In a rapidly growing economy like the UAE, businesses face increasing pressure to operate with financial discipline and transparency. While companies focus on growth, scaling operations, and improving customer experience, many still overlook one fundamental area of internal control: employee expense management.
For SMEs and larger enterprises alike, a formal employee expense policy is no longer a “nice to have”; it’s a necessity. From improving fairness and clarity to staying compliant with VAT regulations, a well-structured policy ensures your company protects its margins while treating employees with respect and consistency.
In this guide, we’ll walk you through the key components of an effective UAE employee expense policy and show you how to bring it to life with automation.
Why your UAE business needs a formal expense policy
Many businesses in the UAE, especially SMEs, operate without a formal expense policy. This creates a variety of problems:
- Employees aren’t sure what they can or can’t claim
- Managers rely on inconsistent judgment when managing employee expenses
- Finance teams waste time chasing down missing receipts
- The company risks violating VAT regulations and audit requirements
A clear policy brings immediate, measurable benefits:
- Controls costs by preventing overspending or out-of-policy spending
- Improves fairness by ensuring everyone plays by the same rules
- Enables compliance with the UAE VAT law by maintaining clear documentation
- Reduces friction between employees, managers, and finance teams
- Creates audit-ready records that support transparency and accountability
In short, a formal policy aligns financial discipline with operational efficiency, and that’s vital in today’s business environment.
The key components of a comprehensive UAE expense policy
To create an effective expense policy, think practically. The most effective policies are clear, straightforward, and closely aligned with local regulations and business standards.
Let’s break it down step by step.
Defining reimbursable vs. non-reimbursable expenses
Start by setting clear boundaries. Which expenses qualify for reimbursement, and which don’t?
Reimbursable examples (in a UAE context):
- A client lunch at a restaurant in DIFC
- A taxi from the office to a meeting in Abu Dhabi
- Hotel accommodation for a trade show in Riyadh
- Data roaming charges used during a business trip
Non-reimbursable examples:
- Daily commute to the office (including fuel or metro fare)
- Personal mobile phone bills
- Gifts purchased for personal use during business travel
- Business class upgrades unless pre-approved
The clearer this section is, the fewer disputes your finance team will need to mediate.
Setting clear and fair spending limits
Establishing spending limits protects your company from budget surprises while giving employees guidance on acceptable costs.
Common categories to include:
- Accommodation: AED 500-800 per night, depending on city and hotel class
- Meals: AED 75-150 per day, depending on role and travel location
- Transportation: Standard taxi fares or ride-sharing; car rentals with prior approval
- Per diems: If you offer them, clearly define rates by region and trip type
Be sure to:
- Benchmark against industry norms
- Adjust by seniority or travel purpose
- Review and update limits annually based on inflation and vendor pricing
Outlining the approval workflow
Expenses don’t manage themselves. Define a simple, transparent process for submission, review, and reimbursement.
Your policy should specify:
- Who submits the expense (employee)
- Who approves it (typically the direct manager)
- Who validates and reimburses (finance team)
Sample workflow:
- Employee submits expense with supporting receipt and explanation
- Manager reviews and either approves or flags for clarification
- Finance verifies the submission and processes payment within a set SLA (e.g. ,5-7 business days)
This eliminates delays, miscommunication, and bottlenecks.
Specifying receipt and documentation requirements
In the UAE, this is not just good practice; it’s legally required for VAT compliance.
Your policy should state that:
- All claims must include an itemized receipt, showing VAT separately
- Receipts must be uploaded within 48 hours of the transaction
- Foreign currency expenses must be converted clearly with documentation
- Business purpose must be briefly noted for any large or unusual charges
This protects your business during internal and external audits and ensures you can recover eligible VAT. Read more about the receipt and documentation requirements.
Aligning your policy with the UAE Labour Law
A great expense policy isn’t just about controlling costs. It should also respect employee rights under UAE Labour Law and demonstrate your company’s commitment to fair and ethical practices.
Here’s how to align your policy with local labor standards:
- Acknowledge standard working hours: 8 hours per day, 48 hours per week
- Respect overtime rules: Provide clear reimbursement for any meal or travel expenses incurred during extra hours worked
- Make it easy for employees to submit and track their claims
- Ensure timely reimbursements to avoid burdening employees with out-of-pocket costs
This shows that your company values both financial discipline and employee well-being; a balance that builds trust and culture.
From policy to practice: how automation ensures 100% compliance
Even the best policy will fail if it’s hard to enforce. That’s why more UAE businesses are turning to spend management platforms to bring their policies to life.
With Pemo, you can turn your static policy document into a dynamic, real-time system of control and compliance.
Here’s how:
- Set spending limits directly on physical or virtual corporate cards; no manual policing needed
- Automatically flag out-of-policy expenses for manager or finance review
- Enforce receipt uploads through mobile reminders, ensuring documentation is collected in real time
- Sync expenses with accounting tools like QuickBooks, Zoho, or Tally to speed up reconciliation
- Generate audit-ready reports with clean, complete data anytime you need them
This takes the pressure off your finance team while empowering employees to spend responsibly. The result? Fewer errors, faster reporting, and total confidence in your expense controls.
Final thoughts
Creating a clear, well-enforced employee expense policy in the UAE is not about micromanaging your team. It’s about building a fair, compliant, and scalable system that protects your business and supports your people.
The right policy:
- Prevents unnecessary costs
- Streamlines approvals
- Improves compliance
- Reduces audit risk
- Builds a culture of financial accountability
And when paired with an automation tool like Pemo, it stops being a burden and becomes a business advantage.
Want to automate your expense policy?
Book a demo with Pemo to see how you can gain control, ensure compliance, and simplify every dirham your team spends.
