How to pay international contractors in UAE


Sep 5, 2023

The shimmering skyline of Dubai and the sprawling business hubs of Abu Dhabi are a testament to the United Arab Emirates' (UAE) rapidly expanding economy. Over recent decades, the construction boom, coupled with the allure of its free zones, has attracted numerous international companies. 

Given the intricacies of UAE law and the specificity of its jurisdictions, it’s crucial to understand how to seamlessly integrate contractors into your business processes, especially when it comes to payments. So, how can international companies navigate the UAE’s intricate laws?

Follow this step-by-step guide to ensure you're correctly classifying and compliantly paying your contractors in the UAE.

Step #1: Classify your workers in the UAE

Hiring contractors begins with proper classification. With initiatives like Emiratisation—which encourages hiring local talent in the private sector—ensuring accurate classification between full-time employees, subcontractors, and independent contractors is paramount. Beware that misclassifying workers in the UAE can lead to legal consequences, hefty fines, and a tarnished business reputation.



High level of worker autonomy. Contractors are generally given more freedom to decide how to complete their work and when to do it.

More direction from the employer. Employers have more control over employees and provide more direction on how to perform their work. They may also set specific working hours.

Equipment and tools are owned by the worker.

Equipment and tools are typically provided by the company.

Less integrated. Contractors are usually more independent, often working remotely.

Highly integrated. Employees are more integrated into the employer's organization. They are also more likely to work at the employer's premises.

No entitlement to benefits. Contractors don’t receive the same benefits as employees and are responsible for managing their own taxes.

Entitled to benefits. Employees enjoy benefits and protections, like minimum wage, vacation pay, and paid sick leave. They may also be entitled to benefits like health insurance and retirement plans.

Time-bound arrangement. Contractors are usually hired for a specific time period or project.

Indefinite engagement. Employees are generally hired for an indefinite time.

Risk of loss. Contractors assume more risk and liability for their work.

Protected from loss. Employees are generally covered from work-related liabilities.

Subcontracting permitted. Contractors can assign work to be performed by another individual or business.

No subcontracting. Employees are expected to complete work themselves. They can’t delegate tasks without company approval.

Step #2: Determine the best way to pay your contractors in the UAE

The financial landscape of the UAE offers various methods to transact with contractors. While the country is modern and well-versed in global banking practices, understanding the preferred and most efficient payment methods can simplify the process and ensure timely compensation for your contractors. Here are some key options to consider:

  • Local bank transfers: Given the robust banking infrastructure in cities like Dubai and Abu Dhabi, this method is highly favored. Local transfers ensure timely payments, favorable exchange rates, and compliance with local laws. 
  • International wire transfers: Used by companies that operate from international jurisdictions, this option comes with additional fees and slightly longer processing times. 
  • Payment platforms: Companies like PayPal or TransferWise are gaining ground in the UAE due to their ease of use and international appeal. However, it’s essential to confirm your chosen platform's accessibility and popularity in specific Emirates or free zones.
  • Global payroll services. Contractors are rarely included in payroll since they invoice for their services separately—often through accounts payable for many companies. But with Rippling, you can pay Emirati employees and contractors, wherever they are, in a single pay run.

Considering the diverse jurisdictions of the UAE, especially when dealing with free zones that may have their own rules, it’s important to clearly state the payment terms in the employment contract. 

Step #3: Use global payroll software to process payments for Emirati contractors 

In a dynamic business environment like the UAE, global payroll software can be a game-changer. It streamlines the payment process, automatically adheres to UAE laws, and ensures timely payments. With Rippling, you can pay employees and contractors across the world, in a single pay run. Here’s a preview of how Rippling’s global payroll system works:

Step #4: Ensure your Emirati contractors have the right tax information 

For years, the UAE has been known for its zero corporate tax regime, meaning many companies and most professionals don’t pay any corporate tax on their income. This regime has been a significant attraction for businesses and independent contractors. It’s important to note that The UAE began rolling out a 9% business tax in June 2023

For many contractors, there's no income tax in the UAE for income under AE 375,000. Workers earning below this amount don't have to file tax returns for their earnings. However, they must be diligent in maintaining records of their income, especially if they have tax obligations in other jurisdictions. 

In addition to the previously mentioned details, contractors should be familiar with:

  • VAT implications: With the introduction of value-added tax (VAT) in recent years, contractors need to understand the tax's applicability to their services.
  • Free zone regulations: Contractors operating in free zones should be aware of unique regulations and benefits that might differ from the mainland.
  • Double taxation agreements: The UAE has agreements with several countries, known as double taxation agreements. Contractors from the included countries can benefit greatly from these treaties.

Frequently asked questions about running payroll for contractors in the UAE

Do you need to withhold taxes when paying contractors in the UAE?

No, there's no need to withhold taxes as the UAE doesn’t levy personal income tax.

Does the Emirati minimum wage apply to independent contractors in the UAE?

The UAE doesn't have a fixed minimum wage; however, wages are often determined by nationality and the nature of the job.

Do Emirati contractors get benefits?

Benefits largely depend on the contractual agreement. However, by law, self-employed individuals or freelancers don't receive the same benefits as full-time employees.

Can you pay contractors in the UAE in your home currency?

While possible, it's preferable to pay them in their local currency (AED) to avoid exchange rate discrepancies and additional fees.

Can you manually pay contractors in the UAE?

Yes, manual payments like cheques are still prevalent, especially in the construction industry. However, digital methods are becoming more popular due to their convenience.

How do you turn a contractor into an employee in the UAE?

Transitioning a contractor to an employee requires adherence to labor laws, including drafting a new employment contract and ensuring provisions like health insurance and social security are provided.

What are the legalities of hiring in the DIFC?

The Dubai International Financial Centre (DIFC) is a free zone with its own set of employment laws, separate from the UAE's federal labor laws. It’s essential to be familiar with DIFC-specific regulations when hiring there. For instance, the DIFC has its own employment law which provides protections and entitlements for employees, such as annual leave, sick pay, and end-of-service gratuity, which can differ in nuance from the UAE's federal labor laws.

Is arbitration an option for construction disputes in the UAE?

Yes, arbitration is often the chosen method for resolving construction disputes, especially those involving international contractors. Knowledge of local laws, such as the UAE Civil Code, becomes essential in these situations.

What considerations are there when hiring in the DIFC?

When hiring in the Dubai International Financial Centre (DIFC), companies must take into account that the DIFC has its own employment contract templates, distinct from federal UAE ones. The recruitment process in the DIFC may also involve different steps or documentation. Additionally, understanding the distinct employee rights and benefits under DIFC's employment law can aid in smoother contract negotiations and prevent potential disputes.

What are the consequences for misclassification in the UAE?

Misclassification can lead to legal penalties, and businesses may also face claims for benefits from the misclassified worker—especially if they're seen as an employee rather than an independent contractor.

How does the UAE's labor law affect international contractors?

UAE's labor law primarily focuses on protecting the rights of employees. International contractors must still be aware of these laws to ensure they aren't inadvertently classified as employees.

Is health insurance mandatory for contractors in the UAE?

For residents, health insurance is mandatory in places like Dubai. Contractors, even if not full-time employees, may need to have their health insurance provided by the hiring company or procured independently.

Are contractors entitled to time off?

Time off entitlement isn't standardized for contractors as it is for full-time employees. It typically depends on the terms negotiated in the individual contract.

Are there specific laws for construction work in the UAE?

Yes, construction industry practices are regulated, especially concerning construction disputes, safety regulations, and contracts. Both main contractors and subcontractors should be aware of these to ensure compliance.

How is the notice period determined for contractors?

The notice period for contractors isn't standardized like it is for full-time employees and is typically defined in the contractual agreement between the business and the contractor.

Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.

last edited: September 5, 2023

The Author

Carissa Tham

A British Columbia-based tech content strategist and writer, Carissa has lived and worked in Singapore, Taiwan, and Canada. Carissa lends her unique global perspectives to growing Rippling’s brand in the Asia-Pacific region and beyond.