The UAE’s Wage Protection System (WPS) is a crucial initiative designed to ensure the timely and accurate payment of wages to employees. Developed by the Ministry of Human Resources and Emiratisation (MoHRE), the WPS requires all salaries to be paid through approved electronic means, helping to safeguard workers and streamline payroll processes.
In this guide, we will provide a detailed look at how the WPS operates, its requirements for compliance, and the benefits it extends to employees and employers. Understanding these aspects is vital for anyone in the UAE’s workforce, as it promotes transparency and fairness in employment practices. Whether you are an employer or an employee, mastering the intricacies of the Wage Protection System will enhance your working experience in the UAE.
What is the WPS salary system?
Introduced in 2019, the UAE’s Wage Protection System (WPS) was developed collaboratively by the Central Bank of the UAE and the Ministry of Human Resources and Emiratisation (MoHRE). This sophisticated electronic salary transfer system allows private sector organisations to disburse employee wages through banks, approved financial institutions and the Bureau de Change.
MoHRE provides a robust database that enables private-sector companies to generate salary files for their employees. These files, which contain vital details about each employee’s salary as stipulated in their contract, are then sent to the respective banks for wage distribution. This process allows MoHRE to monitor and ensure that all employees receive their dues accurately and on time, fostering a transparent and reliable payment environment.
Aims and objectives of the WPS UAE
This expansive database facilitates the timely disbursement of agreed-upon wages. The UAE’s Wage Protection System (WPS) encompasses all organisations registered with the Ministry of Human Resources and Emiratisation (MoHRE), spanning diverse businesses across multiple industries. The system caters to a broad spectrum of employees within the private sector.
Key objectives of the WPS include:
- Ensuring a steadfast commitment to protecting employee wages.
- Safeguarding employers’ interests by providing a streamlined system that minimises the time and effort required to process and pay wages.
- Enhancing job security within the UAE’s private sector, while also aiming to fortify work relationships and uphold the rights of both employees and employers.
- Offering a transparent and user-friendly payment mechanism.
- Maintaining a reliable and regularly updated database for the UAE Ministry of Labour, which includes new wage data from the private sector.
- Protecting employees and reducing labour disputes related to wages.
Who are the WPS stakeholders?
- Employees or Workforce: This term refers to any individual on the payroll of a private sector organisation in the UAE, who works in exchange for a mutually agreed wage. Each employee must hold a valid labour card issued by the Ministry of Human Resources and Emiratisation (MoHRE).
- Employers: These are the proprietors of organisations within the UAE’s private sector that are registered with both MoHRE and the Wage Protection System (WPS).
- Banks: This category includes any bank where an employer holds an account used specifically for the transfer of wages to all employees on its payroll.
- Agents: This group comprises banks, Bureau De Change, and other financial institutions that have been approved and authorised by the Central Bank of the UAE to handle salary disbursements through the WPS system. The Central Bank routinely updates its roster with the names of approved and authorised agents.
Registration procedure for employers for the wage protection system
Employers in the private sector can easily register for the UAE’s Wage Protection System (WPS) through the MoHRE’s official website. The registration process involves using the company details provided by the Ministry.
Once registered, employers can log in to their accounts and update the following information:
- Bank account details
- A list of employees, including the details of the bank or agent the company works with
- The bank or agent where each employee holds an account
- The specific date on which salaries are to be paid
According to MoHRE guidelines, “the salary month cannot have a difference of more than one month from the dates chosen to pay the salary.” Additionally, the guidelines state that “whenever an employee joins or leaves a company, a new employee list must be downloaded and attached to the application.”
How the WPS works in the UAE
Once you have registered your account, it is important to understand how the Wage Protection System (WPS) operates in the UAE. The process involves four main steps:
Prepare and submit the Salary Information File (SIF)
The Salary Information File (SIF) is a digital document containing crucial details about employers and their employees, including base salary, Cost-To-Company (CTC), benefits, and any deductions. The WPS requires the submission of the SIF whenever wages or salaries are paid. Initially, the file undergoes a review by a WPS agent to ensure accuracy before final submission. Commissions, bonuses, and gratuities are exempt from the SIF requirements.
Salary check by MoHRE and Central Bank
Once the SIF is submitted to the WPS, it is jointly reviewed by the Ministry of Human Resources and Emiratisation (MoHRE) and the Central Bank of the UAE. This review verifies the accuracy of the information within the SIF and ensures compliance with the UAE’s WPS guidelines. For example, MoHRE will confirm adherence to the regulation that requires employers to transfer at least 75% of employee salaries through the WPS system.
WPS agent receives payment order
If the MoHRE and the Central Bank find everything in order, they will authorise a payment order to the WPS agent for salary disbursement. The employer will be notified via email if there are any discrepancies in the SIF. This notification will detail the errors and request any necessary corrections. Promptly addressing these errors is crucial to avoid potential penalties and late fines.
Money transfer from WPS agent to employee account
Upon receiving the payment order, the WPS agent facilitates the transfer of salaries directly into employees’ bank accounts. Many banks serving as WPS agents offer dedicated WPS payroll cards, which function similarly to regular debit cards, allowing convenient access to salaries. For optimal efficiency, employers are encouraged to ensure their staff possess active bank accounts and debit cards for streamlined salary withdrawals.
How to withdraw your salary from the UAE’s Wage Protection System (WPS)
There are several ways to withdraw your salary from the WPS in the UAE:
Withdrawal through a WPS Card
A WPS card is a convenient option for employees without a bank account. Companies registered with WPS can utilise money exchanges in the UAE, which offer cost-effective, WPS-compliant payroll services. These exchanges facilitate fund transfers and salary disbursements and issue WPS cards. Employees can use these cards at various locations across all emirates.
Withdrawal through an ATM Machine
Employees with a registered bank account in the UAE can withdraw their salary using their ATM card. This method provides a straightforward way to access your funds at any ATM.
Penalties for companies failing to pay employee wages under the WPS
The UAE’s Wage Protection System (WPS) imposes stringent penalties to deter companies from withholding employee wages. Below is a detailed list of penalties a company might face for non-payment of dues.
Penalties for companies with a workforce of fewer than 100 employees
For small to medium enterprises with fewer than 100 employees, failing to pay salaries within 60 days will result in the following penalties:
- The company will be barred from issuing new work permits.
- The company will be subject to fines imposed by MoHRE.
- Referral to court for further legal proceedings.
- If the company fails to pay wages twice in one year, MoHRE will apply the same penalties as those for larger firms with more than 100 employees.
Penalties for enterprises employing over 100 employees
For private sector firms in the UAE with over 100 employees, failing to pay employee dues within 10 days can result in the following penalties:
- From the 16th day of delayed wages, the company will be prohibited from obtaining new work permits.
- Companies delaying wages by more than a month will be referred to judicial authorities for further punitive measures.
- Similar penalties will apply to other companies owned by the same proprietor registered with WPS in the UAE.
- The owner(s) will be barred from registering any new companies.
- Employees’ bank guarantees will be liquidated.
- The company will be downgraded to the third category.
- Workers will be allowed to seek other job opportunities.
- If wages are delayed for over 60 days, a fine of AED 5,000 per employee will be imposed, up to a maximum fine of AED 50,000 for multiple employees.
Final Thoughts
In conclusion, the UAE’s Wage Protection System (WPS) is a robust framework designed to ensure timely and accurate payment of employee wages, fostering a fair and transparent working environment. Compliance with WPS not only safeguards employees’ rights but also protects employers from severe penalties.
At Davidson & Co., we pride ourselves on being a premier boutique firm in the UAE, specialising in Business Advisory and Employment matters. Our dedicated team of lawyers in dubai offers tailored solutions to meet the unique needs of our clients, ensuring comprehensive and strategic guidance. With a deep understanding of the local market and regulatory landscape, we are committed to delivering exceptional service and fostering long-term client relationships built on trust and excellence.
