Payroll in the region: three obligations on a salary, and the gratuity nobody booked
What leaves your bank account at month end is neither what the business spent nor what the employee earned. Between the two sit a contribution the employer pays itself, tax that is yours to hold and not to keep, and a benefit accruing quietly whether or not anyone resigns.
The Fatouraty team
Payroll is the largest line in most sets of books and the one carrying the most obligations. What leaves the bank account at month end is neither what the business actually spent nor what the employee actually earned: between the two sit a contribution the employer pays out of its own money, tax withheld at source that is yours to hold and not to keep, and an end-of-service benefit accruing quietly every month whether or not anyone has resigned. Post wages as a single line — debit salaries expense, credit bank — and you have dropped all three at once.
Three obligations sit on top of a salary
All three are the employer's to compute, withhold and remit, and the differences between them are not an accounting detail. The first is a paired rate: the employee pays part, the employer a larger part. The second costs the business nothing — it comes out of the employee's own pay — but it is a debt the business owes until it is remitted. The third is not a tax at all: it is a labour entitlement that grows with every month of service.
- Social security: a percentage from the employee and a larger one from the employer, computed on a base that differs by country — gross, basic, or basic plus housing — and capped monthly in most of them. Most Gulf schemes cover nationals only, which is the whole reason the gratuity exists.
- Income tax withheld at source: progressive bands with an annual personal exemption in Jordan, Egypt and Tunisia, and none at all on employment income in the Gulf states — a real simplification rather than a gap in coverage.
- The end-of-service benefit: neither a bonus nor optional. It accrues with every month worked, and IFRS requires it on the balance sheet whether or not anyone has resigned. In the Gulf it is the complement of social security, not a parallel to it: whoever the scheme does not cover, the gratuity does.
| Country | Social security (employee / employer) | Base | End-of-service | Income tax | WPS |
|---|---|---|---|---|---|
| Jordan | 7.5% / 14.25% — covers expatriates too | Gross | — social security is the scheme | Progressive | No |
| Saudi Arabia | 9.75% / 11.75% nationals; 0% / 2% others | Basic + housing | 15 days, then 30 after 5 years | None | Yes |
| UAE | 5% / 12.5% nationals only | Gross | 21 days, then 30 after 5 years | None | Yes |
| Qatar | 5% / 10% nationals only | Basic | 21 days a year | None | Yes |
| Kuwait | 8% / 11.5% nationals only | Gross | 15 days, then 30 after 5 years | None | Yes |
| Bahrain | 7% / 12% nationals; 1% / 3% others | Gross | 15 days, then 30 after 3 years | None | Yes |
| Oman | 7% / 11.5% nationals only | Gross | 15 days, then 30 after 3 years | None | Yes |
| Egypt | 11% / 18.75% | Gross | — | Progressive | No |
| Tunisia | 9.18% / 16.57% | Gross | — | Progressive | No |
The gratuity is a balance-sheet liability, not a year-end surprise
This is the biggest and quietest error in Gulf employers' books. The benefit does not arise on the day someone resigns; it arises day by day with the service. It is created by the month passing, not by the signature on a clearance form. A ledger carrying no provision for it understates liabilities for years, then takes the whole cost in the month an employee with six years' service walks out — so a month that was genuinely profitable shows a loss on paper, and the income statement has lied twice: about every month before, and about this one.
And the calculation is not linear. The daily rate is one thirtieth of a month's pay, computed on basic pay in the Gulf profiles, at 15 or 21 days per year of service in the first tier and 30 days per year once the tier year is passed — in every one of these countries except Qatar, which stays at 21 throughout. Where there is a second tier the liability accelerates with seniority, and an employee's fifth anniversary — or third, in Bahrain and Oman — is an event for your balance sheet and not only for the HR file.
What a payroll run actually posts
The entry is eight lines, not two. Three of them are expenses — because the employer's contribution and the gratuity accrual are costs of the month exactly as the salary is — and five are liabilities, because wages and every deduction stay a debt of the business until money moves:
| Side | Account | What it is |
|---|---|---|
| Debit | 6000 Salaries and wages | Gross pay for the month |
| Debit | 6010 Employer social security | The employer's own contribution, not a deduction |
| Debit | 6020 End-of-service benefits | This month's gratuity accrual |
| Credit | 2500 Salaries payable | Net pay, until the money leaves |
| Credit | 2510 Social security payable | Employee and employer shares together, until remitted |
| Credit | 2520 Employee income tax payable | Withheld at source |
| Credit | 2530 End-of-service provision | The accrued liability |
| Credit | 2200 Accrued liabilities | Standing deductions |
It balances because gross equals net plus the employee's social security plus income tax plus deductions, and because the employer's two charges appear on both sides. Paying the wages is a separate step with its own date — debit salaries payable, credit bank — because the cost belongs to the month that was worked while the cash leaves on pay day, and in books being caught up those can be two months apart.
The three expense lines carry the employee's cost center, grouped, so a department's income statement includes its largest cost. The liabilities stay undimensioned deliberately: a payable is owed by the business, not by a department. A workspace that does not use cost centers sees exactly the lines it saw before.
Part months, overtime, and the base that does not move
A joiner on the 28th is owed three days, not a month. Basic pay and allowances scale by days worked over days in the month, and the payslip prints both figures because that is the first line a joiner or a leaver checks. More importantly, the proration flows into the contribution base and into the gratuity accrual as well: a full-month accrual on someone who worked three days inflates a liability your balance sheet then carries for years.
A month's variable pay — overtime, a bonus, unpaid leave days, a one-off deduction — is recorded against the month, not against the employee. The distinction is deliberate: what sits on the employee record is standing and true until it changes, and putting one month's overtime there is the mechanism by which it quietly becomes a permanent raise.
Overtime and bonuses are pay, and are taxed as pay, but they do not enlarge the contribution base or the gratuity base: those are written against the contractual wage, and someone who worked two extra Fridays has not thereby raised their pension entitlement. A raise works the same way — it applies from the first month that has not yet posted, and nothing is retrospective, because an employee's copy of what they were paid is not something a later edit gets to rewrite.
The Wage Protection System file: a condition of paying, not a report about it
In Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait, wages must be paid through the banking system in a prescribed record format that the labour ministry reconciles against the employer's registered workforce. It is not a report about having paid: without an accepted file you may not pay at all, and persistent failures reach as far as new work permits. Jordan, Egypt and Tunisia pay wages by ordinary transfer and have no such file.
Fatouraty produces the widely used SIF skeleton — one detail record per employee, then one control record summarising the batch — generated from the frozen payslips rather than from a recomputation, so the file and the ledger cannot disagree. Banks vary the dialect, field order and employer identifiers in particular, so treat the output as the posted figures in the standard shape rather than one bank's exact template. A country with no wage-protection scheme gets no file, and neither does a reversed run: inventing one for either would be worse than having none.
A month run wrongly, and an employment that ends
A wrong month is reversed, not edited. A mirror journal posts, the wage payment is unwound if the money had already gone out, each employee's accrual is taken back off their register row, and the run is marked reversed so the month can be run again. The payslips stay: they are the record of what was actually posted, and deleting them erases the evidence of the error along with the error. A run whose gratuity has since been settled refuses to reverse, naming the employee by staff number, rather than leaving the register and the provision disagreeing.
Ending an employment does not settle the benefit. What is owed stays on the balance sheet until money actually moves; when the settlement happens it posts as a debit to the provision and a credit to the bank, and any difference between what was accrued and what is actually paid goes to the end-of-service expense so the income statement carries the true final cost. Without that step the provision only ever grows, and the one number the whole mechanism exists to keep honest slowly becomes fiction.
There is no draft state for a payroll run. A draft is a computation over the employee register and writes nothing, so a stored draft would be a record of something that does not exist. A run appears the moment it posts, and not before.
What the auditor and the practice board see
The AI auditor reads payroll among everything else, and flags a month with staff on the register and no run, wages posted with the pay date passed and no payment, a provision that disagrees with the register, social security or withheld tax accumulating unremitted, and leavers still provided for a month after they left. The practice board's per-client count picks up headcount, payroll owed and wages unpaid — payroll is the deadline that cannot slip, because people notice. Both stay completely silent for a workspace with no employees and no runs: an accounting product should not nag anyone about a module they run elsewhere.
What this does not do today
A country with no profile computes no contributions at all rather than guessing at them. The rates are defaults, to be signed off against the authority's own tables before anything is remitted. The wage-protection output is a standard skeleton and not a particular bank's template, so yours may want a different field order or different identifiers. And the module files nothing and remits nothing to any authority on your behalf: it computes, it posts, and it produces the file — submitting it stays your action.
Frequently asked questions
Does Fatouraty calculate end-of-service gratuity?
Yes, monthly rather than on departure. Each employee carries their own accrual on their register row, the month's accrual posts as an expense against a balance-sheet provision, and the register's total equals the provision account in the ledger. It is computed on basic pay in the Gulf profiles, at 15 or 21 days per year, rising to 30 after the tier year in every profile but Qatar's, which stays at 21.
Which countries get a Wage Protection System file?
Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait. The file is generated from the frozen payslips rather than from a recomputation. Jordan, Egypt and Tunisia get none, and neither does a run that has been reversed.
Is the employer's social security share a deduction from pay?
No. The employee's share comes out of their own pay and costs the business nothing extra, while the employer's share is a cost in its own right, debited to a separate account and raising the true cost of employment above the advertised salary. Both shares then sit in one payable until they are remitted.
Do overtime and bonuses increase the end-of-service benefit?
No. Both are treated as pay and are taxed as pay where income tax applies, but the contribution base and the gratuity base are written against the contractual wage alone. That is deliberate: a month with overtime in it is not a permanent increase in entitlement.
How do I correct a payroll month I already posted?
By reversing it rather than editing it. A mirror journal posts, the payment is unwound if it had already gone out, each employee's gratuity accrual is taken back, and the month can then be run again. The old payslips stay as the record of what was posted. If any employee from that run has since had their gratuity settled, the reversal is refused outright.
Is employee data encrypted?
Yes: names in both scripts, email, national ID and bank account, under the same workspace key that protects contacts. They are decrypted for the screen, for the payslip, and in the bank file, and nowhere else. The audit trail carries staff numbers and amounts, never names.