uses MOHRE labour contracts or is registered with MOHRE for employment activities, the new Wage Protection System (WPS) rules under Resolution 340 will apply to you. As legal analysis from DLA Piper confirms, the resolution applies to all MOHRE-licensed private sector companies.
However, some free zones operate under their own employment systems. Free zones such as Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) follow separate labour frameworks and are not directly governed by MOHRE in the same way.
Other major free zones that already use WPS, including Dubai Multi Commodities Centre (DMCC) and Jebel Ali Free Zone (JAFZA), are expected to follow the updated payroll rules as well.
If you are unsure which labour framework applies to your company, it is important to verify it before June 1, 2026. Delays or misunderstandings around payroll compliance can lead to unnecessary penalties and operational issues later.

What You Need to Do Before June 1

Based on the cases we are working through with our own clients this month, here is the action list every UAE private sector employer should complete in the next two weeks. None of it is hard.

• 1. Check if you are on WPS 2.0
  Call your bank or payroll provider and ask. If they hesitate, you are not on it. Fix it this week.
• 2. Move your payroll cut-off back
  The salary has to land in the worker's account on the 1st, not leave your bank on the 1st. Send transfers by the 27th or 28th.
• 3. Check your deduction paperwork
  Every salary deduction needs a signed contract, loan agreement, or attendance record behind it. No paperwork means no valid deduction. And that breaks your 85% compliance.
• 4. Brief your HR and finance team
  Most late payroll happens because someone thinks "one week late is fine." It is not, anymore. Print the penalty timeline and stick it on the wall. Make sure everyone knows Day 5 freezes hiring.
• 5. Re-read your payroll provider contract
  Their mistake is your problem. Check the clause on payment timing. If it is vague, ask for an amendment.
• 6. Plan your June payroll now
  Eid al-Adha is on May 27. The deadline is June 1. That is three working days. Block the dates and make sure the right people are at their desks.
• 7. Get a compliance review if you are at higher risk
  This matters if you have 25+ employees or you work in construction, transport, security, cleaning, or recruitment. A two-hour review now costs less than one month of trade license fees. A category downgrade costs you for three years.

Need help understanding how Resolution 340 may affect your business operations or payroll process?
Our team at Emirates First can assist you with labour and payroll compliance guidance, documentation support, and PRO-related requirements to help your business stay aligned with the latest MOHRE regulations.
If you would like a quick review or guidance before June 1, feel free to connect with our team.