What is the concept of WPS in the UAE?

09 Mar 2022

Years after the Wage Protection System (WPS) was enacted, the UAE people admitted in the 2017-2018 workers welfare report that WPS entitles Emiratis and captive talent from around the world. It has prevented labour disputes, retained wage provisions, and refrained from acquiring a considerable amount of money at the workplace.

 

“Paying good wages is not charity at all; it is the best kind of business”

– Henry Ford.

Progress after its implementation: WPS in the UAE

In the entire Arab world, Wages Protection System was the first of its kind, reflecting the pioneering role of the UAE in safeguarding the worker’s wage and enhancing transparency and competitiveness to strengthen the work relationships in the country. In 2015, it was estimated that approximately 3.5 million foreign workers are benefited from WPS. Thus, more than 92% of the country is protected by the WPS. Wage Protection System (WPS) of the UAE is an electronic salary transfer system created by the Ministry of Human Resource & Emiratization (MoHRE) is associated with the Central Bank of the United Arab Emirates. Followed by the Ministerial Decree No. 788 of 2009, the WPS came into force in July 2009 and was further strengthened by another Ministerial Decree No 739 of 2016. The provision allows the Ministry of Labor to form a database that records wages in the private sector to safeguard the timely and complete payment of agreed wages. It instructs all the businesses registered under the MoHRE to remit wages to their employees via banks, bureau de change, and through other financial institutions approved and authorized by the UAE Central Bank as a payment system. WPS covers all institutions registered with the Ministry across various sectors of industry types and labour.

If you are planning to start a new enterprise or business in the UAE, it is pertinent to notice more about the Wage Protection System. This article will know more about the WPS, its features, requirements, consequences on failing to use WPS, and how this system works.

Features of Wage Protection System

Wage Protection System is the initiative of the UAE aimed to enable a dynamic economy that guarantees the timely and complete payment of the agreed-upon wages to safeguard the interests of the workers and attract talents across the globe. The targets of WPS are workers, employers, banks, and agents. The significant features of the Wage Protection System can be summarized as follows:

  1. It Safeguards the worker’s wage and the payment of stipulated salaries;
  2. Making the salary process easy for the employers and providing innovative solutions for the employers to protect their interests is time-consuming and effortless;
  3. It improves job security and strengthens work relationships in the UAE, which ensures all the workers’ rights;
  4. It provides protective and proactive measures to avoid labour/ industrial disputes which involve workers.
  5. It enhances transparency and competitiveness in work relationships;
  6. It allows the UAE Ministry of Labor to regularly update the wages data in the private sector, which will help the government administer the labour market effectively; and
  7. Anticipate and prevent the risk correlated with handling a massive amount of money.

Requirements for WPS

Wages Protection System is a mandatory legal requirement in the UAE for businesses registered under the MoHRE. Such registered companies must adhere to this system as their mode of salary payment. There are some requirements to be fulfilled for joining WPS as the company summarized as follows:

  1. The company must be registered with the Ministry and have a bank account with any banks operating in the UAE;
  2. The company must enter in to contract with any of the banks or financial institutions approved by the Central Bank of the UAE to issue services. The MoHRE has a list of authorized agents, and the employer could choose any one of them in the list. Both of the parties should agree on the services, payments, and other charges;
  3. The institution will transfer the wages through the WPS by the deadlines defined in Ministerial Resolution No. 788 of 2009. Within the two weeks of their due date or on the date stipulated in the employment contract, the financial institution will transfer the salaries through WPS; and
  4. All the bank fees, expenses, provider charges, and other costs incurred on joining the WPS will be the employer’s responsibility as the employer cannot deduct any such costs from the wages of the workers.

Mechanism to Apply in WPS

For joining the Wages Protection System, there are specific steps and procedures. There are five essential steps to be followed to apply in WPS, termed as mechanisms. They are summarized as follows:

Step 1: The company must open an account in one of the banks operating in the UAE.

Step 2: The company shall enter into the contract with a WPS agent sanctioned by the Central Bank of the UAE, such as banks, bureau de change, or any other financial institution. The company will receive a login ID for the WPS e-portal through which everything is done.

Step 3: The employer shall give directions to the bank to transfer the salaries to the workers. Details such as an elaborate wage list and copies of such lists are sent to the agent.

Step 4: WPS will dispatch the wage details and salary transfer instructions of the workers to the Central Bank of the UAE electronically and will be further forwarded to the labour database of the Ministry to ensure that the details received are corresponding and appropriate with those registered in the Ministry.

Step 5: The WPS will send authorized information to the scheduled agent to release the payments and credit the worker’s accounts accordingly.

Penalties for the Delayed Payment of the Wages

WPS is compulsory for all businesses or companies who have registered with MoHRE as they must adhere to the system to pay wages for the workers. So, there will be consequences who fail to join in WPS. The companies that fail to join WPS will be blocked from all new work permits until the salary is paid fully. If the employer continued the violation, then all the new work permits will be denied for a month after the wages are paid. In the instances of third and repeated violation employer will be banned for the work permit for two months, and for the fourth, it will be three. The ban will only be lifted only after the complete payment of the worker’s wage if the institution that delayed the wage payment a month after the due date will be subjected to suspension of their licenses. The work permits of such companies will be denied along with the all-other institutions owned by the owner of the violated institution, i.e., no new visas are allowed for the new applicants of the same owner. Hence such companies will be downgraded as the ‘Third category’ Let’s look into the fines for evading WPS. The apply for the WPS submission and the steps to avoid any penalties could have been easily carried out if a competent corporate lawyer is hired at the time of company registration. To cover all corporate commercial costumes required.

Fines for Avoiding WPS

An employer is considered a late payer if the salaries are not remitted to the workers within ten days of the due date: the next day of the salary period. As per Ministerial Resolution No 15 of 2017, the fines are charged for the illegal or fraudulent usage of WPS.

  1. Any person who entered incorrect data for evasion will be charged with a fine of AED 5000 for each worker and a maximum of AED 50,000 in the case of multiple workers.
  2. If any failed pay the wages on the due dates through WPS, then will be charged with a fine of AED 1000 per worker.
  3. If any employer forced their workers to sign on fake payment slips stating that they have received their salaries, they would be charged with a fine of AED 5000 per worker.

A commonly raised question is there any specified minimum salary or prescribed number of workers for joining WPS? No, there is no minimum wage for workers. Employing one or more workers and anyone registered with MoHRE is adhered to join Wage Protection System for the electronic payment of their wages. Staff on mission visas are also paid via WPS, which means all employees must be paid through this system. The companies are adhered to pay not less than 80% of the registered salary. Otherwise, MoHRE will block the company and charge an immediate fine. Through WPS, the salary withdrawal is very convenient that the workers could withdraw using the card system. The system reflects the UAE’s willingness to protect and ensure all the fundamental rights of concerned parties. Thus, Wage Protection System is a step in the right direction as efficiency in the system could provide excellent transparency and stability in the wage payments.