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How the Wages Protection System (WPS) Works In The UAE

Nov 15, 2023 | Human Resources

In the bustling economic landscape of the UAE, timely and fair wage payment is a vital concern for both employees and employers. The Wages Protection System (WPS) is the UAE’s innovative solution to this challenge, ensuring that workers’ salaries are paid on time and accurately.

Keep reading to learn how the WPS works in the UAE and how it can benefit you in the workplace. You’ll be equipped to navigate the UAE’s labour market confidently and securely by staying informed.

What is The Wages Protection System (WPS) In The UAE

The Wages Protection System, commonly known as WPS, is an advanced electronic salary transfer system that is crucial in the United Arab Emirates’ labour market. It was established by the Ministry of Human Resources and Emiratisation (MOHRE) in collaboration with the Central Bank of UAE. The core of WPS is to ensure the timely and accurate payment of workers’ wages, ensuring these payments align with the terms set out in their employment contracts.

The Purpose Of Wages Protection Systems

The WPS’s main goal is to protect employees’ wages, which is especially important in a country like the UAE, where a significant portion of the workforce is made up of expatriates. By requiring that employers pay salaries that are paid electronically through accredited financial institutions, the system offers a transparent and efficient way to monitor wage payments.

This reduces labour disputes and protects workers’ rights by tackling issues such as non-payment or delayed payment of salaries. For employers, the WPS streamlines the payroll process through automation, saving time and resources, and provides legal proof in case of disputes.

How Wages Protection Systems Evolved

The WPS was introduced in July 2009, under Ministerial Decree No. 788, to address the challenges workers faced due to some employers not paying correct wages, delaying payments, or using offshore accounts to avoid payments.

Over the years, the system has been refined with additional regulations to bolster its operations, such as the Ministerial Decree No. 739 of 2016 and further updates in 2019 and 2022. These improvements have been key in ensuring that the system stays strong and adapts to the evolving dynamics of the labour market.

Overview Of Wages Protection Legislation

The legislative framework of the WPS is extensive and mandatory for all private sector companies in the UAE, including those in the Jebel Ali Free Zone (JAFZA). Employers must register with the WPS, maintain a corporate bank account in the UAE, and set up a contract with a WPS agent who is in charge of the actual payment of an employee’s wages. The process involves employers preparing and submitting a Salary Information File (SIF), which MOHRE and the Central Bank then check before funds are transferred to employees’ accounts.

Employers have to stick to strict deadlines for transferring wages and ensure that at least 70% of all staff and at least 75% of their wages are paid through the WPS. They’re also forbidden from passing on any fees charged by banks or exchange offices for transferring money through the WPS to the employees. Failing to comply with the WPS regulations can result in severe penalties, including work permit bans, fines, referral to court, and the liquidation of the employer’s bank guarantees.

The WPS has effectively reduced labour disputes and enhanced the efficiency of payroll processes for employers. It has also inspired other countries in the region, demonstrating its success in protecting workers’ wages and offering innovative solutions for employers. As an employee or employer in the UAE, it’s important to be familiar with the WPS to ensure you follow the rules and know your rights and responsibilities within this system.

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Key Components of a Wages Protection System

Monitoring Wage Payments

The system’s capability to meticulously oversee wage payments is a critical component. Employers are required to upload the necessary data to an electronic platform, which is then examined for adherence to the agreed terms of the employment contract. This oversight applies to all private sector companies within the UAE, ensuring a broad scope of employee protection.

Timely Disbursement Of Salaries

The enforcement of prompt salary distribution is central to the WPS. After the verification of salary details, a payment instruction is sent to the designated WPS agent, who agrees upon wages and is responsible for the swift transfer of funds to the workers’ bank accounts. This mechanism reinforces employees’ trust in receiving their earnings and bolsters the standing of compliant employers.

Resolution Of Wage Disputes

The WPS also offers a structured process for addressing wage disputes. MOHRE is instrumental in facilitating negotiations between conflicting parties to achieve a satisfactory resolution. Should these efforts be unsuccessful, the dispute can be referred to the Labor Disputes Settlement Committees, which have the authority to make binding rulings. This layered approach to resolving conflicts highlights the UAE’s commitment to preserving industrial harmony and safeguarding employee rights.

Compliance With Labour Laws

Adherence to labour regulations is enforced strictly under the WPS. Non-compliant employers are subject to various sanctions, including financial penalties and restrictions on their business operations. These severe consequences emphasise the critical nature of compliance. For employers, this translates to accurate and timely submissions of salary data and adherence to payment schedules. On the other hand, employees should be aware of their entitlements and the protective measures available to them.

The WPS stands as a multifaceted framework that not only streamlines wage transfers but also acts as a preventive measure against violations of labour regulations. It enhances transparency, shields employees from potential abuses, and contributes to a balanced and equitable employment atmosphere. As a cornerstone of the UAE’s labour system, the WPS reflects the nation’s forward-thinking approach to labour rights and its dedication to creating a dignified and fair workplace.

What Are The Rules For WPS Salary In UAE?

For employers, there are specific obligations under the WPS. They are required to enrol new hires into the system within their first month of employment, among other financial institutions, ensuring immediate protection under the WPS.

Salaries must be disbursed by the day following the date stipulated in the employment agreement, emphasising the importance of punctuality in wage distribution. Additionally, a minimum of 90% of the workforce must receive their pay within the specified pay period each month.

A threshold is set for salary payments, with employers obligated to pay at least 80% of an employee’s wage in any given month, allowing for certain permissible deductions that must be documented to ensure fairness.

Registration for the WPS is done through the MOHRE website, necessitating a corporate bank account and an agreement with a WPS agent responsible for the electronic transfer of funds. Employers must compile and submit a SIF containing all necessary payroll details for review by MOHRE.

Following approval of the SIF, the employer instructs the WPS agent to proceed with disbursing salaries. Employers may utilise payroll management software to aid in compliance with WPS regulations and avoid errors that could result in penalties.

Certain groups are exempt from the WPS, such as employees embroiled in wage disputes, those absent without leave, newcomers within their first month, and individuals on unpaid leave. Additionally, certain employers, including UAE nationals with specific business operations, are not required to participate in the WPS.

Non-compliance with WPS mandates can lead to severe repercussions, including prohibitions on work permits, monetary fines, legal action, and the potential forfeiture of bank guarantees. These penalties underscore the government’s commitment to enforcing the system.

The WPS provides employees with a reliable and transparent method for receiving their wages, accessible through various means, including WPS cards and ATMs. This system fosters job stability and upholds the rights of all parties involved to pay salaries, thereby reducing wage disputes.

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What Is The Penalty For WPS Infringements In The UAE?

An employer must adhere to the WPS guidelines by not disbursing salaries within the agreed-upon wage timeframe or not paying the correct amounts. Otherwise, they can incur significant penalties. The severity of these penalties corresponds to the gravity and recurrence of the violations.

For instance, a company with a workforce exceeding 50 people that postpones salary payments beyond 17 days from the scheduled due date may receive a formal notice from MOHRE. This step is indicative of the stringent measures in place to enforce timely wage distribution.

Repeated non-compliance can lead to escalated measures from MOHRE, including a halt in issuing new work permits, which can severely impact a company’s operations. A persistent disregard for the regulations can also lead to judicial proceedings, tarnishing the company’s reputation and leading to additional financial and operational setbacks.

The WPS also aims to ensure clarity and accountability in salary transfer wages and transactions. Employers are mandated to use an approved bank for salary transfers, which are conducted electronically to the employees’ bank accounts, minimising the risk of payment delays or omissions.

To avoid these penalties, employers are encouraged to utilise payroll outsourcing services or automated payroll systems to maintain accuracy and timeliness in wage payments. Service providers such as Connect Resources offer assistance in adhering to WPS regulations.

Smaller enterprises are not exempt from repercussions if they fail to meet payment deadlines. Delays beyond 15 days can trigger a series of reminders and warnings, escalating to more stringent penalties if not rectified promptly.

Certain employees may be exempt from the WPS, such as those on unpaid leave or involved in wage-related disputes, provided MOHRE is informed in advance. However, for the majority, the WPS serves as a vital protective mechanism.

The increased scrutiny of employers who flout WPS mandates underscores the UAE government’s commitment to upholding a regulated labour market and the imperative nature of compliance with the WPS.

FAQs

Is WPS Mandatory In UAE?

Yes, WPS is obligatory for all the companies registered in the UAE, with certain free zones and government-owned entities being exceptions. It acts as a safeguard against the improper withholding of wages and is an integral part of employment regulation in the country.

Is There A Grace Period For WPS In The UAE?

Employers are granted a 30-day window from the commencement of an employee’s contract to register them with the WPS. This period provides sufficient time for employers to comply with the registration requirements.

How Can I Check My WPS Salary In UAE?

Employees can verify their salary payments through the MHORE’s official website. This platform allows for the confirmation of whether the employer has submitted the SIF and if the payment has been executed. Discrepancies are flagged within the system, prompting employers to make necessary corrections.

What Are The Benefits Of WPS In The UAE?

For employees, WPS ensures timely and complete wage payments. It has also reduced wage-related labour disputes and enhanced the transparency of financial transactions between private-sector employers and their workforce.

The system facilitates payroll management for employers, leading to time savings and reduced administrative burdens. Compliance with WPS regulations indicates a company’s adherence to labour laws, potentially attracting foreign investment and enhancing the UAE’s competitive image.

Moreover, WPS has improved the financial security and confidence of the workforce, attracting skilled labour and reinforcing the UAE’s status as a just and regulated employment landscape.

Ensuring Fair Wage Practices

The Wages Protection System is a testament to the UAE’s commitment to maintaining a fair and transparent labour market. By safeguarding timely and full payment of wages, the WPS provides a structured and secure environment for both employers and employees.

Employers gain a streamlined payroll process, and you get the peace of mind that comes from guaranteed wage security. With robust legislation and strict penalties for non-compliance, the UAE continues to strengthen its workforce’s rights, reinforcing its position as an attractive destination for global talent.

Through the WPS, the UAE has set a regional benchmark for the wage protection system, promoting an ethos of respect and fairness in the labour market that underpins the nation’s thriving economy.

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