The Wage Protection System (WPS) in the UAE, often referred to as WPS UAE, is a pioneering electronic salary transfer system designed to ensure timely and complete payment of wages to employees. This system underscores the UAE’s commitment to safeguarding workers’ rights and maintaining a transparent labour market. Shuraa Business Setup offers invaluable guidance and expertise for entrepreneurs navigating this landscape. As a premier consultancy firm, Shuraa helps business owners understand and comply with regulations like WPS, making setting up a business in the UAE seamless and efficient. Shuraa ensures that your business operates smoothly and adheres to all legal requirements, whether a startup or an established enterprise.
What is WPS in UAE?
The WPS UAE, established in July 2009 through Ministerial Decree No. 788, is a significant initiative by the Ministry of Human Resources and Emiratization (MoHRE) in collaboration with the Central Bank of the UAE. Further reinforced by Ministerial Decree No. 739 in 2016 and additional regulations introduced on September 1, 2019, the WPS ensures that employees in the UAE receive their salaries accurately and on time. The system allows MoHRE and the Central Bank to verify and validate these payments by requiring employers to upload salary information to a centralised database. This mechanism is crucial in preventing unfair practices such as salary delays, underpayment, and the use of illicit funds, thus fostering a healthier and more transparent employer-employee relationship.
Purpose of the Wage Protection System (WPS)
The primary goal of the WPS UAE is to safeguard employees’ wages, which is particularly crucial in a country with a large expatriate workforce. By mandating that employers pay salaries electronically through accredited financial institutions, the system ensures transparency and efficiency in monitoring wage payments. This approach helps reduce labour disputes and protects workers’ rights by addressing non-payment or delayed salary payments. For employers, the WPS simplifies the payroll process through automation, saving time and resources while providing legal proof in case of disputes.
Evolution of the Wage Protection System (WPS)
The Wage Protection System (WPS UAE) was launched in July 2009 under Ministerial Decree No. 788 to tackle issues like incorrect wage payments, payment delays, and the use of offshore accounts by some employers. Since its inception, the system has been strengthened through additional regulations, including Ministerial Decree No. 739 in 2016 and further updates in 2019 and 2022. These enhancements have been crucial in maintaining the system’s robustness and adapting to the changing dynamics of the labour market.
A Guide to Wage Protection Legislation in the UAE
The Wage Protection System (WPS) is a comprehensive and mandatory framework 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 engage a WPS agent responsible for disbursing employees’ wages. This process requires employers to prepare and submit a Salary Information File (SIF), which MOHRE and the Central Bank verify before transferring funds to employees’ accounts.
Employers must meet precise wage transfer deadlines, guaranteeing a minimum of 70% of their workforce and 75% of their salary payments are processed via the WPS. Additionally, employers cannot pass on any fees charged by banks or exchange offices to the employees. Non-compliance with WPS regulations can result in severe penalties, including work permit bans, fines, court referrals, and liquidation of the employer’s bank guarantees.
The WPS has significantly reduced labour disputes and streamlined payroll processes for employers, setting a benchmark for similar systems in the region. Understanding and complying with the WPS is crucial for employers and employees to ensure fair treatment and adherence to legal standards in the UAE.
Benefits of the WPS UAE
The WPS UAE guarantees employers pay their employees accurate and timely salaries, reducing disputes between parties. This system safeguards employees’ rights as outlined in the UAE Labour Law. Moreover, the WPS benefits employees and employers by streamlining payroll processes and mitigating legal complexities. Serving as legal proof, the WPS provides assurance to employers.
Key Elements of Wage Protection Systems
Vigilant Oversight of Wage Payments
The system’s meticulous scrutiny ensures adherence to employment contracts, covers all private sector entities in the UAE and provides comprehensive employee safeguarding.
Ensuring Prompt Salary Disbursement
Under the WPS, designated agents swiftly transfer verified salaries to employees’ accounts, bolstering trust and credibility among compliant employers.
Facilitating Wage Dispute Resolution
Structured mechanisms, led by MOHRE and Labor Disputes Settlement Committees, aim to resolve conflicts, highlighting the UAE’s commitment to industrial harmony and employee rights.
Upholding Compliance with Labor Laws
Stringent regulation enforcement underscores the importance of accurate data submission and adherence to payment schedules for employers while empowering employees with knowledge of their entitlements.
The WPS serves as a multifaceted framework, streamlining wage transfers, enhancing transparency, and fostering a balanced workplace. Reflecting the UAE’s progressive stance on labour rights, it signifies a commitment to equitable workplaces and employee well-being.
How do you register for WPS UAE?
To register for the Wages Protection System (WPS) in the UAE, employers must follow these steps:
Ensure Possession of a Corporate Bank Account
Employers must have a corporate bank account registered in the UAE to facilitate wage payments.
Establish a Contract with a WPS Agent
A contract must be set up with a WPS agent responsible for disbursing employee wages. This agent can be a bank, exchange house, fintech company, or another financial institution.
Adhere to Payment Deadlines
Wages must be paid to employees according to the deadlines specified in Ministerial Decree No. 788.
Comply with Payment Percentage Requirements
Employers must pay at least 70% of all staff (excluding those on unpaid leave) and ensure that at least 75% of wages or salaries are distributed through the WPS.
Agree to Pay fees
Employers must cover any fees, charges, or expenses incurred by the WPS.
By meeting these requirements, employers can successfully register for the WPS in the UAE, ensuring compliance with labour regulations and benefiting both employees and employers alike.
Understanding the Operation of WPS UAE
Registering and utilising WPS UAE is straightforward once all prerequisites are met.
Preparation and Submission of SIF
The Salary Information File (SIF) contains essential details about the employer and employees, such as CTC, Basic Pay, perks, and deductions. Employers submit the SIF with wage payments to ensure accuracy and compliance with WPS guidelines.
WPS Salary Verification by MoHRE and Central Bank
After the SIF submission, MoHRE and the Central Bank conducted a salary check to verify compliance with WPS regulations. They examine criteria like paying at least 75% of salaries to employees.
Issuance of Payment Order to WPS Agent
Upon successful verification, MoHRE and the Central Bank issue a payment order to the WPS agent for wage disbursement.
Transfer of Funds to Employee Accounts
WPS agents transfer funds to employees’ bank accounts when receiving the payment order. Some banks offer a specialised WPS Payroll card for easy salary withdrawal.
To ensure smooth operations and avoid penalties, employers should promptly address any identified errors in the SIF and ensure employees possess bank accounts and debit cards for efficient salary access.
Guide to Preparing SIFs for WPS in the UAE
To utilise WPS in the UAE effectively, preparing error-free Salary Information Files (SIFs) is crucial. Here’s a step-by-step guide on how to prepare SIFs and their format:
Understanding the WPS SIF Format
Firstly, it’s essential to note that each SIF file is maintained as an Excel document. Begin by opening a blank Excel file.
Entering Employee Details Record (EDR)
The next step is to input the Employee Details Record (EDR), which comprises basic information for each employee. Ensure to include the following details in each column for every employee:
- Employee ID
- Employee Name
- Basic Salary
- Allowances
- Deductions
- Total Salary
By accurately inputting this information, you’ll create a comprehensive SIF that adheres to WPS requirements, ensuring smooth salary disbursement in the UAE.
| A | B | C | D | E | F | G | H | I | J |
| Employee details record | Employee 14-digit labor card number | Bank Routing Code | Employee bank account number | Start date of salary | End date of salary | Number of days for which salary is paid | Fixed or basic salary of employee | Variable salary | Number of leave per year |
Consequences of Non-Compliance: Fines and Penalties
Failure to meet WPS requirements in the UAE results in fines and penalties, particularly regarding payment delays.
Payment Delays
When payments are delayed, fines or penalties vary based on the organisation’s size. For organisations with 100 or more employees in the UAE, the following penalties apply if wages are not paid within 10 days of the due date:
- The company loses eligibility for work permits from the 16th day of wage delay.
- The employer is prohibited from establishing new companies.
- MoHRE can take action against all other companies owned by the defaulting employer.
- The organisation is downgraded to the third category.
- Workers are permitted to change employers.
These penalties emphasise the importance of timely wage payments and adherence to WPS regulations to avoid financial and operational repercussions.
Consequences of Intentional Misinformation
Organisations found intentionally providing incorrect information to evade salary obligations face penalties in the UAE.
Penalty for Misinformation
A fine of up to AED 5,000 per affected worker, with a maximum of AED 50,000 for multiple affected employees, is imposed.
These penalties underscore the seriousness of providing accurate and transparent information in wage-related matters, promoting fairness and accountability in employment practices.
Maximising Returns with the Right WPS Agent in the UAE
To maximise the benefits of the Wage Protection System (WPS) in the UAE, selecting the right agent is paramount beyond meeting regulatory requirements. This choice significantly impacts a company’s ability to avoid penalties, maintain compliance with deadlines, and ensure seamless salary disbursement. A reliable agent facilitates cost-effective and straightforward payment processing and guarantees timely salary distribution to all employees, regardless of their salary level. By prioritising the selection of a suitable agent, businesses can streamline their WPS experience, fostering trust and satisfaction among employees while optimising operational efficiency.
FAQs
Q1. What is the WPS system in UAE?
WPS (Wage Protection System) is an electronic wage transfer system ensuring employee rights in the UAE.
Q2. What does “WPS Salary” signify in the UAE?
Employers registered with MoHRE must utilise WPS to pay employee wages.
Q3. How can I verify my company’s WPS status?
Employers and employees can verify WPS status on the MoHRE website.
Q4. What is the minimum employee count required for WPS?
Companies with at least 10 employees must follow WPS guidelines.
