UAE payroll monthly journals: (1) debit salary expense / credit salaries payable; (2) debit GPSSA employer expense (12.5%) / credit GPSSA payable; (3) debit gratuity expense / credit gratuity provision; (4) debit leave expense / credit leave accrual; (5) when WPS paid: debit salaries payable / credit bank. GPSSA remitted by 15th of following month.
UAE payroll journal entries — full set
Each monthly payroll run requires the following journal entries:
- Step 1 — Accrue salary expense: Debit: Salary expense [gross salary including allowances] / Credit: Salaries payable. This recognises the expense in the period earned, before the WPS payment clears.
- Step 2 — GPSSA employer contribution (UAE/GCC nationals only): Debit: GPSSA employer contribution expense [12.5% of basic salary] / Credit: GPSSA payable. Employer pays this — it is an additional cost above the gross salary.
- Step 3 — GPSSA employee deduction: Debit: Salaries payable [5% of basic salary] / Credit: GPSSA payable. The 5% is withheld from the employee’s gross and added to the employer’s 12.5% — total 17.5% remitted to GPSSA.
- Step 4 — Gratuity accrual (all employees): Debit: Gratuity expense [1/12 × annual entitlement] / Credit: Gratuity provision. Annual entitlement: 21 days × basic daily rate (years 1–5); 30 days × basic daily rate (year 6+).
- Step 5 — Leave accrual (all employees): Debit: Leave expense [2.5 days × daily basic rate] / Credit: Leave accrual. Employees accrue 30 days/year = 2.5 days/month.
- Step 6 — WPS payment: Debit: Salaries payable [net pay — after GPSSA employee deduction] / Credit: Bank. This clears when the WPS SIF file is processed and the bank debits the account.
- Step 7 — GPSSA remittance (by 15th of following month): Debit: GPSSA payable [total 17.5% for nationals] / Credit: Bank.
Gratuity provision accounting in detail
Monthly gratuity accrual calculation per employee:
Basic daily rate = Annual basic salary ÷ 365 (or 360 — use one consistently).
Annual entitlement = 21 days × basic daily rate (years 1–5) or 30 days × basic daily rate (year 6+).
Monthly accrual = Annual entitlement ÷ 12.
The gratuity provision should appear as a current or non-current liability on the balance sheet each period. It is not an off-balance-sheet commitment. For CT purposes, the monthly accrual is a deductible expense in the period it is recognised — you do not wait until the employee leaves to claim the deduction.
Leave accrual accounting
UAE employees accrue 30 days of annual leave per year (2 days/month in year 1 = 2.5 days/month from year 2). The accrual is calculated on the basic salary daily rate.
When an employee takes leave: Debit: Leave accrual / Credit: Salaries payable. The actual payroll payment in the leave period is then against the liability, not as a new expense.
When an employee leaves without taking leave: Debit: Leave accrual / Credit: Bank (cash out the unused leave at current basic daily rate).
Payroll accounting done manually every month?
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Frequently asked questions
What journal entries are required for UAE payroll?
Six monthly entries: (1) salary expense accrual, (2) GPSSA employer contribution expense, (3) GPSSA employee deduction from payable, (4) gratuity accrual, (5) leave accrual, (6) WPS bank payment. Plus GPSSA remittance by the 15th. Each entry has a debit and credit.
Is gratuity provision tax-deductible in UAE?
Yes. Monthly gratuity accruals are deductible for UAE Corporate Tax purposes in the period they are recognised — the accrual basis applies. You do not wait until the employee leaves to claim the deduction. The provision must be calculated correctly per UAE Labour Law entitlements.
How is GPSSA recorded in UAE bookkeeping?
Two entries: (1) Debit GPSSA employer expense (12.5% of basic) / Credit GPSSA payable — this is the employer’s cost. (2) Debit salaries payable (5% of basic) / Credit GPSSA payable — this is withheld from the employee. Total 17.5% GPSSA payable is remitted by the 15th of the following month.
What is the WPS clearing account in UAE payroll accounting?
Some businesses use a WPS clearing account as an intermediate step: when payroll is approved, debit salaries payable and credit WPS clearing. When the bank debit processes, debit WPS clearing and credit bank. This allows reconciliation of approved payroll to actual bank payments.
How do you account for end-of-service gratuity payment when an employee leaves?
When the employee leaves: Debit: Gratuity provision (balance of accrued amount) / Credit: Bank (actual payment). If the actual gratuity is higher than the provision (e.g., due to a salary increase), the difference goes to gratuity expense in the period of departure. If lower (e.g., employee resigned within 1–3 years), the excess provision is released back to P&L.