Payroll Problems in the UAE, and How to Fix Them

Here are the failures that cause the most trouble, and what prevents each.

1. Not reconciling headcount to the payroll run

The single most useful control, and the one most often skipped.

Take your actual staff list. Compare it to the people paid this month. Every month.

Leavers who stay on the run are one of the most common internal frauds anywhere, and they persist because nobody performs this comparison.

2. End of service accrued only when someone leaves

End of service gratuity builds up over the whole period of employment. If you recognise it only when someone resigns, your accounts understate your liabilities and the cost arrives as a shock.

Accrue it monthly. It is a real obligation whether or not anyone has left, and your auditor will look for it.

This also affects Corporate Tax, because your accounting profit is the starting point for the computation.

3. Treating WPS as the accounting record

The Wage Protection System is a payment mechanism. It is not your payroll record and it does not contain everything you owe.

Allowances outside WPS, end of service, leave accrual and reimbursements all sit outside it. A business that reconciles to WPS alone has an incomplete picture.

4. Leave not tracked

Untaken leave is a liability, and in a company that never tracks it, the balance can be substantial by the time anyone counts.

It also creates a control problem. Frauds that need ongoing concealment surface when somebody takes two consecutive weeks off. A business where nobody takes leave is a business where nothing surfaces.

5. One person running the whole process

If the same person adds employees, sets salaries, runs the payment and reconciles the result, there is no control at any point.

The minimum split is that someone other than the preparer approves the run, and someone other than the preparer compares headcount to the payroll.

In a small company that person is the owner, and it takes ten minutes.

6. Salary changes agreed verbally

An increase agreed in a conversation and applied by the payroll clerk with nothing in writing.

It is not the honesty that is the problem. It is that there is no record of what was agreed, which matters at the point of a dispute and at the point of an audit.

Every change in writing, approved by someone other than the person applying it.

The monthly routine that covers most of it

1. Headcount reconciled to the payroll run.
2. Changes since last month listed, with written approval for each.
3. Gross payroll compared to last month, and any movement explained.
4. End of service and leave accruals updated.
5. Payment approved by someone other than the preparer.

Twenty minutes, and it removes most of what goes wrong.

Where we fit

We run payroll and the accruals behind it as part of bookkeeping. If you want a check rather than a service, start with the headcount reconciliation.