Calculates the end-of-service gratuity (EOSB) for private sector employees in the UAE mainland and most free zones, based on Federal Decree-Law No. 33 of 2021.
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How Overtime Pay is Calculated in the UAE
Overtime pay in the United Arab Emirates is governed by Federal Decree-Law No. 33 of 2021 and its Executive Regulations. The law mandates that employees receive their normal hourly wage plus a minimum premium for any work performed beyond their normal working hours. Understanding this calculation is essential for both employees to ensure they are paid correctly and for employers to remain compliant with labor regulations.
The Legal Formula for Overtime
The core of the calculation involves three steps. First, determine the employee's normal hourly wage. This is done by dividing the monthly basic salary by 30 (the standard number of days used for salary calculations) and then by the number of normal working hours per day as stipulated in the employment contract.
Second, identify the correct premium percentage based on when the overtime was performed:
- Normal Overtime: Work performed on a normal working day, but outside regular hours, earns a premium of at least 25% of the hourly wage.
- Night Overtime: Work performed between 10:00 PM and 4:00 AM earns a premium of at least 50% of the hourly wage.
- Rest Day Overtime: Work performed on the employee's weekly day off (rest day) earns a premium of at least 50% of the hourly wage. Alternatively, the employer may provide a compensatory day off instead of the extra pay.
Finally, the total overtime pay is calculated as: (Hourly Wage + Premium per Hour) × Number of Overtime Hours. The premium per hour is simply the hourly wage multiplied by the applicable premium percentage.
Example Calculation
Consider an employee with a basic monthly salary of 7,200 AED, a standard 8-hour workday, who works 3 hours of overtime on a normal day.
- Hourly Wage = 7,200 AED / 30 days / 8 hours = 30 AED per hour.
- Premium per Hour (25%) = 30 AED × 25% = 7.5 AED.
- Pay per Overtime Hour = 30 AED + 7.5 AED = 37.5 AED.
- Total Overtime Pay for 3 hours = 37.5 AED × 3 = 112.5 AED.
If those same 3 hours were worked at night, the premium would be 50% (15 AED), making the pay per hour 45 AED and the total pay 135 AED.
Important Limits and Considerations
The law places strict limits on overtime. An employee cannot be asked to work more than 2 hours of overtime per day. Furthermore, when averaged over a three-week period, the total working time (normal + overtime) must not exceed 144 hours. Employers must plan schedules carefully to stay within these limits.
It is also crucial to note that the premiums (25%, 50%) are minimums. An employment contract or company policy can specify a higher overtime rate, which would then take precedence. The calculation here uses the legal minimums.
What to Do With This Information
If you are an employee, use this calculator to verify your overtime pay slips. If you are an employer, use it to ensure your payroll calculations are accurate and lawful. For formalizing work terms, especially regarding working hours, overtime rates, and rest days, it is essential to have a clear Employment Contract. A well-drafted contract prevents disputes by explicitly stating the basic salary, normal working hours, and the agreed-upon overtime premium, which can be higher than the legal minimum.