A year-end payroll checklist for the UAE is not the same as the one a UK or US payroll team uses. There is no annual tax return for employees, so the pressure sits elsewhere: the December WPS run that has to land by 1 January, the gratuity provision the auditor will test, the leave year that has to be closed before balances start accruing against a year that no longer exists, and the 2027 setup that has to be in place before the first January payroll.
This guide gives the close as a dated timeline from late November to mid-January, a checklist by area, a worked leave carry-forward example under Cabinet Resolution No. 1 of 2022, and a gratuity provision tie-out you can copy into your audit file. It also shows where each step sits in HR software built for the UAE.
What does a year-end payroll checklist cover in the UAE?
A UAE year-end payroll close covers seven areas: the December payroll and WPS file, year-end variable pay such as bonuses and leave encashment, the gratuity provision reconciled to a calculated liability, the leave year close with carry-forward, document renewals due early in the new year, the payroll journals and audit file, and the financial year, pay periods and holidays for the year ahead.
Two of these are hard deadlines set by regulation. Since 1 June 2026, Ministerial Resolution No. 340 of 2026 requires the previous month's wages to reach workers by the 1st of the following month, so December wages are due by 1 January (see the full WPS rules guide). And for companies with 50 or more employees, 31 December is the year-end checkpoint for the Emiratisation target; confirm your position with MOHRE before the year closes rather than after.
Everything else is a control rather than a deadline, and controls are cheaper in December than in the audit.
When should each year-end step happen?
Start in the last week of November with the decisions that need approval, use the first ten days of December to clear anything that would block the close, run and lock the December payroll with the 1 January WPS due date in mind, load the 2027 setup before the year turns, and close the leave year and true up the gratuity provision in the first two weeks of January.
| When | Do | So that |
|---|---|---|
| By 30 November | Agree bonus and leave encashment decisions; list leavers with a last working day in December; pull the leave balance report with the projected balance at year end. | Decisions are made while there is still time to act on them. |
| 1 to 10 December | Remind employees with carried-over days about to lapse; chase pending leave applications; confirm the 2027 financial year and pay periods exist. | Nothing blocks the close later. |
| December payroll run | Enter bonuses, encashment and final settlements as variable pay; compare the run to November; lock; generate the WPS SIF; export the journal voucher; publish payslips. | December wages reach workers by 1 January. |
| Before 1 January | Load the announced 2027 public holidays; enter 1 January salary revisions with their effective date; approve or reject every open 2026 leave request. | The first January run calculates from correct data. |
| 1 to 15 January | Close the 2026 leave year (preview, then commit); run the end-of-service liability as at 31 December and true up the provision; hand the auditor the locked runs, SIF files and journals. | The books for 2026 are settled before the audit asks. |
The order matters in one place. Close the leave year after the December payroll is locked, not before, because leave encashment paid in December changes the closing balance that the close carries forward.
What goes on the year-end payroll checklist?
Seven areas, each with a test that tells you it is done: payroll locked and explained, the WPS file generated from the locked run, the gratuity provision tied to a calculated liability, the leave year closed within the carry-forward cap, expiring documents listed with owners, twelve balanced payroll journals, and the 2027 financial year, holidays and salary revisions in place.
| Area | Done when | Red flag |
|---|---|---|
| Payroll | November and December runs locked; December variable pay complete (bonus, encashment, settlements); every component change explained month on month | A changed figure with no HR event behind it |
| WPS | December SIF generated from the locked run; December wages due by 1 January under Ministerial Resolution 340 of 2026; bank and IBAN changes verified | A SIF generated before the run was locked |
| Gratuity | End-of-service liability for every employee as at 31 December; provision in the ledger trued up; leavers paid in the year removed from the provision | Provision never compared with a calculated liability |
| Leave | Pending applications cleared; carry-forward applied within the cap; excess paid in lieu by agreement or forfeited only where policy and law allow; opening balances for 2027 | Balances still accruing against a year that has ended |
| Documents | Visas, Emirates IDs and labour cards expiring in Q1 2027 listed with owners; trade licence and establishment card renewals diarised | A visa that expires in January and was noticed in January |
| Finance | Payroll journals for twelve months posted and balanced; payroll cost, provision movement and leave liability ready for the audit file | Payroll cost in the ledger that does not tie to the locked runs |
| Next year | 2027 financial year and pay periods; 2027 public holidays; salary revisions dated 1 January; next year’s payroll budget | A January payroll that fails because the period does not exist |
The payroll and WPS rows are the ones most teams already do. The three that get skipped are the gratuity tie-out, the leave close and the document list, and those are the three an auditor or a MOHRE inspector asks about. The payroll audit checklist covers what the auditor will request; this post is about having it ready before they do.
For the December run itself, the month-on-month comparison is the same discipline as any other month, only with more variable pay to explain. The salary reconciliation guide shows the comparison step by step.
How do you close the leave year and apply carry-forward?
For each employee and leave type, take the closing balance at 31 December, carry forward up to the cap your policy sets, and decide what happens to the rest. Under Article 19 of Cabinet Resolution No. 1 of 2022 an employee may, with the employer's approval, carry forward no more than half of their annual leave, or agree to be paid for it. Record the decision per employee.
The legal frame is short. Article 29 of Federal Decree-Law No. 33 of 2021 gives a full-time employee 30 days of annual leave for each year of service after the first, and two days a month between six months and a year. The employer sets the leave dates according to the needs of the business, and cannot prevent an employee from using leave accrued for more than two years. Article 19 of the Cabinet Resolution adds the carry-forward limit of half the entitlement, with cash in lieu by agreement. At the end of service, leave not taken is paid on the basic wage.
Worked example. A company with a 30-day annual entitlement sets its carry-forward cap at 15 days, which is half the entitlement. Three employees at 31 December 2026:
| Employee | Entitlement | Used | Closing | Carried | Excess | Treatment |
|---|---|---|---|---|---|---|
| A. Rahman | 30 | 22 | 8 | 8 | 0 | All 8 days carried. Within the cap. |
| B. Fernandes | 30 | 7 | 23 | 15 | 8 | Cap reached. 8 days paid in lieu by agreement: basic 6,000 ÷ 30 = 200 a day, so 1,600 in the December run. |
| C. Okafor (joined 1 July) | 15 accrued | 4 | 11 | 11 | 0 | Six months at 2.5 days a month. All 11 days carried. |
Result of the close: 34 days carried into 2027 as opening balances (8 + 15 + 11), 8 days paid in lieu at AED 1,600, and nothing forfeited. The 1,600 belongs in the December payroll as a variable amount, which is why the leave close runs after that payroll is locked. Had B. Fernandes not agreed to payment, the 8 excess days would need a decision under your policy and Article 29, not a silent write-off.
Carried-over days usually come with an expiry, for example they must be used within the first six months of the new year. If your policy says so, put the dates in the diary now and remind people in Q1, because the reminder is what stops the same balance being carried, expired and argued about twelve months later. See the leave management module for how the cap, the expiry and the close are set up.
How do you reconcile the gratuity provision at year end?
Calculate the end-of-service liability for every active employee as at 31 December using the Article 51 bands (21 days of basic wage for each of the first five years, 30 days a year after that, capped at two years' wage), then compare it with the provision in the ledger after the year's accruals and the settlements paid to leavers. Post the difference as a true-up.
The provision is usually built up monthly as the increase in liability, and released when a leaver is paid. The year-end test is simply whether the ledger balance equals a fresh calculation at the year-end date:
| Line | AED | Note |
|---|---|---|
| Provision at 1 January 2026 (opening) | 412,000 | Closing balance from the 2025 audit file |
| Add: monthly accruals posted during 2026 | 98,400 | Twelve payroll journals, gratuity expense line |
| Less: gratuity paid to leavers in 2026 | (36,500) | Three final settlements, each released from the provision |
| Provision per ledger at 31 December 2026 | 473,900 | 412,000 + 98,400 − 36,500 |
| Liability per end-of-service calculation at 31 December 2026 | 476,150 | Every active employee, Article 51 bands, basic wage |
| True-up journal (debit expense, credit provision) | 2,250 | One leaver’s settlement was paid but not released from the provision until January; corrected |
The difference of 2,250 (476,150 less 473,900) is small, but the point is that it is explained. A provision that is never compared with a calculation drifts for years, and the auditor finds it in the year the gap is large. If your company provisions monthly, the mechanics are in EOSB accrual explained for finance teams, and the journal lines in payroll journal entries in the UAE.
To check a single employee's figure by hand, the UAE gratuity calculator applies the same bands.
What has to be set up before the first payroll of 2027?
Five things: the 2027 financial year and pay periods, the 2027 public holidays as announced by the Cabinet, salary revisions effective 1 January entered with their effective date rather than typed over the old figure, the carried-forward leave as opening balances, and a payroll budget for the year so January's cost is compared with something.
Financial year and pay periods. Create them before 31 December. If the year does not exist, leave applications dated in January fail and the January payroll has no period to run in.
Public holidays. Load the 2027 dates once the official announcement is made; they drive both attendance marking and leave day counting. Update them again if a date moves.
Salary revisions. Enter each increment with its effective date so the salary history shows the old and new figure. Typing over the old figure loses the audit trail and misstates the gratuity base for the months before the change.
Document renewals. List every visa, Emirates ID and labour card expiring in the first quarter, with an owner, and the company’s own trade licence and establishment card alongside them.
Budget. A bottom-up forecast of fixed salaries, benefits falling due and the monthly gratuity accrual, department by department, gives finance the 2027 payroll budget without a spreadsheet rebuild.
The document step is the one with a regulatory edge: an expired labour card or visa found in January is a fine waiting to happen, and the document expiry reminders only help if the dates were entered in the first place.
How HRX360 runs the year-end close
In HRX360 the December payroll moves from Completed to Locked, and the WPS SIF file, payslips and journal voucher are produced from the locked run. The end-of-service report calculates the liability as at 31 December, and the provision can be accrued each run. The leave year is closed from Settings with a dry-run preview, carry-forward caps and an audited history. Payroll is on the Professional plan.
The steps, in the order the checklist above needs them:
December payroll. Bonuses, leave encashment and final settlement amounts go into Variable Salary Entry. Process the run, open the Salary Review workbook to compare December with November line by line, fix and reprocess, then Lock. The WPS Generator, the Payslip report and the Journal Voucher all read from that locked run; the official numbered journal only exports once the run is locked. Publish payslips when you are ready for employees to see them.
Gratuity. The End-of-Service Gratuity report calculates every employee’s liability as at any date you choose, using the UAE 21-day and 30-day bands on the components you have flagged as gratuity-eligible. If finance has switched on the provision under Payroll Setup, each locked run accrues the month’s movement into the journal voucher, so the year-end tie-out compares two numbers that already exist.
Leave year close. Under Settings, Company Setup, add the 2027 financial year as a four-digit year before the current one ends. Then open Period Close, pick 2026, and run Dry-Run Preview: a per-employee table of closing balance, carry-forward and forfeit, with nothing saved. Commit Close writes the carried days as 2027 opening balances and the excess as audited forfeit rows. The close is blocked while 2026 leave applications are still pending, and a closed year can be re-run with corrected settings, with every run recorded.
Carry-forward rules. Each leave type carries its own Allow Carry Forward switch, a cap in days or as a percentage of the entitlement, and an optional expiry counted from the start of the new year. The Leaves Expiring Soon report lists who still holds carried-over days about to lapse, and the Leave Balance report shows the projected balance at year end before you close.
Holidays and salaries. Import the 2027 holiday list from your own Excel or CSV in one step. Salary changes are entered against the employee with an effective date, so the salary history keeps both figures.
Documents. The all-staff Employee Documents list orders every visa, passport and Emirates ID by soonest expiry, and the Company Documents register does the same for the trade licence, establishment card and tenancy contract, each with a named owner and reminder emails at the warning and critical stages.
Budget. The Salary Forecast report projects fixed salaries, benefits due and the gratuity accrual month by month for 3 to 24 months, by department, with Excel export, which is next year’s payroll budget in one run.
Leave, documents and the employee portal are on every plan. Payroll, the WPS file, Salary Review, the gratuity report and the journal voucher are part of the payroll module on the Professional plan. The payroll GL and journal voucher page covers the accounting side in detail.
Close 2026 from one locked run
HRX360 locks the December payroll and produces the WPS file, payslips and journal voucher from it, calculates the gratuity liability as at 31 December, and closes the leave year with a preview before anything is written. Full UAE payroll with WPS, Salary Review and gratuity is on the Professional plan, from AED 14 per employee per month, billed annually.
Frequently asked questions
What is a year-end payroll checklist in the UAE?
It is the list of checks and closing steps a UAE employer completes between late November and mid-January: the December payroll and WPS file, year-end bonuses and leave encashment, the gratuity provision tie-out, the leave year close with carry-forward, document renewals due in the new year, and the financial year, pay periods and holiday calendar for the year ahead.
How much annual leave can be carried forward in the UAE?
Under Article 19 of Cabinet Resolution No. 1 of 2022, an employee may, with the employer’s approval, carry forward no more than half of their annual leave to the following year, or agree with the employer to be paid for the balance instead. For a 30-day entitlement that is 15 days. Company policy can be more generous, not less.
Do we have to pay cash for unused annual leave at year end?
Not automatically. Payment in lieu of annual leave during employment is by agreement between the employer and the employee. At the end of service, however, the employee is entitled to be paid for leave not taken, calculated on the basic wage under Article 29 of Federal Decree-Law No. 33 of 2021. Record which option applied to each employee.
When is the December salary due under WPS?
Since 1 June 2026, Ministerial Resolution No. 340 of 2026 requires the previous month’s wages to reach workers by the 1st of the following month, so December wages are due by 1 January. Lock the December run and generate the SIF file with the bank’s processing time in mind, because the New Year holiday can fall on a working day.
How do I check the gratuity provision at year end?
Run an end-of-service liability calculation for every employee as at 31 December and compare it with the provision balance in the ledger after the year’s monthly accruals and the amounts paid to leavers. The difference is a true-up journal. The liability itself follows Article 51 of the Decree-Law: 21 days of basic wage per year for the first five years, 30 days a year after that.
What must be set up before the first payroll of 2027?
The 2027 financial year and pay periods, the public holiday calendar for 2027 as announced, any salary revisions effective 1 January entered with their effective date, carried-forward leave balances as opening balances, and the leave year closed so balances do not keep accruing against a year that has ended.
Does HRX360 handle the year-end payroll and leave close?
Yes. Payroll runs move from Completed to Locked, with the WPS file, payslips and journal voucher produced from the locked run. The gratuity liability is calculated as at any date and, when switched on, provisioned each run. The leave year is closed from Settings with a dry-run preview before anything is written. Payroll features are on the Professional plan.