Wage Protection System (WPS) in the UAE – Why your new business needs to register
Setting up a business in Abu Dhabi, Dubai or the wider UAE can be a complex task. It is important to ensure that the need to fulfill any legal requirements is considered, especially when it comes to any company’s most valuable resource – their staff.
The Wage Protection System (WPS) was approved by the UAE Government in 2009 to ensure that companies pay their staff the correct amount that matches the initial offer letter and local labour contract. For all companies that have staff in the UAE it is a mandatory legal requirement to register and pay staff through WPS.
In this article, James Swallow from PRO Partner Group explains WPS, and why it is essential that companies get this set up swiftly and accurately as soon as the company or branch is formed and staff are hired.
What is the Wage Protection System (WPS)?
The Wage Protection System was set up to ensure that companies within the UAE pay their staff correctly. Ratified by the UAE Government in 2009 and supported by the Central Bank of the UAE, this system was the first of its kind in the Arab world, and was designed to help companies meet their legal obligations to pay their workers in a timely way.
It also allows the Ministry of Human Resources and Emiratisation (MHRE) (formerly the Ministry of Labour – MoL) to keep a record of private sector salary payments, so that employers failing to pay their staff on time and in full can be identified. The system therefore seeks to protect staff against the late payment (or non-payment) of their salaries.
Registering is a legal requirement for most companies
It is mandatory for all companies to register for WPS who
- Have an on-shore presence (UAE Establishment, LLC or Branch); and
- Are registered with the Ministry of Human Resources and Emiratisation (MHRE / MoL).
Companies who do not comply, or who fail to pay their staff within 10 days of the salary due date, may receive a fine, and could also receive a block on the processing of visas for new members of staff if payments are further delayed.
Note: that companies registered in a free zone are not required to use WPS as they are not registered with MHRE / MoL at all and only have registration with General Directorate of Residency and Foreigners Affairs (GDRFA or Immigration). The reason for this is at this stage staff are strictly speaking only supposed to work within that Free Zone and not within the UAE itself.
Advantages of registering for WPS swiftly with your local bank
There are several advantages for any company in using online WPS systems to pay staff:
- Streamlines the payroll and salaries function, freeing up staff time for other responsibilities
- Provides evidence that salaries and wages have been paid on time, which is important if there is ever any labour dispute
- Promotes transparency and trust between businesses and their employees, who can have confidence that they will be paid in a timely manner
- Avoids the cost and risk of handling large amounts of cash in the workplace.
The alternative to paying WPS through your local company bank account to the employees local bank account is to use a money exchange, however this is time consuming and involves cash payments but is the only alternative where a local bank account may not have been set up yet.
Note: that WPS cannot be done through foreign banks or company or employee banks that are not in the UAE.
How does the system work?
There is a 6-step process from the time the company starts the salary payment instruction, to the employee receiving the funds, as shown below:
Figure 1: The WPS payment process
What are the requirements for WPS registration?
Any company registered with the MHRE / MoL must apply. In order to register, companies must do the following:
- Hold an account with a UAE bank
- Contract directly with a UAE bank, bureau de change, or financial institution authorized by the Central Bank to deliver the salary and wage payments
- Agree to meet the deadlines for payment as set out in Ministerial Resolution no. 788 of 2009, and as amended by Ministerial Decree 739 of 2016.
- Transfer wages at least once a month within 10 days of them becoming due, or more frequently and on specified dates if that is stipulated within the worker’s contract
- Agree to meet any and all expenses associated with WPS, which could include bank charges and other institutional fees. Companies are not allowed to pass these costs on to their employees.
How to register for WPS in the UAE
All companies should initially register with a UAE bank, who should be able to offer advice on documents required to start setting up a WPS account.
The WPS system will required the MHRE / MoL number for the company (this number can be found on the company Labour Card (also called a Form 7) and the 14 digit MHRE / MoL for the individual employee (this number can be found in the middle of the Employee Labour (Gold) Card that is issued once the Labour Contract is submitted. For more information on this and where to find the correct numbers please ask.
Figure 2: Example of Employee Labour (Gold) Card showing 14 digit Labour number
Note that staff on Mission Visas must also be paid through WPS – all employees must be paid through this system.
As a general rule the company must pay no less than 80% of the total registered salaries for all employees of the company otherwise MHRE / MoL will immediately block the company and may impose an immediate fine.
In order to remove a block the company must ensure they make the payment again through WPS for all staff and potentially the company may have to present themselves at the Ministry of Labour (MHRE / MoL) with proof that staff have been paid and assurances that they are now set up and ongoing payments will be made through WPS.
For further information on how to register for the Wage Protection System (WPS) or any other related government liaison matter in the UAE and wider Gulf, or for advice on how to set up a business in Abu Dhabi, Dubai, or the UAE, contact Greg Hastings, Business Development Manager of PRO Partner Group, on email@example.com or call a member of the team on:
#WageProtectionSystem #WPS in the #UAE – Why your new #Business needs to register #Dubai #AbuDhabi #LaboutContract #MHRE #Salary #BusinessServices #CompanyFormation #BusinessSetup #PRO #PROServices https://t.co/cQc0dLKYSg
— PRO Partner Group (@PROPartnerGroup) January 23, 2018