Understanding what is WPS in UAE is important for both employers and laborers as it has been a significant part of labor relations of the country since 2009. The Wage Protection System (WPS) is an electronic salary transfer system to ensure the timely transfer of wages to the workers.
UAE is one of the top choices for foreigners for many reforms, one of which is WPS. The government of UAE has launched to solve any kind of imbalance in the distribution of payments. Employers must understand the WPS system as failure to comply can result in fines. As an employee it is important to understand the system 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. The system was further supported by Ministerial Decree no.739 of 2016. Generally, WPS is a wages transfer process through an electronic system that is responsible for the wages of workers in the UAE. The system ensures the workers are paid on time and the right amount of salary as mentioned in the contract.
WPS has an electronic database system where companies are required to upload the files of Salary Information for MoHRE and the central bank. Both authorities confirm and validate the salary details before the transfer of 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, delaying the wages, using funds from illegal resources or using offshore accounts to avoid paying the salaries. Due to these unfair conduct often caused disputes and breakdown of trust between employers and workers.
The WPS system is also necessary as a large number of laborers are foreigners. To resolve this issue, the MoHRE introduced the WPS system and required all companies in 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.
According to the International Labour Organization (ILO) by October 2015, 3.5 million expatriate workers in the country were benefiting from the WPS system.
How Do You Register for WPS in UAE?
It is necessary for employers of laborers in the JAFZA and UAE to be registered on the WPS program. The WPS program is designed to protect the rights of both employers and employees in the country.
Before registering for WPS, it is important to understand the following requirements.
Having a Corporate Bank Account – WPS in UAE
The employers must have a corporate bank account in a UAE registered bank for the payment of salaries.
Having a Contract with WPS Agent – WPS in UAE
The employers must have a contract with a WPS agent who will be responsible for distribution of employee’s salaries. The WPS agent can be a bank, fintech company, exchange house or a financial institution registered with the MoHRE authorities.
Comply with Payments Deadlines – WPS in UAE
The employers must make sure to send wages before the deadlines according to the deadlines mentioned in Ministerial Decree no. 788 of 2016.
Follow the Payments Percentage Requirement – WPS in UAE
Employers must pay at least 70% of all workers (except those on unpaid leave) and make sure that 75% of salaries and wages are paid through the WPS.
Agree to Pay Bank Fees – WPS in UAE
Employers must pay any kind of bank fees, provider charges, and other related payment charges.
After understanding the above mentioned requirements you can visit the website of MoHRE to set up your WPS account and get your login ID for the e-portal of WPS.
How does the WPS Work in the UAE?
After completing the above mentioned requirements and registering an account, you have to follow the steps given below.
Preparing and Submitting an ISF
An SIF means salary information file which contains basic data about the employer and employees. It includes information about salaries or wages, such as basic salary, allowances, deductions, additional bonuses, overtime payments etc of each employee.
When employers want to send salary payments, they are required to fill out and submit an SIF on the WPS. The WPS agent will check the file for any kind of error before submitting it to the WPS.
However, in case of bonuses, commissions, expenses, end of service benefits and gratuity you don’t need to fill an ISF.
WPS Salary Verification by the MoHRE and Central Bank
After submitting the SIF to the WPS, the authority of MoHRE and central bank conduct a WPS salary check to make sure the information is accurate and meets the requirements of the WPS system. Both authorities will check the criteria of paying 75% 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 there are any errors in the SIF, you will be notified through email to update and correct the SIF. It is important to make sure there are no errors to prevent any kind of fines or penalties.
Transferring Money to Employees Account
After receiving the payment order, the WPS agent will transfer the money from the employer to the account of the employees. Some banks offer a WPS payroll card for the registered employees of the company. The WPS payroll works like a debit card.
To avoid fines and penalties, employers should make sure there are no errors in the Salary Information Files (SIF) and the employees have a bank account, a normal debit card and a WPS payroll card to withdraw and transfer money.
How to Prepare SIF for WPS in the UAE?
To effectively use the WPS, the preparation of error-free SIF is important. Let us discuss the process of preparing an error-free SIF and their format.
Overview of WPS SIF Format
The first step is understanding that the SIF is kept in an excel file. Start the process by opening a blank excel file.
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,
| A | B | C | D | E | F | G | H | I | J |
| Employees Details Record (EDR) | Employee 14-digit labour card number | Bank Routing Code | Employee bank account number | Start date of salary | End date of salary | Number of days salary is paid | Fixed of basic salary of employee | Variable Salary | Number of leaves per year |
Employee Variable Pay Details
The third step involves including employee’s Variable Pay Details (EVPD). This step is necessary if your employee has a part of their pays as variables, such as bonuses and overtime.
Key Factors of Wage Protection System
The government of UAE is constantly working to refresh the rules and regulations and objectives of the wage protection system to ensure timely and fair distribution of wages across the country. Given 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 are incharge of swiftly transferring the verified wages to the accounts of employees which strengthens the trust and credibility of employers.
Resolving Wage Disputes
The structured and systematic program of WPS, administered by the Labor Disputes Settlement Committees and MoHRE resolve any kind of disputes and conflicts which shows the government’s commitment to the rights of employees 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 right knowledge of entitlement.
The wage protection system has many variations, streamlining the process of wage transfer, increasing transparency and helping boost a healthy work environment.
Benefits of WPS in UAE
The WPS system in UAE makes sure the companies pay their employees the agreed wages on time. It helps minimize the industrial disputes between labourers and employers. It makes sure the rights of employees are fulfilled and ensures transparency in employers and workers relationship.
The WPS system also benefits the employers by streamlining the process of wage payments and saving time and money. Additionally, if an employee claims to be underpaid, the WPS system acts as a legal proof for the employers.
Penalties & Fines of Non-Compliance
If you fail to meet the WPS requirements, you may face certain penalties and fines.
Delay in Payments
If there are any kind of payment delays, there will be fines and penalties according to the size of the company. If a company has 100 or more employees, the following apply if the company fails to pay wages within 10 days of salary due date (as mentioned in the contract),
- Starting from the 16th day from the date of the delay in salaries, the company will not be able to 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.
- Employee’s bank guarantee will be terminated.
- The company will be demoted 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, they will be charged with AED 5000 fine per employee.
Additionally, if a company forces its employees to sign a fake payment slip to avoid fines they will also be charged with AED 5000 per affected employee.
How to Check WPS Status of Company?
The process of checking WPS status of a company can be done 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 select the MoHRE services you want to check.
- Select “company information” from 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 what is WPS in UAE is necessary for both employers and employees in order to comply with the regulations. By following the above mentioned steps and choosing the right agent can help you maximize profits. The right agent will help you meet the payment deadlines and avoid any kind of fines.
Contact Al Riyady for all your business related queries. Our experienced team can help you resolve your business issues and save your time and money. We also provide other services including Tax Consultancy, PRO Services Dubai, and Bookkeeping.
