Weak HR oversight leaves companies vulnerable to WPS issues, gratuity shortfalls and Nafis-related penalties.
Dubai: The first discussion often takes place in the owner’s office late in the afternoon, after the workplace has quietened down. At times it is held in the boardroom; on a few occasions, it has been in the majlis at the back of a warehouse. The finance manager, COO, or sometimes the owner himself places a laptop on the table and asks the same question: “Can you review this and tell me what we are actually dealing with?”
What they are dealing with is often a growing end-of-service liability, a Wage Protection System query left unanswered for days, or a Nafis target approaching its deadline without a clear owner. The figures vary from one company to another, but the underlying concern remains the same.
Over the past 18 months, our team has worked with 86 UAE mid-market companies — each employing between 50 and 250 people across mainland and free zone operations, spanning sectors such as logistics, food, healthcare, construction, and even a prominent furniture brand.
These businesses represent the backbone of the private sector and account for a significant share of the country’s employment growth. Yet across every organisation, we encountered a variation of the same late-afternoon meeting.
After 18 months of sitting in these meetings, our conclusion is straightforward: the UAE mid-market is expanding faster than many companies’ HR capabilities can keep pace with. By 2026, that gap may become the defining factor separating businesses that scale successfully from those that struggle to move forward.
The issue is appearing in three key areas. Two are visible symptoms; the third is the underlying cause. We want to explain them the way we would discuss them with a business owner over coffee — not in the format of a consulting presentation.
WPS is more than just payroll
The Wage Protection System (WPS) has been mandatory in the UAE for more than a decade. Managed by MOHRE, with salary files submitted through banks and wages paid directly to employees, the process is familiar to most businesses. Many owners we meet submit their files on time every month and take confidence from that consistency.
But timely submission does not always mean accurate compliance.
The challenges rarely come from whether employees were paid; they usually arise from how payments are recorded and classified. A housing allowance listed as “other” in the SIF file but shown as part of basic salary in the employment contract. Overtime payments made in cash and excluded from records. A new employee’s pro-rata salary calculated using figures that do not match the offer letter.
These issues are not necessarily intentional violations. In many cases, they are the result of finance teams making adjustments under month-end pressure. However, they can still trigger queries from MOHRE. Over time, unresolved queries accumulate, and when a company urgently needs a visa amendment for a key hire, the delay may come from a compliance file waiting in the wrong queue at Tasheel.
Across our client base, two out of every five firms had received a query from MOHRE in the previous 24 months. These were not penalties — they were queries. In our view, this is the early warning indicator that mid-market businesses should monitor every quarter.
Each query is a small sign that payroll and HR may be operating from different sets of information. Left unresolved, that gap can eventually surface in a visa application, a tender submission, or a buyer’s due diligence process.
Gratuity is a liability, and someone should know the number
Under Federal Decree-Law No. 33 of 2021, end-of-service gratuity for mainland employees is calculated at 21 days of basic salary for each of the first five years of service and 30 days for each year beyond that. The calculation itself is straightforward; maintaining an accurate and current liability figure is the challenge.
In our experience, few business owners can immediately state their company’s current gratuity exposure. Finance may have one figure, HR another, while the auditor’s calculation may reflect the position at the last reporting date. After salary increases, many companies do not revisit the calculation using the updated basic salary.
Across the firms we reviewed, the average gap between the amount companies had provisioned and their actual liability was approximately Dh1.8 million per business. While not necessarily a crisis on its own, it is exactly the kind of unexpected figure that can emerge during due diligence. With mid-market mergers and acquisitions activity continuing to grow, such surprises are increasingly becoming a business issue rather than a private internal matter.
Another overlooked area is employee movement between free zone entities and mainland companies within the same group — such as transfers from JAFZA to a mainland LLC, DMCC to a Dubai operating company, or ADGM to an Abu Dhabi onshore entity. Without a documented continuity arrangement, the gratuity calculation period may reset, often becoming clear to the employee only when they resign.
Companies operating in the DIFC have a structured alternative through the DIFC Employee Workplace Savings (DEWS) scheme, a funded contribution model that replaces traditional gratuity. For other businesses, the priority is establishing and documenting a clear policy before the issue becomes a problem.
Most mid-market firms do not have an HR function. They have an HR favour.
This is the issue that quietly drives the other two. Around half of the firms in our portfolio do not have a dedicated HR professional. The responsibilities are being handled — leave approvals are processed, visas are renewed, salaries are paid — but the work is often carried out by the founder, finance manager, or an administrative assistant who has taken on the responsibility of following up with Tasheel. It is being managed as an act of support for the business, rather than as a structured business function.
That approach may work with a workforce of 20 employees. It becomes increasingly difficult at 100.
At that scale, informal processes are overwhelmed. Visa renewals compete with WPS submissions, leave records, outdated employee handbooks and Emiratisation requirements. Tasks that once relied on individual effort begin to require dedicated ownership and systems.
Emiratisation is often the area where this gap becomes most visible. Under MOHRE’s Nafis programme, mainland private-sector companies with 50 or more skilled employees are required to increase their Emirati workforce by two percentage points annually.
Businesses that approach the requirement as a strategic workforce plan — building pipelines through Nafis, partnering with national universities and tracking progress regularly — often find it creates meaningful hiring opportunities. In our experience, Emirati professionals placed into client roles over the past year have become some of the strongest additions to those organisations.
Companies that wait until the final months of the year to address their targets, however, often find themselves facing penalties rather than opportunities.
Most mid-market firms do not have an HR function. They have an HR favour. That is the message our team continues to come back to.
What our team has started telling owners
Buy back the HR calendar. That is the core message.
It does not necessarily require hiring a full-time HR director from day one. It could mean bringing in a fractional HR partner, training a capable office manager, or appointing a part-time HR generalist who reports directly to the owner. What matters most is having one clearly accountable person responsible for the entire HR calendar.
That ownership means ensuring WPS records are reconciled with employment contracts every quarter, gratuity liabilities are reviewed annually based on current basic salaries, visa renewals are managed proactively, and Nafis targets are tracked consistently rather than addressed at the last minute.
The broader strategic message for owners is simple: the UAE has developed one of the region’s clearest labour frameworks. MOHRE, Nafis, Federal Decree-Law No. 33 of 2021 and u.ae provide clear guidance on employer responsibilities. In 2026, the advantage will not come from waiting for regulatory change; it will come from using the clarity already available to build stronger businesses.
The mid-market companies that do this effectively are the ones our team expects to see securing major contracts, attracting new regional investment and positioning themselves as acquirers rather than acquisition targets. Those that postpone the work risk facing difficult conversations later — whether with auditors, regulators, or buyers who uncover issues during due diligence.
On a good week, our role is to help business owners have that late-afternoon conversation one or two years earlier than they expected.
The UAE mid-market is entering a defining period of opportunity. The next decade of competitive advantage will be built quietly through stronger people systems, disciplined processes and proactive HR management — long before others recognise the difference.
