A Detailed Guide on the Wage Protection System in the UAE

Implement a compliant payroll management

Share this post
5 min read

UAE has been one attractive destination for expats since forever, who now call UAE their home. The country has embraced them with open arms as it has embraced growth and development. 

One of the many reforms that the UAE has adopted to continue being the top choice for expats is the WPS, or Wage Protection System. It was launched with the motive of solving all wage distribution disparities, and enforcing fair and timely payments. 

But, as simple as it sounds, not many people understand the significance of the WPS regulations governing wages. This guide has all the details that employers need. You will learn how to adopt WPS and be WPS compliant, its perks, and the best practices.

What is WPS in the UAE?

The United Arab Emirates saw a major breakthrough in the wage system with the introduction of WPS, or Wage Protection System, in July 2009.

Looking back to the times before WPS existed, employee exploitation was the norm. Private sector employers did everything in their knowledge to deprive employees of their rightful wages on time. They went to the extent of using offshore accounts or illegal sources of funds to avoid payments. This broke employees' trust and confidence in private-sector employers, leading to economic downturn.

To change this, the Ministry of Human Resources and Emiratisation (MOHRE) teamed up with the Central Bank of the UAE to introduce an electronic salary transfer system - WPS. The motive of WPS was to eliminate inconsistent and unfair salary payments by enforcing fair payments made on time and in full. Ever since its launch, the governing authorities have been updating it to fit the needs of both employers and employees, keeping it valid and beneficial even today.

The Wage Protection System mandates safe, timely, and appropriate wage and salary payments to the private sector workforce. To enforce this, the system requires every private sector employee to get approval from MoHRE and The Central Bank of UAE and disburse funds from a registered financial institution.

Employers must submit their Salary Information Files, which MoHRE and The Central Bank of UAE investigate and confirm. The approved files are then sent to the salary distribution partner to disburse them. This is the process of WPS and a must for all private-sector employers. 

WPS is not just pro-employees; it also helps employers in multiple ways. It gives them WPS-compliant status, making them the desirable option for great talent. It also keeps employers compliant with labor laws governing the country. Not to forget about the operations perks it provides, such as streamlining, automating, and maintaining records of disbursals.

What are the primary functionalities of the WPS?

Ensuring timely and fair wage distribution across the entire country is tough. The governing authorities have, time and again, refreshed the rules, regulations, and objectives of WPS to deliver what is promised. Here are some of the high-level functions of WPS that contribute to its vision:

  1. Tracking movement of funds - WPS has all the fund movement records, such as inflow and outflow, and keeps monitoring them all the time. This access and record keeping of funds helps the system detect delays in payments and other similar disparities. It also ensures no involvement of illegal or fraudulent sources in the business process.
  2. Ensure order and transparency - the system ensures the salary details of employees are validated and then forwards them to the financial organization that disburses the funds, aka the WPS agent. 
  3. Enforcing effective data monitoring - the salary records and employees' data are sent frequently to the Labour Regulatory Authority (LRA) for routine checks and monitoring. 
  4. Facilitating employer bank transfers - the system is also responsible for accepting payment transfers from the employers’ bank account to the agents. These balances are maintained at the employee level.
  5. Executing salary disbursement - other WPS functions include confirming receipts sent from agents detailing payable and disbursed amounts to employees and accepting refund requests from agents and employers.

What are the benefits of WPS in the UAE?

WPS has a lot in store for both employers and employees. Here’s a list of some of the benefits to give you a better idea of this framework.

Benefits for employees:

  • Uniform disbursements - this system ensures salaries are disbursed on time, keeping employees financially secure. Safeguarding employees’ rights and interests is the primary role of WPS.
  • Transparent payments - nothing is hidden; hence, there is no scope for unethical practices. Employers have to disclose payments they make to employees, reinstating trust and confidence between both parties. Disputes are no longer a major concern.
  • Secure financials - employees enjoy transparent and fair salary brackets that are paid on time. It spares them the hassle of financial troubles due to nonpayment. The nation grows stronger financially.
  • Economic upliftment - with equality in pay and financial security among the workforce, the country is always gearing towards a better economy and way of life.
  • Productivity boost - employees who receive their salaries on time are more happy and content. They tend to have a better quality of life. They strive and excel in their jobs every day doing justice to their professional and personal lives.

Benefits for employers:

  • Compliance - following the WPS process is the ticket to compliance with the labor laws as well. WPS-compliant employers enjoy a shield from legal breaches, penalties, and fees.
  • Secure financials - no legal cases and troubles safeguard all employers’ bottom lines. Employers enjoy financial stability as much as employees.
  • Operational efficiency - automation is a major part of this process, and because WPS streamlines the disbursal process, employers save time and money.
  • Reduced legal trouble - the transparent framework also safeguards employers against fraudulent employee cases. Any non-payment fraud cases are easily and efficiently dealt with proof.
  • High reputation - WPS complaint is the trademark of trust. An employer who has it is the top choice for employment among great talent. In terms of business expansions and investments as well, they are highly trusted.

How to register for the Wage Protection System?

The WPS protects your business’s interests and integrity. Getting registered with WPS is not an obligation but a great convenience. Hence, it is beneficial for employers to get registered. All private sector employers have to register for WPS compulsorily and can do it on the MoHRE’s official website. But they need some things before getting started with the process. They are:

  • A corporate account registered with a UAE bank.
  • A contract with the WPS agent, the institution that executes salary disbursement to employees. A WPS agent can be a bank, an exchange, a FinTech company, or any other financial organization until and unless they are registered with MoHRE.
  • Details of all employees and their salary brackets.
  • Payroll details.

Additional details

  • Employers must note down and follow the payroll timelines explained in Ministerial Decree No. 739 of 2016 (the latest version of the system).
  • The terms and conditions of the mandate require employers to pay a minimum of 70% of all staff and 75% of their payments.
  • Employers must bear bank fees, provider charges, and other payment costs and expenses. 

As an employer, you can now use all the above details to register on MoHRE’s official website. Create an account and get access to the WPS e-portal.

How does WPS work?

Getting registered on the WPS portal is the first and one-time step. Thereafter, employers must go through a monthly process to ensure on-time salary disbursals.

Source

Here are 4 steps to the monthly WPS process: 

1. SIF file submission

Employers should undertake this step and prepare a salary information file, otherwise referred to as SIF. This file has all the information on your business, the employees, and their salary breakdowns. However, payouts such as commissions, bonuses, expenses, end-of-service benefits, and gratuities do not require SIF submission to WPS.

Employers must fill out the form according to the payroll timelines and submit it to the website. The WPS agent is the first party to check the file for mistakes and confirm the submission. 

2. Approvals from MoHRE and the central bank

Upon successful submission of the SIF, MoHRE and the central banks now examine it thoroughly. If all the details are in line with the terms and conditions of WPS, the file is approved. 

3. Payment orders to the WPS agent

If approved, they now notify the WPS agent of the same, prompting them to release the payments. In cases of disparities, employers are informed about them and prompted to rectify them at the earliest.

4. Salary disbursal by WPS agent

This is the final step in the process, where the WPS agent disburses salaries to employees' accounts. They may as well issue WPS cards to employees on certain terms and conditions, such as having no bank account. The card is designed like a debit card with similar functionalities. 

What are the consequences of non-compliance?

Employers attempting to breach any WPS regulations are subject to strict penalties, in addition to loss of reputation. Here are the penalties for non-compliance:

Companies with more than 100 employees:

Employers must pay the salaries within 10 days of the due date, or

  • They will lose their work permit on the 16th day after the due date.
  • Company owners will not be allowed to register new subsidiaries or brands.
  • The company’s branches or daughter companies will suffer some consequences.
  • The company’s bank guarantee will be liquidated and used.
  • The company will lose its prime status and be considered in the third category.
  • Employers will have the ministry’s support for job shifts.
  • 30 days of non-payment will lead to a referral to judicial authorities.
  • 60 days of non-payment attract an additional fee of AED 5,000 per affected worker, up to AED 50,000 for multiple workers.

Companies with less than 100 employees:

Employers failing to pay employee dues for 60 days face:

  • Loss of work permit
  • Fines and fees
  • Referral to court

Employers who record this offense twice a year will face all the penalties that employers with more than 100 employees face.

Cases like fraud

If employers are found guilty of other types of breaches, such as furnishing incorrect data in the SIF trying to avoid payments, or forcing employees to sign fake payment slips, will attract a fine of AED 5,000 per affected worker, up to AED 50,000 for multiple workers.

What are some best practices for the Wage Protection System?

Follow the below-mentioned tips or best practices to avoid the penalties of WPS and be compliant: 

  1. Establish transparent salary policies - maintain transparency in assigning salaries, and follow the fair allocation of salary brackets to avoid disputes and disagreements. 
  2. Ensure accuracy in salary payments - stay abreast of the salary timelines and ensure all your employees receive their salaries on time. Work with them to ensure they have a bank account and everything else they need to successfully receive payments.
  3. Maintain compliance with WPS regulations - draft your payroll process in line with WPS regulations. Ensure you meet all the requirements of the system to enjoy its benefits.
  4. Use an accredited payment solution - a bank can handle the disbursal process, but payment solution providers like PayBy offer more than that. They will handle all your obligations and stress, such as rectifying mistakes in SIF, following the timelines, and staying up to date with all the changes in WPS regulations. And they can do it in the most fast and efficient manner. You get more time to focus on your core business activities and grow your revenue. 

How can PayBy help?

But you don’t have to do it all by yourself. Save yourself the hassle of getting into the tiny details of WPS and let PayBy handle it all. 

Our digitally integrated payroll + wallet solution is quick and easy to use. Employers enjoy the benefits of digital onboarding, payroll transfers, and tracking. While employees get access to all financial products, card benefits, and so much more.

What to know more? Get in touch with PayBy today.

Want to know more about cashless payments or how it benefits your business growth?

A person holding a smart phone in their hand.

See All Guides

Open Banking Explained

July 19, 2024
|
5 min read
This is some text inside of a div block.
|
Tag

A Definite Guide to PCI Compliance

June 19, 2024
|
5 min read
This is some text inside of a div block.
|
Tag

A Detailed Guide on the Wage Protection System in the UAE

June 18, 2024
|
5 min read
This is some text inside of a div block.
|
Tag

Complete guide on Banking as a Service

June 18, 2024
|
5 min read
This is some text inside of a div block.
|
Tag