Hire Contractors in the UAE

The United Arab Emirates (UAE) is seeing a rise in the growth of self-employment work across sectors. The government has also made it easier for businesses to engage with independent contractors in the UAE through the Khebrati or self-employment platform. 

Hiring independent contractors can be a strategic move to access specialized skills without the overhead of full-time employment. However, the legal complexities of managing contractors in the UAE can be resource-draining for any global company.  

This comprehensive guide explores the benefits of using the Skuad AOR platform to streamline your process of hiring contractors in the UAE. 

We will discover the challenges of direct hiring, legal considerations, and the advantages of leveraging Skuad for efficient and risk-free contractor management. 

How to Hire Contractors in the UAE

The degree of control over recruitment determines the available process to hire contractors.  

The most common way of hiring contractors in the UAE is through an established local entity. 

However, it involves significant upfront costs, time, and legal complexities. Additionally, it requires your full responsibility for compliance with contractor laws in UAE and local regulations. 

Thus, many businesses are now exploring alternative options, such as using an Agent of Record (AOR) for more efficient and risk-free contractor management.

Hiring contractors through Skuad AOR

AOR platforms like Skuad simplify hiring contractors in the UAE and globally. 

By leveraging our services, you can efficiently manage your contractor workforce without the complexities of setting up a local entity and direct hiring. 

Skuad not only helps you onboard contractors in the UAE but also protects your IP rights and prevents you from violating them during the contract period. 

You can stay compliant with country-specific employment laws, and be ready for taxes and audits for every country you hire. 

Have more questions? - contact our team right away.

How to pay contractors in the UAE

Skuad also manages contractor payroll for efficient invoice tracking, timely disbursements, and record-keeping for tax purposes. 

With zero onboarding fees, you can pay your contractors on time and in the currency of the country they live. 

Other ways to pay contractors in the UAE only involve the transfer of funds and include: 

• Bank transfer: Requires bank account details for both parties.
• Cheque: This can be time-consuming to issue and clear.
• Payment gateways like PayTabs, PayFort, or PayU may involve a transaction fee.

This makes direct hiring of contractors in the UAE tricky. Now let’s look at a few challenges you may face when hiring independent contractors in the UAE.

Challenges of Hiring Contractors in the UAE

Here are some key issues to tackle before hiring contractors in the UAE:

Fulfilling contractor visa requirements

• It is easier to hire contractors in the UAE by introducing freelance licenses in Abu Dhabi & Dubai. 
• While the UAE's freelance license is issued for 48 business types, it is restricted to specific sectors like media, education, and technology. 
• This may limit your ability to hire independent contractors in the UAE for a wider range of roles.

Contractor laws in UAE

• Furthermore, free zone visas operate independently of the Ministry of Human Resources & Emiratisation (MoHRE) and have specific rules regarding work within the free zone.
• Recent changes have introduced corporate tax and VAT for contractors in the UAE.  
• Most UAE contractors earning less than AED 375,000 are exempt from personal income tax. However, they may require your help maintaining financial records, understanding VAT implications and free zone regulations, and gaining potential benefits from double taxation agreements.

Emiratisation of workforce

• The UAE government's Emiratisation policy of the workforce can impact contractor hiring indirectly. 
• Companies with 20-49 employees must include at least two Emiratis to increase employment opportunities. 
• There might be an increased risk of misclassifying employees as independent contractors in the UAE to circumvent Emiratization rules. 
• While exact penalties for misclassification might not be explicitly stated, MoHRE imposes substantial fines for various labor law violations.

Thankfully, contractor laws in UAE allow you to use specialized contractor management software like Skuad to overcome hiring challenges, onboard independent contractors, automate payments, and more.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here is a comprehensive comparison table between the impact of directly hiring contractors and via Skuad.

You can go through this detailed checklist to avoid misclassification of employees as independent contractors in the UAE.

Cost of Hiring Contractors in the UAE

The contractor laws in UAE do not prescribe a national minimum wage so you can set rates per the scope of the project and market standards. The average contractor pay in UAE is USD 200-600 per month. 

Moreover, the cost of hiring contractors will also depend on your business structure in the UAE. Partnering with a contractor management company lets you save onboarding costs and pay contractors in the UAE in any currency at a currency conversion cost.

How to Convert a Contractor into an Employee in the UAE

You must convert a contractor into an employee in the UAE to gain control over their work schedule. US employers may find a similar approach when switching workers from 1099 to W2 status. 

You can begin either of the two ways. The first approach is to establish a legal entity in the UAE and hire your independent contractor full-time. 

To do so, you must ensure that the employment contract clearly defines and mutually accepts statutory labor rights related to work timings, overtime pay, leave & holidays, benefits, and termination.

The employer's cost of converting a contractor into a full-time employee is 14.5% on an annual salary of USD 60,000.

The second approach is to partner with an EOR (employer of record) solution to help you onboard & manage contractors in the UAE as your full-time employee. 

All the legal implications of hiring contractors and converting them into employees are by EOR solution at a platform use fee. 

Hire Contractors in the UAE with Skuad

Skuad empowers organizations to seamlessly hire, pay, and manage independent contractors in the UAE and globally. 

Skuad eliminates the need to establish a local entity & simplifies the complex process of contractor management. 

Moreover, Skuad offers a cost-effective and efficient solution for global expansion and accessing top talent in over 160 countries. 

‍Get your demo today to outsource the complexities of payroll, benefits, and legal matters concerning contractors in the UAE!

FAQs

1) What is the difference between a contractor and an employee in the UAE?

In the UAE, an employee is a person who works under a formal employment contract, receives regular wages, and is entitled to employee benefits like paid leave, health insurance, and end-of-service gratuity. A contractor is a self-employed individual who provides services to a company on a contractual basis without receiving employee benefits. Contractors have more autonomy in their work and are responsible for their taxes and insurance.

2) Do contractors pay tax in the UAE?

Yes, contractors in the UAE pay corporate taxes at 9% for income exceeding 375,000 dirhams annually. This applies equally to holders of contractor work visas in UAE for US citizens and others. 

3) How much does hiring an employee in the UAE cost?

It would cost about 14.5% on an annual salary of USD 60,000 to hire an employee in the UAE. Further, the severance accruals could be up to 2.88% approximately for a monthly salary of USD 6,000. 

4) How do I pay independent contractors in the UAE?

To pay independent contractors in the UAE, you can issue payment via bank transfer to the contractor's account or use payment gateways like PayFort, PayU, PayTabs, Telr, etc. However, managing contractors through Skuad AOR enables you to automate contractors’ payments and maintain payroll compliance per local laws.

5) What does contractor management include?

Contractor management includes onboarding, performance evaluation, and contract closure. It involves defining project scope, selecting contractors, creating contracts, managing communication, monitoring performance, ensuring quality, handling payments, and managing potential risks and liabilities.