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wps uae
  • By Business Consultant
  • November 26, 2024

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.

Introduction of WPS in UAE

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.

Why is such system needed

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.

Purpose and goal of WPS UAE

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

  • Providing a transparent and easy-to-use payment system
  • Strengthen the work relationship and protecting the employer and employee rights
  • Minimize the industry disputes and improve job security in private sector
  • Offer and maintain a reliable database for salary files of companies
  • Ensure that salaries are paid on time and accurately

Parties involved in WPS system UAE

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.

Registering with the WPS in UAE

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:

  • Corporate Bank Account: Hold a corporate bank account with a registered bank in the UAE.
  • WPS Agent Contract: Enter into a contract with a WPS agent authorized by MOHRE, who will be responsible for the disbursement of wages.
  • Timely Payment of Wages: Ensure wages are paid through the WPS by the deadlines outlined in Ministerial Decree No. 788, as amended in Ministerial Decree No. 739 of 2016.
  • Minimum Payment Standards: Payment should cover 70% of all staff (excluding those on unpaid leave), and at least 75% of wages and salaries must be paid.
  • Payment Costs: Any bank fees, expenses, provider charges, or other related payment costs must be borne by the employer.

How to register on WPS system UAE?

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.

Working of wage protection system in UAE

Let’s have a look at how the WPS actually works:

1. Preparation and Submission of SIF

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.

2. Salary Review by MOHRE and Central Bank

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.

3. Payment Order Issued to WPS Agent

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.

4. Money Transfer from WPS Agent to Employee Account

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.

Preparing the SIF as per WPS rules

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:

First: Create a new excel sheet

The SIF is prepared on an Excel sheet. Therefore, start by opening a blank Excel sheet.

Second: Enter EDR

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:

  1. Employee details record (must read EDR)
  2. Employee’s 14-digit labour card number
  3. Bank routing code
  4. Employee bank account number
  5. Start date of salary
  6. End date of salary
  7. Number of days for which the salary is paid
  8. Fixed or basic salary of the employee
  9. Variable salary
  10. Number of leave days per year

Third: Enter EVP

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.

Fourth: Enter SCR

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:

  1. Salary Control Record (must read SCR)
  2. 13-digit agent ID
  3. Bank routing code
  4. File creation date
  5. Time of file creation
  6. Payroll month and year
  7. Number of rows in the file (EDR only)
  8. Total amount of salary paid (fixed plus variable)
  9. Payment currency (must be AED)
  10. Optional field

Fifth: Name and save the file

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.

Penalties for noncompliance with WPS system UAE

Employers must strictly follow the WPS regulations in the UAE. If they fail to do so, they shall face the fines and penalties.

A. Fines for non-payment of dues:

The penalties for delaying the salary or wage payment depends on the size of the defaulting company:

1. For companies with more than 100 employees:

If the wages or salary due are not paid within 10 days of due date, the following penalties would apply:

  • Owner cannot register any new company
  • Cannot get work permits from 16th day of delay
  • MOHRE will act against any other companies owned by the defaulting owner
  • Employees bank guarantees will be liquidated
  • Company will be degraded to 3rd category
  • Workers will be allowed to leave

If the delay is more than 30 days from due date:

  • MOHRE will refer the defaulting company to judicial authorities.

If the delay is more than 60 days from due date:

  • A fine of AED 5,000 per affected worker will be levied, will can go up to maximum of AED 50,000 for multiple employees.

2. For companies with less than 100 employees:

In case the payment is delayed for more than 60 days, such companies will face:

  • Fines
  • Work permit ban
  • Referral to judicial authority

In case the same default happens twice a year, penalties applicable on companies more than 100 employees will be applied.

B. Fine for providing false information:

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.

C. Fine for forcing 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.

Maximizing the WPS value in UAE

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:

FAQs

1. What is WPS in the UAE?

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.

2. Who is the WPS provider in UAE?

The WPS was established by Ministry of Human Resources and Emiratisation in association with the Central Bank of UAE.

3. What are the minimum number of employees for WPS?

Companies with a minimum of 10 employees are subject to WPS compliance.

4. What documents are required for WPS registration?

The documents typically required for WPS registration in UAE include:

  • Passport copy of owner
  • Visa and Emirates ID of owner
  • Power of attorney/board resolution
  • Employees passport copies, Emirates ID, visa page
  • Sponsors Emirates ID and passport copy, if applicable

5. How can employees withdraw their salary from WPS UAE?

Here are ways through which employees can withdraw their salary through WPS Dubai:

  • WPS card: This card is for employees without bank account. They can get it from exchanges their company has tied up with.
  • ATM machine: For employees with a registered bank account, ATM card can be used.

6. What is the penalty for the WPS salary?

The penalty for the delayed payment of salary for 60 days is AED 5,000 per affected worker.

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