Over the past few decades, the UAE has solidified its standing as one of the foremost hubs for startups, thanks to its business-friendly environment, government support, and strategic location. Abundant investment and funding opportunities for entrepreneurs further bolsters the Emirates’ success as a leading startup hub.
However, opportunities always come with challenges. Although the UAE has business-friendly laws and regulations, these are strictly enforced to both local and foreign organisations. For instance, you need to establish a legal entity, navigate social and cultural nuances, and hire a skilled regional workforce – all of which indeed is overwhelming, particularly for startups.
This is where the employer of record (EOR) comes into play for startups. EOR acts as a legal employer for the onboarded talent, handling payroll, visas, work permits and compliance on behalf of your startup. This way, you can focus on business expansion without worrying about HR duties in the UAE. Please note that there are differences between EOR and PEO (Professional Employer Organization). It is important to understand both types of HR solutions – EOR and PEO – to choose the right one for your needs.
Let us discuss how EOR services can help startups expand in the UAE.
Benefits of EOR in UAE for Startups
The following are the key benefits of hiring EOR services in the UAE for your startup:
Enter Without Establishing a Legal Entity
To operate in the UAE, you need to set up a legal entity in the respective market for hiring international employees in the region. However, setting up an entity is challenging, particularly for startups, because it’s a time-consuming, expensive, and lengthy matter. Companies may exhaust resources navigating local labour, corporate tax, and employment laws. Then, there is time, effort, and money involved in fulfilling requirements like registering with the local government, appointing local directors, identifying mandatory employee benefits, and much more. EOR (Employer of Record) eliminates all these hassles so you can focus on your global expansion goals. Because they act as a legal employer on behalf of your startup, you don’t need to set up a separate legal entity. Also, being a legal employer to your global talent, EOR handles the full legal liability on your behalf. Your EOR partner will handle everything – compliance,visas, work permits, payroll, local benefit administration, termination, and everything in between.Conserve Resources
Limited resources are one of the biggest challenges for startups; they face resource constraints, including manpower, funding, and time. However, entering a foreign market requires massive resource investments, adding more hurdles to companies (particularly for early-stage startups) looking to hire internationally. By hiring EOR (Employer of Record) services, companies can conserve resources by skipping the time-consuming and overwhelming process of entering and operating in UAE markets. All the resources you save can be spent on core business operations and empowering your company, knowing that your HR processes are in expert hands.Ensuring Regulatory Compliance and Risk Management
Ensuring compliance is an uphill battle from day one. Running a business in any foreign market means the burden of ensuring compliance and avoiding legal risks. You need a comprehensive risk management strategy and expertise in the UAE’s local regulations. However, the challenge is that every country in the UAE has unique laws and regulations. On top of that, these laws and regulations keep changing frequently. Noncompliance can have severe consequences, such as hefty fines, lawsuits, reputational damage, or even an operational ban and suspension of your business license in the UAE. When you partner with an EOR solution, you don’t need to stay on top of changing regulations to ensure compliance. EORs support compliance because they understand local laws and ensure compliance with payroll, corporate taxes, worker classification, visa processes, employee benefits, and other regulations on your company’s behalf. So you can have peace of mind and focus on your employees’ daily management without worrying about legal penalties.Administering Employee Benefits
The UAE labour law mandates employee benefits, such as mandatory health insurance, end-of-service gratuity, annual leave, sick leave, maternity and paternity leave, and other miscellaneous benefits. In addition, employers must also comply with Wage Protection System (WPS) regulations for salary disbursement. For the uninitiated, WPS is an electronic salary transfer system introduced by the UAE government to ensure that employees receive their wages fairly and on time. Ensuring proper employee benefits administration not only avoids legal risks for noncompliance but also protects employee rights and helps attract and retain top talent. However, administrating benefits is difficult for foreign startups entering UAE markets because of changing labour laws, unfamiliar social norms, and language cues. An EOR solution ensures that employee benefits meet country-specific regulations and align with your company’s framework. This is all while ensuring your sensitive employee data, including personal details, health records, and financial information, is protected against breaches.
EOR Payroll Management Services to Stay Safe and Compliant
Payroll holds huge significance in the UAE, with the government’s strict regulations for fair and timely salaries. The government has implemented the Wage Protection System (WPS) to protect employees’ rights by ensuring that salaries are paid in full and on time. Failure to disburse salaries on time can result in fines up to AED 5,000 per worker and other major legal implications. In addition, false information or fraudulent payment slips also lead to similar consequences. EOR’s day-to-work involves payroll processing for foreign businesses and keeping up with changing payroll and employment laws. As a legal employer responsible for payroll management services to your employees in the UAE, EORs:- Guarantee timely salary disbursements without any delays or penalties.
- Ensure 100% compliance with UAE labor laws
- Offer tailored solutions for your specific payroll requirements.
- Maintain proper records of employees on payroll and communicate necessary details with the WPS system.
