Companies across the UAE are preparing for a major payroll shift ahead of a new government deadline requiring salaries to be paid on the first day of each month, a move expected to place additional financial and operational pressure on small and medium-sized enterprises.
The Ministry of Human Resources and Emiratisation (MoHRE) announced that, beginning June 1, 2026, all businesses must transfer employee salaries on the first day of every month through the Wage Protection System. Previously, companies had until the 10th day of the month to complete salary payments.
The tighter deadline is aimed at improving payroll discipline, increasing transparency and strengthening worker protection across the country. However, business leaders and HR specialists say the new rules will force many firms to rethink cash flow management and payroll operations.
Mayank Patel, senior vice-president at Adecco and head of the Europe, Middle East and Africa region, said businesses can no longer rely on customer collections received during the first week of the month to fund payroll obligations.
He noted that companies will now need to compress month-end closing procedures, approval cycles and WPS processing timelines. This, he said, makes coordination between finance and human resources departments more critical than before.
Patel added that businesses may need to maintain pre-funded payroll accounts, stronger liquidity reserves and, in some cases, payroll financing arrangements to avoid disruptions. He said companies would need to move towards proactive cash flow planning rather than waiting for incoming payments to cover salary expenses.
Industry experts believe the transition may be especially difficult for SMEs that operate with limited cash reserves or continue to rely heavily on manual payroll systems.
Pedro Lacerda, senior vice-president at TASC Outsourcing, said the regulation reflects the UAE’s broader efforts to strengthen payroll compliance and employee confidence. He said the rule would encourage businesses to adopt more structured payroll systems and reduce delays in salary payments.
Still, he acknowledged that smaller firms could face operational challenges during the initial implementation phase, particularly when managing approvals, payroll processing and fund allocation within a shortened timeframe.
“The immediate priority for SMEs will be ensuring clear payroll planning, maintaining sufficient liquidity and communicating proactively with employees,” Lacerda said.
MoHRE has also outlined a strict escalation process for companies that fail to comply with the new salary deadlines. Businesses will receive notifications on the second day of delay, while work permit suspensions may begin on the fifth day. Fines and downgrading to Category 3 status could follow on the 11th day, with potential labour action starting from the 16th day.
Khadija Boudlal, HR and operations director at XTB MENA, said companies would need to organise payroll operations more efficiently to avoid penalties and maintain compliance.
She added that firms with stronger financial planning and liquidity management systems would be better positioned to adapt smoothly to the new requirements as the deadline approaches.
