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The United Arab Emirates is a perfect blend of over 200 nationalities. More than half of its population is made up of expatriates who have crossed seas to start a new life here. They are working in various sectors, including education, finance, technology, research and science, fashion, media, and creativity, actively contributing to the nation’s economy. The government frequently introduces initiatives to facilitate a strong working and living environment for foreigners while promoting growth for them. At the same time, they ensure that the workplace and labour market in UAE remain transparent, safeguarding the interests of all parties involved. One such initiative is WPS UAE, which stands for the Wage Protection System in the UAE.
Whether you are an employer or an employee in the nation, understanding this system helps you comprehend how wages and salaries are safeguarded in the nation, ensuring the timely and accurate disbursement of salary payments to employees. In this article, let us explore how the wage protection system in the UAE actually works along with its significance.
Wage Protection System, also known as WPS UAE, was introduced in 2009 under Ministerial Decree No. 788 as a collaboration between the Ministry of Human Resources and Emiratisation (MOHRE) and the Central Bank of UAE. So basically, the WPS is a centralized electronic salary distribution system that aims to provide a safe, secure, and efficient mechanism to ensure the timely and accurate payment of wages to employees by their employers in UAE. The system was further amended in 2016 by Ministerial Decree No. 739, and later on, in 2019, many new regulations were incorporated into it by MOHRE.
This salary distribution system allows private employers to make salary payments through banks and approved financial institutions. On this system, companies must create salary information files (SIF) for their workforce on a reliable database. These files contain details about the salary of employees of the firm. The Central Bank and Ministry validates the information, checking if the salary is as per standards, as per contracts, is legal, and if the payment is being made on time without delay, etc. Once the Ministry validates it, permission is given to authorized financial institutions for the transfer of money to the employees.
WPS is necessary in today’s era to monitor and prevent unfair practices by some employers. These could include unscrupulous actions such as refusal to pay wages on time, delaying payments, illegal use of funds, or not paying as per the contract or labour market standards. Having a robust system that oversees salary distribution minimizes such possibilities as there is close monitoring by the Ministry and the Central Bank. This results in a decrease in labour disputes and creates a strong and healthy relationship between employers and employees.
Here is the thing: WPS UAE is a win-win situation for everyone. For employees, it ensures the payment of agreed-upon wages on time. For employers, it helps save time and costs through automation and streamlining of payroll processes. WPS records also serve as legal proof of salary payments and help minimize industry tensions, creating a conducive work environment in the nation.
The main objective of WPS is to ensure a healthy work climate in UAE where every party’s (employer and employee) interests are protected. Here is the purpose that the WPS serves in the nation:
Commitment to secure the employees’ salaries
The WPS UAE targets various parties, which include:
1. Employees: They are individuals on the payroll of a private organization operating in the UAE. They must hold a job contract and a labour card issued by MOHRE.
2. Employers: The owners of private organizations operating in the UAE who are required to register with MOHRE and WPS.
3. Banks: Accredited banks and financial institutions through which salaries and wages are distributed. Employers must have a corporate bank account with these institutions.
4. Agents: Authorized banks, financial institutions, or exchange houses permitted by the Central Bank of UAE to provide salary payment services through the WPS in UAE. The Central Bank regularly updates the list of approved agents.
WPS UAE is mandatory for all companies in the UAE and JAFZA and they must register for it. However, royal or government-owned companies and other free zones are exempt from WPS compliance. Before registering with the WPS Dubai or UAE, organizations must fulfil certain requirements:
After meeting the above requirements, visit the MOHRE website and set up your account. Once registered, you will receive login credentials for the WPS UAE portal.
Let’s have a look at how the WPS actually works:
The first step is to prepare the Salary Information File (SIF). A SIF contains details about the employer and employees, including information on wages, salaries, allowances, overtime payments, and additional bonuses for each employee. Whenever salary or wage payments are to be made, the SIF needs to be prepared and submitted to the WPS. The file is first sent through the WPS agent before being submitted for further processing.
Once the SIF is submitted, it is strictly reviewed by the Central Bank of UAE and MOHRE. They check that the form adheres to their standards and contains all the required details as per WPS regulations. For example, they verify whether 70% of staff are being paid as mandated.
After successful verification of the details, MOHRE and the Central Bank issue a payment order to the WPS agent, authorizing them to proceed with wage distribution.
Finally, the WPS agent transfers the approved amounts to the employees’ bank accounts. Employees may withdraw their salaries through bank accounts using debit cards or through WPS payroll cards. Employers must ensure their staff has bank accounts for seamless salary withdrawals.
The backbone of the WPS UAE is updating the salary information file (SIFs), which is essential for using the WPS. Let us look into format of WPS SIF.
Here is a step-by-step procedure of preparing a SIF for WPS system in UAE:
The SIF is prepared on an Excel sheet. Therefore, start by opening a blank Excel sheet.
On a blank sheet, you need to enter employee detail record, which is a compilation of essential detail about the employee. For every employee, there will be a row that starts with the ERD column. Number of rows will be equal to number of employees in organization. Here are the 10 columns and the details each column should contain in a row:
You may need to include Employee Variable Pay details (EVP) for an employee if a part of their pay is variable, such as overtime, bonuses, etc. This row should come after the EDR rows, with one row per employee.
Finally, you need to include the Salary Control Record (SCR), which provides details about the company. This row comes as the last row in the Excel sheet. The columns for this row should contain the following details:
Once all the information is entered into the Excel sheet, save and name the file. The SIF file name should be a combination of your MOHRE employer ID, date, and time. Also, ensure the file is saved in the .SIF file format.
Note: For smooth and error-free WPS UAE salary transfers, it is crucial to enter accurate and complete information in the SIF.
Employers must strictly follow the WPS regulations in the UAE. If they fail to do so, they shall face the fines and penalties.
The penalties for delaying the salary or wage payment depends on the size of the defaulting company:
If the wages or salary due are not paid within 10 days of due date, the following penalties would apply:
If the delay is more than 30 days from due date:
If the delay is more than 60 days from due date:
In case the payment is delayed for more than 60 days, such companies will face:
In case the same default happens twice a year, penalties applicable on companies more than 100 employees will be applied.
Companies who deliberately provide incorrect data so that they can reduce the salary and wage payments will face fine of EAD 5,000 per affected employee. The fine can go up to AED 50,000 for multiple employees.
Companies who force their employees to sign a fake salary slip so that they can avoid paying salaries or wages to them will have to pay AED 5,000 fine per worker.
The compliance of WPS UAE regulations is very important for employers. Not only it leads to fines and other punishments but in the long run the image of the company also gets distorted. That is why it is best to get assistance from the legal experts who can help you understand and meet the WPS requirements better.
Other than meeting all the WPS requirements, a company can also maximize the value of WPS. How? By choosing the right agent! The right agent makes the process of WPS compliance smooth and error-free. Be it the preparation of SIF files in the right format or making the payments of salaries or wages on time, a reliable agent will help you through it and make the entire process fast, error-free, safe, and, lastly, cost-effective. Moreover, they can help you with employee bank accounts too. Thus, they can help create a secure, safe, and healthy work environment for your company and fostering positive relationships built on trust.
In case you have any other doubts or want to know more about WPS UAE, please contact our legal experts at Dubiz Business Setup. With over seven years of expert experience, we have facilitated countless business setups in Dubai and helped entrepreneurs with legal matters be it WPS, labour or Emiratisation law. Let us know how we can help you:
WPS system UAE is an electronic payment distribution system that allows the disbursements of salaries and wages to the employees by the private sector companies.
The WPS was established by Ministry of Human Resources and Emiratisation in association with the Central Bank of UAE.
Companies with a minimum of 10 employees are subject to WPS compliance.
The documents typically required for WPS registration in UAE include:
Here are ways through which employees can withdraw their salary through WPS Dubai:
The penalty for the delayed payment of salary for 60 days is AED 5,000 per affected worker.