Did you know that the UAE ensures employees get paid on time, every time?

Wondering how?

It’s with the Wages Protection System (WPS). Designed to address the all-too-common issue of delayed or unpaid wages, the WPS ensures timely salary disbursements, protecting workers and promoting transparency. More than 5.2 million workers in the UAE are already benefiting from this system. 

By bridging the gap between employers and employees, the WPS not only upholds workers' rights but also helps businesses maintain a stellar reputation. 

How does WPS work? What are the requirements for employers? What are the penalties for non-compliance? Let’s dive into this blog to answer all your questions!

What is the Wage Protection System (WPS) In The UAE?

The UAE is home to expatriates from more than 100 countries, contributing to the economic development and overall growth of the country.  To make wage distribution easier, the government of the UAE has launched the Wage Protection System (WPS). 

WPS in UAE was launched as a joint effort by the Central Bank of the UAE and the Ministry of Human Resources and Emiratization (MOHRE). Wages Protection System is a robust electronic salary transfer system that enables private sector organizations to pay their employees’ salaries through banks, approved financial institutions, and Bureau de Change. By requiring employers to pay salaries electronically through accredited financial institutions, the system offers a transparent and efficient way to monitor wage payments.

How the Wages Protection System evolved

The Wage Protection System (WPS) was introduced in 2009 through Ministerial Decree No 788 to address challenges such as incorrect wage payments, payment delays, and the use of offshore accounts by some employers to avoid payments.

Since its launch, the system has been refined and improved through additional regulations. Ministerial Decree No. 739 of 2016, along with updates in 2019 and 2022, has significantly strengthened the system, allowing it to adapt to the evolving labor market dynamics.

Goals and objectives

The WPS covers all the institutions registered with MoHRE across various sectors. 

Its primary goal is to protect employees' salaries, which is especially crucial in the UAE due to the large expatriate workforce. Ensuring timely and accurate wage payments helps prevent financial instability and exploitation among expatriates, who make up a significant part of the labor force and often lack local support systems. 

Some of its main goals are:

• To ensure solid commitment to safeguarding employees’ salaries

• To protect employee rights, safeguard them from exploitation, and ensure they receive rightful earnings. 

• Provide a structured, easy-to-use, transparent payment system

• Offer a reliable database and enable effective monitoring and oversight of wage payments for the UAE Ministry of Labour.

• Promote the use of banking channels for salary payments, enhancing financial inclusion for employees.

• Enhance the credibility and reputation of compliant employers within the market.

WPS stakeholders

There are various stakeholders involved in the WPS as follows:

• Employees or Workforce: Any individual who works in an organization in the private sector for an agreed-upon wage. The employee must hold a valid labor card by MoHRE.

• Employers: The owners of an organization in the private sector in the UAE registered with MoHRE and WPS.

• Banks: Bank in which the employer has an account through which the wages are transferred to all the employees.

• Agents: It includes banks, Bureau De Change, or any other financial institution approved by the Central Bank of the UAE to offer salary payments through the WPS.

Improved Compliance with Labor Laws

According to Labor Resolution Number 43 of 2022, employers must follow certain regulations to comply with the law. Here are the list of regulations that businesses must comply with: 

1. New workers must be integrated within 30 days from the date of joining the company.
2. The WPS salary payment date is due 1 day after the payment date established in the contract of the employees.
3. Payments are considered late if not made within 15 days after the due date.
4. 90% of employees must be paid within the month, with unpaid leave requiring MoHRE notification.
5. Employers must pay 80% of the salary within the month, with deductions subject to verification.
6. Even if there is no specific date on which both parties have agreed on a salary payment, the employer must pay it once a month.

Key Components of a Wages Protection System

Monitoring wage payments

The WPS ensures rigorous oversight of wage payments. 

Employers are required to upload essential data onto an electronic platform, where it is reviewed to ensure compliance with the terms outlined in the employment contract. This oversight applies to all private companies in the UAE, providing a comprehensive level of protection for employees.

Timely disbursement of salaries

WPS was primarily established to ensure timely disbursement of salaries. Once salary details are verified, a payment instruction is sent to the WPS agent, who then ensures wages are quickly transferred to employees' bank accounts. This process builds trust and boosts the reputation of employers.

Resolution of wage disputes

In case a wage dispute arises, MoHRE steps in to negotiate a mutually satisfactory resolution. If negotiations are unsuccessful, the issue can be escalated to the Labor Disputes Settlement Committees, which have the power to make binding decisions. This multi-tier setup highlights the UAE’s commitment to fair labor practices and employee rights protection.

Compliance with labor laws

Employers who don’t comply with the UAE labor laws face hefty fines and operational restrictions. This enforcement mechanism incentivizes timely and accurate salary submissions for employers while promoting awareness of rights and protections for employees.

In the UAE, the WPS system is more than just a system for transferring wages–it’s a safeguard against labor law violations and a means of employee protection. It promotes transparency, protects employees from exploitation, and creates a fair work environment. 

How to Register for WPS in UAE

If you are an employer in the UAE, you must be on the WPS. All private sector companies in the UAE can easily register for the Wage Protection System (WPS). 

Before registering for WPS, you must fulfill the following requirements:

1. You need to be registered with the Ministry and have an account with a bank operating in the UAE.
2. You must have a contract with a WPS agent. This can be a bank, exchange house fintech, or any other financial institution registered with the MoHRE. 
3. Wages must be paid to the employees as per the deadlines stipulated in Ministerial Decree No. 788 as amended in Ministerial Decree No. 739 of 2016.
4. You must pay at least 70% of all staff (except for some level of unpaid leave) and at least 75% of their wages or salaries. 
5. You must agree to meet any bank fees, expenses, provider charges, and other related payment costs incurred in WPS. 

Now that you understand the requirements, you can visit the MoHRE website to set up your account and obtain your login ID for the WPS e-portal.   

WPS registration requirements 

After registering, employers can log in to their accounts to update employee lists and other relevant information:

• Corporate bank account details
• Employee’s bank account or agent details
• List of employees with bank account details
• The date for salary disbursement

Important things to note:

As per the MoHRE guidelines,

1. Salary month cannot have a difference of more than a month from the date chosen for salary disbursements

2. Whenever an employee joins or leaves the company, you have to download a new employee list and attach it to the application.

How Does WPS Work in the UAE?

Once you’ve met all the conditions and registered your account successfully, take the following steps to use WPS.

Step 1: Preparation and submission of SIF

Salary Information File (SIF) is a standard form that contains information about you and your employees such as CTC, basic pay, deductions, allowances, bonuses, etc. Everytime you pay wages or salaries, you must submit the SIF on WPS. The file first goes through the WPS agent who checks for errors and then submits it to the WPS. 

Step 2: WPS salary check by the MoHRE and the central bank

After the submission of SIF to the WPS, MoHRE in collaboration with the central bank will conduct a WPS salary check to ensure all the details are correct and meet the WPS requirements

Step 3: Issuance of payment order to your WPS agent

If the WPS salary check is successful, the MoHRE and the central bank will send a payment order to your WPS agent. In the event of errors, you’ll receive an email requesting to correct the identified errors and update the SIF. 

Step 4: Transfer of money from your WPS agent to employees’ accounts

Once your WPS agent receives the payment order, it transfers the money to your employees’ bank accounts. Many banks that serve as WPS agents provide a special WPS payroll card for the company's registered employees. The WPS payroll card works like any other debit card. 

How Can Employees Withdraw Their Salary From WPS UAE?

Your employees must have a bank account and a normal debit card or a special WPS payroll card to withdraw their salary or transfer the amount. 

WPS Penalties for Non-Compliance

Employers must strictly adhere to the WPS guidelines to avoid financial risks and penalties resulting from incorrect disbursements. The severity of these penalties corresponds to the gravity and recurrence of the violations.  

Here are the penalties that a company might face for non-payment of dues: 

Penalties for companies with more than 100 employees

If a private company in the UAE with over 100 employees fails to pay employee wages, within a period not exceeding 10 days, they will face the following penalties:

• The company will not get any work permits from the 16th day of the date of delay in wages.
• MoHRE has the right to take action against all the other companies owned by the defaulting employer
• The owner(s) will not be allowed to register for any other company.
• The company will lose its reputation and be downgraded.
• Employees’ bank guarantees will be liquidated.
• Workers will be permitted to find other job opportunities.

If the delay extends more than a month from the due date, the MoHRE will refer these companies to the judicial authorities for further measures. If it extends for over 60 days, a fine of AED 5,000 per employee (whose wage has been delayed) will be charged up to a maximum fine of AED 50,000 for multiple employees.

Penalties for companies with less than 100 employees

If a small to medium enterprise with less than 100 employees fails to pay employee salaries within 60 days from the due date, then they are liable to the following penalties:

• Work permits ban
• Fines
• Referral to court

If such delays (up to 60 days) happen twice within a year, the Ministry of Human Resources and Emiratisation (MoHRE) will treat these companies as they do those with over 100 employees. 

Other forms of non-compliance

• Companies that intentionally provide false information to evade salary payments can be fined up to AED 5,000 per affected employee, with a maximum penalty of AED 50,000 for multiple employees.

• Companies that force employees to sign false payment slips to avoid salary payments will be fined AED 5,000 per affected employee.

How Can UAE Companies Pay Their Employees on Time to Avoid Penalties?

To ensure timely employee payments and maintain compliance with UAE labor laws, companies can adopt any of the following strategies:

1. Implemet an automated payroll system. With this, companies will be able to pay their employees on time, handle complex calculations, and tax deductions and maintain compliance with UAE labor laws seamlessly. It reduces human error and ensures every employee gets their paycheck on time. 

2. Partnering with an Employer of Record. An EOR acts as the official employer and handles all payroll functions such as salary payments, benefits, and legal compliance. EORs, with their expert knowledge and support, help you stay compliant with UAE labor laws, minimizing the risk of penalties. It allows you to focus on your core business activities while ensuring your employees are paid accurately and on schedule.

Read: Top 9 Benefits of Using an Employer of Record for Global Expansion

UAE Payroll Made Easy with Gloroots

Looking to hire from the UAE?

Gloroots Employer of Record (EOR) services offer an all-in-one solution, ensuring timely and accurate payments to your employees in the UAE. Here’s how Gloroots can help:

• Guarantees on-time salary disbursements, ensuring your employees receive their paychecks promptly, without any delays or penalties.

• Ensures your business stays 100% compliant with UAE labor laws, reducing the risk of penalties.

• Offers customized solutions to match your specific payroll requirements, ensuring a perfect fit for your global strategy.

• Integrate various payroll aspects into a unified, user-friendly interface, making cross-border payroll management efficient and error-free.

• Our team of experts is always available to provide support and guidance, helping you navigate the intricacies of global payroll management.

By partnering with Gloroots, you can focus on your core business while we handle your payroll with precision and compliance. Ready to simplify your payroll? Let’s get started!