The United Arab Emirates has always been an attractive destination for expatriates. For many of them, it’s a second home. Besides, the country has also been warm and welcoming towards its foreign guests and indulged them with growth and development. In addition, the UAE constantly comes up with new reforms and policies in favor of the expats living in the country, one of them being the Wage Protection System. The key intention of introducing WPS UAE was to solve all wage distribution inequalities and enforce fair and timely payments of salaries to the workers in the UAE.
It might sound simple, however, often it becomes difficult for many to understand the significance of the WPS regulations. So, here’s a guide with all the details on how to implement WPS, its perks, and the best practices.
Wage Protection System in the UAE: Explained
With the introduction of the Wage Protection System in July 2009, the United Arab Emirates witnessed a major revolution in the wage system. Earlier, the exploitation of employees was a usual norm, especially in the private sector where employers did everything to deprive employees of their fair wages. They used to practice illegal ways to avoid payments. This injustice tends to break the trust and confidence of employees in their employers, leading to economic deterioration.
To amend this situation, the Ministry of Human Resources and Emiratisation (MOHRE) along with the Central Bank of the UAE introduced WPS, an electronic salary transfer system that will eliminate late and unfair salary payment practices and enforce timely and rightful wages to employees in the UAE. Ever since its implementation, the UAE government has been consistent in updating and remodeling it to suit the needs of both employers and employees.
Importance of WPS UAE
The Wage Protection System ensures secure, timely, and appropriate salary payments to employees, especially in the private sector. To impose this system in the organization, the employer needs to seek approval from MoHRE and the Central Bank and pay out funds from a registered financial institution in the UAE.
This process is mandatory for all private-sector employers. First, they need to submit their Salary Information Files which will be investigated and confirmed by both the governing authorities. Later, the files will be sent to the salary distribution partner for disbursement.
Not just the employees, the WPS system can benefit employers in multiple ways. For instance, they can earn WPS-compliant status which will help them gain more talent from foreign countries. In addition, it will help them stay compliant with labor laws governing the country. The additional perks include restructuring, systematizing, and maintaining records of payouts.
Primary Functionalities of Wage Protection System UAE
Ensuring timely and equal wage distribution across the country can be challenging. Therefore, the government makes sure to revive the rules, regulations, and objectives of WPS UAE to provide what they have committed. So, here are some elite functions of the Wage Protection System UAE:
- Track the movement of money – WPS records the inflow and outflow of funds and monitors them all the time. This helps the system in detecting delays in payments and other similar discrepancies. It also ensures that there is no association of illegal or fraudulent sources in the business procedure.
- Impose effective data monitoring – The data of the employees and their salary records are regularly sent to the Labour Regulatory Authority (LRA) which conducts routine checks and monitors them frequently.
- Ensure order and clarity – The system validates the salary details of employees and then forwards them to the organization that distributes the funds.
- Facilitate bank transfers – The WPS system in the UAE accepts payment transfers from the bank account of the employer to the accounts of the agents.
- Execute salary distribution – Further, it approves the receipts sent from agents that detail the payable and disbursed amounts to employees and also accepts refund requests from agents and employers.
Benefits of WPS UAE
The Wage Protection System UAE has a lot to offer to both employers and employees. Here’s a list of some of the benefits one can avail from this framework –
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For employees:-
- Uniform pay-out – Ensures timely disbursement of salaries, thereby safeguarding the rights and interests of employees and keeping them financially secure.
- Transparent payments – Mandates employers to disclose the payments made to the employees, leaving no room for unethical practices. This restores trust and confidence between both parties.
- Secure finances – Spares the employees from the hassle of financial troubles due to non-payment of wages, thus encouraging financial growth and strength in the nation.
- Economic upliftment – Contributes towards a better economy and lifestyle by ensuring equality in pay and financial security among the workforce
- Productivity improvement – Makes sure that the employees receive their salaries on time so that they strive and excel in their jobs and have a better quality of life, both professionally and personally.
For employers:-
- Compliance – Serves as a ticket to compliance with the labor laws, where they can get protection from legal breaches, penalties, and fees.
- Safe financials – Provides financial stability to employers and saves them from legal cases and troubles.
- Operational efficiency – Streamlines the disbursal process, which subsequently saves time and money for the employers.
- Reduced legal troubles – Protects employers from fraudulent employee cases; Deals with non-payment fraud cases easily and efficiently.
- High reputation – Serves as a trademark of trust; inspires employees to choose the WPS-compliant employers.
Registering for WPS UAE
To get started with the registration process for WPS, employers must ensure the following requirements –
- A business account with a certified UAE bank.
- An agreement with the WPS agent, a MoHRE-approved institution such as a bank, an exchange, a FinTech company, or any other financial organization that executes salary disbursement to employees.
- Details of all employees and their salary ranges.
- Payroll details.
Additional information:-
- Employers are required to follow the payroll timelines described in Ministerial Decree No. 739 of 2016.
- As per the terms and conditions, the employers are mandated to pay a minimum of 70% of all staff and 75% of their payments.
- The bank fees, provider charges, and other payment costs and expenses must be borne by the employer.
Wage Protection System UAE: Monthly Process
Registering for WPS UAE is a one-time step. Thereafter, employers have to undergo a monthly process to ensure prompt salary disbursals. Here is the step-by-step procedure to the monthly WPS process:
- Submission of Salary Information file
- Approvals from MoHRE and Central Bank
- Payment orders to the WPS agent
- Salary distribution by the WPS agent
Consequences of non-compliance
Breaching any WPS regulations can be subject to strict penalties, in addition to the loss of reputation of the employer. The penalties for non-compliance may include the following:-
- Loss of work permit
- No permission to register new subsidiaries or brands
- Legal consequences for branches or daughter companies
- Liquidation of bank guarantee
- Loss of prime status
- Referral to court
Best practices for WPS UAE
The following tips can help you stay compliant with the Wage Protection system in the UAE and avoid any penalties –
- Establish transparent salary policies
- Ensure accuracy in payments
- Maintain compliance with regulations
- Use an accredited payment solution
How Shuraa can help
Now, save yourself the hassle of getting into every bit and piece of WPS UAE. Let the experts at Shuraa handle it for you. For further details on the purpose and functionalities of the UAE’s Wage Protection System, get in touch with Shuraa today. Book a free consultation at www.shuraa.com
