What is WPS in the UAE?

Understanding the Wage Protection System (WPS) is essential within the framework of UAE Labour Law, yet it often poses challenges for both employers and employees.

It's vital for all parties involved to grasp the concept of WPS in the United Arab Emirates (UAE).

In this comprehensive guide, we will explore the intricacies of WPS, shedding light on its significance and implications within the UAE context.

What is WPS in the UAE - Introduction, Origin and Benefits

The Wage Protection System (WPS) in the UAE was established in July 2009 through Ministerial Decree No. 788, as part of the Ministry of Human Resources and Emiratization (MoHRE) initiative in collaboration with the Central Bank of the UAE.

This significant measure was further reinforced by Ministerial Decree No. 739 of 2016, with additional clarifications and regulations introduced on September 1, 2019.

WPS serves as a safeguard for employees' wages in the UAE, ensuring they receive their rightful salaries promptly.

Central to its operation is a comprehensive database where employers are required to upload salary information for their employees, which is then validated by MoHRE and the Central Bank.

The implementation of WPS is crucial in curbing unlawful practices by employers, such as underpayment, salary delays, or utilizing illicit sources of funds.

Such actions not only violate the rights of employees but also strain the employer-employee relationship within organizations.

See also: Minimum Wage in Dubai, UAE 2024 - What You Need to Know!

What are the Benefits of WPS in UAE?

The Wage Protection System (WPS) in the United Arab Emirates (UAE) is a pivotal mechanism established to ensure that employers fulfill their obligation of paying accurate and timely salaries to their employees.

Originating in July 2009 under Ministerial Decree No. 788, the WPS initiative was driven by the Ministry of Human Resources and Emiratization (MoHRE) in collaboration with the Central Bank of the UAE.

Subsequently, Ministerial Decree No. 739 of 2016 further fortified this system, with additional clarifications and regulations introduced on September 1, 2019.

At its core, WPS is designed to minimize disputes between employees and employers by guaranteeing adherence to the UAE Labour Law, which explicitly outlines the rights of employees regarding their remuneration.

By providing a robust framework for the timely and accurate payment of salaries, WPS not only upholds the rights of employees but also fosters a conducive work environment built on trust and fairness.

Moreover, the benefits of WPS extend beyond employees, as it also serves the interests of employers.

By streamlining payroll processes, WPS enhances operational efficiency and reduces the risk of errors or legal complications.

Additionally, adherence to WPS regulations acts as legal proof for employers, mitigating potential disputes and safeguarding their interests.

In summary, the WPS in the UAE is instrumental in promoting transparency, compliance with labour laws, and fair treatment of employees.

Its implementation underscores the commitment of the UAE government to uphold the rights of workers and ensure a harmonious workplace environment conducive to productivity and mutual respect.

Related: UAE Salary Calculator

How to Register for WPS in UAE?

Registering for the Wage Protection System (WPS) in the UAE is essential for all employers, ensuring compliance with regulations while benefiting both employees and employers alike.

Before initiating the registration process, it's crucial to understand the following requirements:

1.   Corporate Bank Account: Employers must possess a corporate bank account registered within the UAE. This account will be utilized for the disbursement of employee salaries through the WPS.
2.   Contract with WPS Agent: Employers must establish a contractual agreement with a designated WPS agent. This agent, which can be a bank, exchange house, fintech entity, or another financial institution, will facilitate the timely payment of wages to employees within the organization.
3.   Adherence to Deadlines: Salaries must be disbursed to employees in accordance with the deadlines outlined in Ministerial Decree No. 788. It is imperative for employers to ensure punctuality in wage payments to maintain compliance with WPS regulations.
4.   Salary Distribution Requirements: Employers are obligated to distribute 70% of all staff wages, with exceptions for certain unpaid leaves, and a minimum of 75% of total wages or salaries. This distribution criterion ensures fair and equitable remuneration for employees.
5.   Financial Obligations: Employers must agree to bear any fees, charges, or expenses associated with the implementation and operation of the WPS. This includes costs related to the services provided by the chosen WPS agent.

By adhering to these prerequisites, employers can initiate the registration process for WPS in the UAE, thereby ensuring adherence to legal requirements while promoting transparency and fairness in salary disbursements to employees.

Related: How to Check Salary in UAE?

How does WPS in UAE work?

Understanding how the Wage Protection System (WPS) operates in the UAE is essential for employers to ensure smooth salary disbursements to their employees. The process involves four straightforward steps:

1. Preparation and Submission of SIF (Salary Information File): Employers are required to prepare and submit a Salary Information File (SIF) containing basic information about both the employer and the employees, including details such as Cost to Company (CTC), Basic Pay, perks, and deductions. This file must be submitted each time wages or salaries are paid through the WPS. Upon submission, the SIF undergoes scrutiny by a WPS agent to identify and rectify any errors before final submission. Notably, SIF submission is not required for payments like commissions, bonuses, or gratuities.
2. WPS Salary Check by MoHRE and Central Bank of UAE: Upon submission of the SIF, the Ministry of Human Resources and Emiratization (MoHRE) and the Central Bank of the UAE conduct a thorough salary check to verify the accuracy of the information provided in the SIF and ensure compliance with WPS guidelines. For instance, MoHRE verifies whether the employer meets the requirement of paying at least 75% of salaries to employees.
3. Issuance of Payment Order to WPS Agent: Upon successful completion of the salary check, MoHRE and the Central Bank issue a payment order to the WPS agent, authorizing the transfer of funds for salary disbursement.
4. Transfer of Money to Employee Accounts: Following the issuance of the payment order, WPS agents transfer the designated funds directly to the bank accounts of employees. Many banks acting as WPS agents issue specialized WPS Payroll cards, functioning as debit cards for convenient access to salary funds.

To optimize efficiency, employers should ensure that employees possess bank accounts and debit cards to facilitate the seamless transfer and withdrawal of salaries. Additionally, promptly addressing any errors identified during the process is crucial to avoid penalties and late fines, thus maintaining compliance with WPS regulations.

How to prepare SIFs for WPS in UAE?

Preparing error-free Salary Information Files (SIFs) is crucial for utilizing the Wage Protection System (WPS) in the UAE effectively.

Let's explore how to prepare SIFs and understand their format:

WPS SIF Format:

1. Use of Excel Document: Begin by opening a blank Excel file, as every SIF file is maintained in this format.
2. Employee Details Record (EDR): The core component of the SIF is the Employee Details Record, which comprises essential information for each employee. Here's a breakdown of the details to include in each column for every employee: Employee Details Record, Employee's 14-digit labour card number, Bank Routing Code, Employee's bank account number, Start date of the salary, End date of the salary, Number of days for which the salary is paid, Fixed or basic salary of the employee, Variable salary, Number of leaves per year

Also Read: UAE Labour Card: A Complete Guide to UAE's Work Permit

By meticulously filling out each column with accurate and up-to-date information for every employee, employers can ensure the preparation of error-free SIFs for WPS in the UAE.

This organized approach facilitates smooth processing and compliance with WPS regulations, thereby enhancing efficiency and transparency in salary disbursements.

Must Read: Overtime Calculation in UAE Made Simple: Learn How

Fines and Penalties for Non-Compliance

Non-compliance with the Wage Protection System (WPS) in the UAE can lead to fines and penalties, particularly in cases of payment delays or intentional misinformation. 

Here's a breakdown of the fines and penalties associated with non-compliance:

Payment Delays:

• For organizations with 100 or more employees, failing to pay wages within 10 days of the due date incurs penalties.
• From the 16th day of payment delay, the company loses the privilege of obtaining work permits.
• The employer is prohibited from establishing any new companies.
• The Ministry of Human Resources and Emiratization (MoHRE) reserves the right to take action against all other companies owned by the defaulting employer.
• The organization may be downgraded to the third category.
• Workers are permitted to seek alternative employment opportunities.

Other Forms of Non-Compliance:

• Organizations intentionally providing incorrect information to evade salary obligations face fines of up to AED 5,000 per affected worker, with a maximum penalty of AED 50,000 for multiple affected employees.

It is crucial for employers to adhere to WPS regulations to avoid such penalties and maintain compliance with UAE labour laws.

Failure to comply not only incurs financial penalties but also tarnishes the organization's reputation and disrupts the employer-employee relationship.

Thus, prioritizing adherence to WPS guidelines is essential for fostering a fair and respectful work environment while upholding legal obligations.

How to get the best return from WPS in UAE?

To optimize the benefits derived from the Wage Protection System (WPS) in the UAE, beyond meeting regulatory requirements, selecting the appropriate agent is crucial. Here's how you can ensure the best return from WPS:

1. Choose the Right Agent: Selecting a reliable and reputable WPS agent is paramount. The right agent will ensure compliance with regulations, avoiding penalties and fines, and adhering to deadlines without fail. This minimizes the risk of non-compliance and associated financial repercussions.
2. Efficient Payment Processing: A proficient WPS agent facilitates seamless and cost-effective payment processing for employers. By leveraging efficient payment methods, such as electronic transfers, the agent streamlines the salary disbursement process, ensuring timely and hassle-free payments to staff members.
3. Reliable Salary Distribution: A competent WPS agent guarantees that all employees, regardless of their salary level, receive their wages punctually. This reliability fosters trust and satisfaction among employees, enhancing morale and productivity within the workforce.
4. Cost-Effective Solutions: Opting for an agent that offers cost-effective solutions for WPS implementation can yield significant returns for employers. By minimizing expenses associated with WPS compliance, such as service fees or charges, employers can maximize their financial gains.
5. Comprehensive Support: Choose an agent that provides comprehensive support and guidance throughout the WPS process. Whether it's assistance with documentation, troubleshooting issues, or addressing queries, reliable support enhances the overall efficiency and effectiveness of WPS implementation.

By prioritizing the selection of the right WPS agent and leveraging their services effectively, employers can optimize returns from WPS implementation in the UAE.

This ensures smooth compliance with regulations, efficient salary disbursements, and ultimately, fosters a conducive work environment conducive to organizational success.