Understanding what is WPS in UAE and its importance for employers and laborers. The wage protection system has been a significant part of labor relations in the country since 2009. It is an electronic salary transfer system that ensures the timely transfer of wages to workers.
UAE is one of the top choices for foreigners for many reforms, one of which is WPS. The government of UAE has launched WPS to solve any imbalance in the distribution of payments. Employers must understand the WPS system, as failure to comply can result in fines. Understanding the system as an employee is essential, as it will help you understand your rights and hold the employer accountable.
What is WPS (Wage Protection System) in UAE?
WPS, or wage protection system, was introduced by the Ministry of Human Resources (MoHRE) in association with the Central Bank of UAE in July 2009. Ministerial Decree No. 739 of 2016 further supported the system. Generally, WPS is a wage transfer process through an electronic system that is responsible for workers’ wages in the UAE. The system ensures the workers receive timely payment and have the right salary, as the contract mentions.
WPS has an electronic database system where companies must upload Salary Information files for MoHRE and the central bank. Both authorities confirm and validate the salary details before transferring the salary to the employees.
The WPS became necessary due to the unethical behavior of some employers, who refused to pay the right amount of salary, delayed wages, used funds from illegal resources, or used offshore accounts to avoid paying wages. This unfair conduct often caused disputes and a breakdown of trust between employers and workers.
The WPS system is also necessary as many laborers are foreigners. To resolve this issue, the MoHRE introduced the WPS system and required all companies in the UAE to follow it. Except for Jebel Ali Free Zone (JAFZA), all other free zones and UAE government-owned or some royal companies are exempt from it.
The International Labour Organization (ILO) stated that 3.5 million expatriate workers in the country were benefiting from the WPS system by October 2015.
How Do You Register for WPS in UAE?
Employers of laborers in the JAFZA and UAE must register with the WPS program, which protects the rights of both employers and employees in the country.
Before registering for WPS, it is essential to understand the following requirements.
Having a Corporate Bank Account
Employers must have a corporate bank account in a UAE-registered bank to pay salaries.
Having a Contract with WPS Agent
Employers must contract with a WPS agent, who will distribute employee salaries. The WPS agent can be a bank, fintech company, exchange house, or financial institution registered with the MoHRE authorities.
Comply with Payments Deadlines
The employers must send wages before the deadlines according to the deadlines mentioned in Ministerial Decree No. 788 of 2016.
Follow the Payments Percentage Requirement
Employers must pay 70% of all workers (except those on unpaid leave) and 75% of salaries and wages through the WPS.
Agree to Pay Bank Fees
Employers must pay bank fees, provider charges, and other related payment charges.
After understanding the requirements mentioned earlier, you can visit MoHRE’s website to set up your WPS account and get your login ID for the WPS e-portal.
How does the WPS Work in the UAE? – What is WPS in UAE?
After completing the requirements mentioned above and registering an account, you must follow the steps below.
Preparing and Submitting an ISF – What is WPS in UAE?
A SIF is a salary file containing basic data about the employer and employees. It includes information about each employee’s salary or wages, such as basic salary, allowances, deductions, additional bonuses, overtime payments, etc.
Employers who want to send salary payments must complete and submit an SIF on the WPS.
The WPS agent will check the file for any errors before submitting it to the WPS.
However, you don’t need to fill out an ISF for bonuses, commissions, expenses, end-of-service benefits, and gratuities.
WPS Salary Verification by the MoHRE and Central Bank
After submitting the SIF to the WPS, MoHRE and the central bank conduct a salary check to ensure the information is accurate and meets the WPS system’s requirements. Both authorities will check the criteria for paying 75% of salaries to their workers.
Issuing Payment Order to the WPS Agent
After successful verification, MoHRE and Central Bank will issue payment orders to the WPS agent.
If the SIF contains errors, the authorities will email you to update and correct them. It is essential to ensure no mistakes to prevent fines or penalties.
Transferring Money to Employees’ Accounts
After receiving the payment order, the WPS agent transfers the money from the employer to the employee’s accounts. Some banks offer a WPS payroll card for the company’s registered employees. The WPS payroll card works like a debit card.
To avoid fines and penalties, employers should ensure that the Salary Information Files (SIF) are error-free and that employees have a bank account, a regular debit card, and a WPS payroll card to withdraw and transfer money.
How to Prepare SIF for WPS in the UAE? – What is WPS in UAE?
Preparing an error-free SIF is crucial for effectively using the WPS. Let’s discuss the process of preparing an error-free SIF and its format.
Overview of WPS SIF Format
The first step is understanding that the SIF is kept in an Excel file. Open a blank Excel file to start the process.
Employee Detail Record (EDR)
The second step is to enter the Employees Detail Record (EDR), which is the basic information of each worker. Every employee will have a row that starts with the EDR column (One EDR for one employee. Here’s how,
Employees Details Record (EDR) Employee 14-digit labor card number Employee bank account number Bank Routing Code Employee bank account number Start date of salary End date of salary Paid Salary days Fixed basic salary of employee Variable Salary Number of leaves per year
Employee Variable Pay Details
The third step involves including the employee’s Variable Pay Details (EVPD). This step is necessary if your employee has a part of their pay as variables, such as bonuses and overtime.
Key Factors of the Wage Protection System – What is WPS in UAE?
The UAE government constantly works to refresh the rules, regulations, and objectives of the wage protection system to ensure the timely and fair distribution of wages across the country. Below are the key factors involved in the WPS program.
Keeping Track of Salary Payments
The system is designed to ensure compliance with the employment contract, protects the rights of employees, and covers all private sector companies in the UAE.
Swift Salary Payments
The WPS-designated agents swiftly transfer verified wages to employees’ accounts, strengthening employers’ trust and credibility.
Resolving Wage Disputes
The structured and systematic WPS program, administered by the Labor Disputes Settlement Committees and MoHRE, resolves all kinds of disputes and conflicts, which shows the government’s commitment to employees’ rights and harmony in the industry.
Compliance with the Labor Laws
The UAE’s labor law enforcement shows the importance of accurate data submission and following the timeline of payments for employers while empowering employees with the proper knowledge of entitlement.
The wage protection system has many variations. It streamlines wage transfer, increases transparency, and helps boost a healthy work environment.
Benefits of WPS in UAE – What is WPS in UAE?
The WPS system in UAE ensures that companies pay their employees the agreed wages on time. It helps minimize industrial disputes between laborers and employers, ensures the fulfillment of employees’ rights, and ensures transparency in the relationship between employers and workers.
The WPS system also benefits employers by streamlining wage payments and saving time and money. Additionally, if an employee claims to be underpaid, the WPS system acts as legal proof for the employers.
Penalties & Fines of Non-Compliance
If you fail to meet the WPS requirements, you may face specific penalties and fines.
Delay in Payments
If there are any payment delays, there will be fines and penalties according to the company’s size. If a company has 100 or more employees, the following apply if the company fails to pay wages within 10 days of the salary due date (as mentioned in the contract),
- Starting on the 16th day, the date of the salary delay, the company cannot get any work permits.
- The owner will not be able to register any new companies.
- The MoHRE will take action against the companies owned by the owner.
- The company will terminate the employee’s bank guarantee.
- The authorities will demote the company to the third category.
- Employees will be allowed to move.
Other Forms of Non-compliance and Fines
If a company intentionally provides incorrect information to avoid fines, the authorities will fine it AED 5000 per employee.
If a company forces its employees to sign a fake payment slip to avoid fines, the authorities will fine it AED 5000 per affected employee.
How to Check the WPS Status of the Company? – What is WPS in UAE?
You can WPS status of a company by doing the following,
- Open the official website of MoHRE.
- Go to the “Services” tab on the homepage and select “New Enquiry Services”.
- A new page will open where you can choose the MoHRE services you want to check.
- Select “company information” from the bottom down
- Enter the company’s number
- You will be able to see all information about the company and the status of WPS.
You can also contact the MoHRE service center to request a company’s WPS status.
Final Words
All in all, understanding WPS in UAE is necessary for both employers and employees to comply with the regulations. Following the earlier steps and choosing the right agent can help you maximize profits. The right agent will help you meet the payment deadlines and avoid fines.
Contact Al Riyady for all your business-related queries. Let our expert team of consultants handle your business issues and save you time and money. We also provide Auditing Services, Accounting Services, Tax Consultancy, Business Valuation, and more.
