Article (1) of the UAE Federal Decree-Law No. (33) of 2021 on the Regulation of Labour Relations defines “Wage” as follows:

“Wage” means the basic wage plus any cash allowances and in-kind benefits granted to the employee under the employment contract or pursuant to this Decree-Law. It may include in-kind benefits that the employer is obligated to provide, or their cash equivalent, where such benefits are considered part of the wage under the employment contract or the establishment’s regulations; allowances payable in return for the employee’s effort or for risks encountered during the performance of work; allowances granted for any other reasons; cost-of-living allowances; a percentage of sales; or a percentage of profits paid in consideration of the employee’s marketing, production, or collection efforts.

The Basic Wage is defined as:

The wage stipulated in the employment contract and paid to the employee in consideration for performing work under the contract, whether on a monthly, weekly, daily, hourly, or piece-rate basis. It excludes all allowances and any other in-kind benefits.

Since the employee’s wage represents the primary source of livelihood and the financial foundation upon which the employee and his or her family depend, the UAE legislator has attached significant importance to protecting wages. Recognizing that the employee is generally the weaker party in the employment relationship, the law seeks to ensure that employees receive their agreed remuneration on time in return for the effort, time, and expertise they provide.

It is also well established that, in employment relationships, work is performed before wages become payable. Accordingly, the legislator has prohibited employers from making deductions from an employee’s wage except in specific and exhaustively enumerated circumstances. These are set out in Article (25) of the Decree-Law, which provides as follows:

Permissible Deductions from an Employee’s Wage

An employer may not deduct or withhold any amount from an employee’s wage except in the following cases:

1. Recovery of loans granted to the employee, provided that:

• the employee has given prior written consent;
• no interest is charged; and
• the monthly deduction remains within the maximum deduction limits prescribed by law.

2. Recovery of amounts paid in excess of the employee’s entitlement, provided that the deduction does not exceed 20% of the employee’s wage.

3. Statutory deductions relating to pension contributions, retirement benefits, or social security subscriptions in accordance with the applicable legislation in the UAE.

4. Employee contributions to an approved savings fund established by the employer, or repayment of loans owed to such fund, provided the fund has been approved by the Ministry.

5. Instalments relating to social schemes, employee welfare programmes, or other benefits and services provided by the employer and approved by the Ministry, subject to the employee’s written consent.

6. Disciplinary deductions resulting from violations committed by the employee in accordance with the establishment’s disciplinary regulations approved by the Ministry, provided that such deductions do not exceed 5% of the employee’s wage.

7. Court-ordered debts, provided that the deduction does not exceed one-quarter (25%) of the employee’s wage, except in respect of court-ordered maintenance (alimony), where a higher percentage may be deducted. Where multiple debts exist, deductions shall be distributed according to the legally prescribed order of priority.

8. Compensation for damage caused by the employee due to negligence, error, or failure to comply with the employer’s instructions, resulting in damage to, destruction of, or loss of the employer’s tools, machinery, products, or materials. Such deductions may not exceed the equivalent of five days’ wages per month, unless a higher amount is authorized by the competent court.

Furthermore, where multiple grounds for deduction exist simultaneously, the total deductions may not exceed 50% of the employee’s wage under any circumstances.

Legal Analysis

Article (25) clearly demonstrates that the UAE legislator has not granted employers discretionary authority to determine the amounts deducted from employees’ wages. Instead, the law expressly prescribes maximum deduction limits for each permissible category. These limits are mandatory, leaving no room for discretionary interpretation or expansion.

One of the most significant safeguards introduced by the legislation is the overall cap that prevents the aggregate of all deductions from exceeding 50% of the employee’s wage, regardless of the number of applicable grounds.

This statutory limitation reflects the legislator’s commitment to balancing the legitimate interests of employers with the fundamental need to protect employees’ financial security. By ensuring that employees retain at least half of their wages, the law seeks to preserve their ability to meet essential living expenses and fulfil their family obligations.

Excessive wage deductions could expose employees to severe financial hardship, social instability, legal complications, and psychological distress, ultimately affecting not only the employee but also the family and society as a whole. For this reason, UAE labour legislation establishes robust legal safeguards to protect employees’ wages against arbitrary, excessive, or unlawful deductions.

Dr. Ghassan Salim Arnous
Legal Consultant
Zayed Al Shamsi Advocates & Legal Consultants