As an SME owner in the UAE, you know that managing your cash flow is essential to the success of your business. But what happens when unexpected HR expenses come up? These expenses can quickly derail your budget and put your business at risk.
Let us discuss some of the most common sudden HR expenses in the UAE and how you can mitigate them. We’ll also provide some additional tips for protecting your cash flow.
Examples of sudden HR expenses in the UAE:
- End-of-service benefits (EOSB): EOSB is a gratuity payment that employers in the UAE are required to pay to their employees upon termination of employment. The amount of EOSB is calculated based on the employee’s years of service and salary.
- Medical expenses: If an employee gets sick or injured, the employer is responsible for covering their medical expenses. This can be a significant expense, especially if the employee requires hospitalization or surgery.
- Legal expenses: If an employee files a lawsuit against the employer, the employer will be responsible for legal fees. This can be a very expensive proposition, especially if the lawsuit goes to court.
- Emiratisation fines: The UAE government requires employers to hire a certain percentage of Emirati employees. If an employer does not meet this requirement, they will be fined.
How to mitigate sudden HR expenses in the UAE:
- Maintain an accrual for EOSB: Employers should start setting aside money for EOSB payments as soon as they hire an employee. This will help to ensure that they have enough money to pay out EOSB when it is due.
- Take a good employee insurance: Employee insurance can help to cover the cost of medical expenses, work-related injuries, and other unforeseen events. This can save the employer a lot of money in the long run.
- Comply with the labor laws: Employers should make sure that they are in compliance with all UAE labor laws. This will help to avoid legal action from employees, which can be very expensive.
- Hire Emiratis as per requirement: Employers should make sure that they are hiring the required number of Emirati employees. This will help to avoid emiratisation fines.
- Move to annual ticket allowance instead of booking airtickets for employees during peak season: Employers can save money by giving employees an annual ticket allowance instead of booking airtickets for them during peak season. This will give employees the flexibility to book their tickets when it is most convenient and affordable for them.
- Rationalize hiring decisions to avoid heavy exit costs: Employers should carefully consider all factors before hiring a new employee. This will help to avoid hiring the wrong person, which can lead to high exit costs.
- Outsource HR to ensure all policies and procedures are up-to-date: Outsourcing HR can help to ensure that all HR policies and procedures are up-to-date and compliant with UAE labor laws. This can help to avoid costly legal problems down the road.
Additional tips for protecting your cash flow:
- Create a budget and track your spending: This will help you to identify areas where you can cut costs.
- Have a cash reserve: A cash reserve can help you to cover unexpected expenses.
- Get business insurance: Business insurance can help to protect you from financial losses in the event of a lawsuit, theft, or other unforeseen event.
- Seek professional advice: If you are struggling to manage your cash flow, seek professional advice from an accountant or financial advisor.
By following these tips, you can mitigate sudden HR expenses and protect your cash flow. This will help you to keep your business running smoothly and avoid financial problems down the road.
