A Comprehensive Guide to UAE Wage Protection System for HR and Payroll Managers

United Arab Emirates (UAE) with its booming economy and diverse job markets, attracts talents across many countries. Their dynamic and vibrant workplace flourishes a rich culture and business innovation. Having said that, with such a multinational workforce, ensuring a fair payroll practice is significant. The UAE’s Wage Protection System (WPS) requires all businesses to understand the intricacies of payroll management.

Implementing Wage Protection System not only promotes transparency and accountability, but also it is an initiative aimed at providing a stable and trustworthy workplace. This reinforces UAE’s commitment to protecting employee’s rights for its rapidly growing economy.

What is a Wage Protection System (WPS)?

Wage Protection System (WPS) is an electronic wage transfer system designed to safeguard employee’s wages working in a company. It ensures accurate and prompt payment of wages via banks or financial institutions approved by the organization. It creates a fair and secure environment by reducing wage-related conflicts, protecting worker’s rights, and ensuring compliance with the UAE’s labour laws.

Launched in 2009, the Ministry of Human Resources Emiratization (MoHRE) in association with the Central Bank of UAE implemented Wage Protection Systen (WPS) with Ministerial Decree No. 788. After a few modifications, this initiative was further reinforced by the Ministerial Decree 739 of 2016. Later, on 1st September 2019, there were regulations to update WPS regime.

The Importance of WPS in the UAE

The WPS in the UAE has a centralized database to store all the employees’ details for payroll processing. It requires companies to update their relevant information and is validated by the MoHRE and the Central Bank in the UAE. Based on the requirements of WPS, it can prevent employers from paying inappropriate wages, delaying salary day, and usage of illegal funds.

The parties involved in the WPS are:

• Employees: These members are a part of the organization for payroll processing. They need to provide valid labour cards to process their WPS payroll in the UAE.
• Employers: They help in registering the payroll processes with MoHRE and WPS to automate payroll operations.
• Banks: Any bank in the UAE can aid and be a part of the companies to provide payroll for their employees.
• Agents: Other financial institutions and bureau de change that the Central Bank has authorized for salary payments via WPS payroll process.

The primary goal of WPS:

• Ensures on time payment of salaries
• Reduces administrative workload for payroll processing
• Streamlines payroll operations and avoids legal complications
• Promotes a transparent and secure wage distribution system
• Improves job security of the employees working in the UAE’s private sector
• Tracks and monitors the employee’s payment to minimize the risk of disputes
• Offers a reliable employee database which gets updated periodically
• Encourages a positive workplace atmosphere between employees and employers.

How to Register for WPS in the UAE?

In the UAE, Wage Protection System (WPS) is one of those basic procedures. It requires extreme attention to details and compliance with the requirements set by the MoHRE. Employers must abide by the rules and regulations of WPS, so long as they work in the UAE region.

The following prerequisites must be known prior to registering for WPS:

• Employers must have a UAE-registered bank account.
• The WPS agent in charge of paying the employees’ salaries in the company needs to be bound by a contract. A WPS agent can be any type of financial institution, including banks and exchanges.
• Employees must receive their wages by the dates specified in Ministerial Decree No. 788, as revised in Ministerial Decree No. 739 of 2016.
• 70% of all employees (except certain unpaid time off) and at least 75% of wages or salaries must be paid by the employer.
• Payments must be transferred at least once a month, within 10 days of their due date, or more frequently as specified in each employee’s contract.
• Employers must consent to pay any fees, charges, or other WPS-related expenses.

How Does WPS Work in the UAE?

After registering your bank account, here is a detailed breakdown of how WPS operates in the UAE for timely payments to the employees:

Step 1: Preparation and Submission of SIF

Salary Information File (SIF) is a document consisting of information on all your employees’ incomes, including basic pay, bonuses, and deductions. Employers submit the SIF documents to the WPS portal every time you pay salaries or wages.

This file goes through a WPS agent. They check for any faults in the SIF documents and make necessary changes before submitting it to the WPS. On the other hand, you do not need to fill out SIF documents for commissions, allowances, and end-of-service benefits.

Step 2: WPS Salary Check by the MoHRE and Central Bank of UAE

Once SIF is submitted to the WPS portal, both MoHRE and Central Bank of UAE audit a salary check. By doing so, all the companies will be officially complying with the labour laws and regulations. To give an example, MoHRE will be verifying whether you are meeting the requirement to give employees at least 75% of their salaries.

Step 3: Issuance of Payment Order to Your WPS Agent

If the salary information does not meet the WPS guidelines, the employers will be required to update any discrepancies before proceeding. Post verification and approval, the MoHRE and Central Bank issue a payment order to the agent assigned by the employer.

The payment order is transmitted securely by the WPS agent through an electronic database, ensuring confidentiality and accuracy in the payment process.

Step 4: Salary Transfer from WPS Agent to Employee Account

As provided in the SIF document, the agent initiates the transfer of salaries from the employer’s account to the respective employee’s bank accounts. This entire transaction process is carried out in real-time by the MoHRE and Central Bank to ensure transparency and adherence to WPS regulations.

How to Create SIF format for WPS?

The Salary Information File (SIF) encompasses all the necessary employee details recorded in an excel sheet. To process penalty-free WPS in the UAE, an error-free SIF makes the payment process more efficient.

There are two components included in SIF documentation — Employee Details Record (EDR) and Salary Control Record (SCR). The information to create a SIF document are listed below:

Employee Details Record (EDR):

• Employee Details Record
• Employee 14-digit labor card number
• Bank Routing Code
• Employee Bank Account Number
• Start date of salary
• End date of salary
• Number of days during which salary is paid
• Fixed or Basic Salary for Employee
• Variable Salaries
• Number of leaves every year

Salary Control Record (SCR):

• Salary Control Record
• 13-digit Agent ID
• Bank routing code
• File creation date
• Time of file creation
• Payroll month and year
• Number of records in the file
• Total amount of salary paid
• Payment currency (in AED)
• Optional field

Methods to Withdraw Salary from WPS

There are several methods to withdraw salary from the Wage Protection System (WPS) after the salaries have been transferred to the employee’s bank account. Here are a few ways that employees can withdraw their salaries:

1. Through WPS card

In case if any employee does not have a relevant bank account, they can register for a WPS card. This is a cost-effective method a company can provide to keep them compliant with the labour laws. Moreover, companies registered with WPS payroll can exchange money seamlessly all across the UAE.

2. Through ATM card

ATMs are the most convenient method to access money anytime, anywhere. Most banks in the UAE offer ATM networks to withdraw money directly from the bank account. By doing so, employees can withdraw their salaries themselves with no effort. The banks will notify the payment transfer through SMS or email, making it a more secure process.

3. Through the bank

Employees can visit their designated bank’s branch and withdraw their salaries. They need to provide valid documents and cards for the withdrawal process. In case of queries, bank assistants are available on hand to help.

Fines and Penalties for Non-Compliance with WPS

Non-compliance with the WPS in the UAE can lead to grave consequences for the companies, including fines, work permit bans, referral to court, and business closure. To avoid these legal actions, it is crucial for employers to strictly adhere to WPS guidelines and timely payment of wages to employees. These are a few fines and penalties for non-compliance with WPS system:

• From the 16th day of payment delay to the employees, the work permit of the company is cancelled
• A fine of AED 5,000 to a maximum of AED 50,000 will be imposed as a penalty for misinformation in payroll practices
• The employer is prohibited from registering new businesses
• MoHRE can take legal action against the company owing to any evading businesses
• Companies may be blacklisted by the MoHRE which downgrades its reputation and credibility
• In extreme cases, the court may order temporary closure of business operation in the UAE

Best Practices of WPS for HR and Payroll Managers

To maximize the benefits of WPS, HR and payroll managers should follow these best practices:

• Stay informed: Update regularly on the latest rules and regulations of WPS system. Practice in relevant training workshops to know more about the advancements in payroll management.
• Proper training: Provide continuous training to HR and payroll managers on WPS processes and make sure that every employer is aware of their responsibilities
• Data management: Maintain up-to-date information on all employee records. Ensuring data integrity and accuracy is an important aspect of WPS compliance.
• Regular audits: Conduct internal audits to prevent any wage-related conflicts and provide internal communication channels for rectifying any issues.
• Software integration: Integrate payroll software with the most suitable WPS platform. One such software is Akrivia’s payroll management which offers seamless salary processing and actionable insights to HR and payroll managers.

Conclusion

The UAE’s Wage Protection System (WPS) is indispensable for practicing fair and accurate payroll operations. Furthermore, choosing the right WPS agent also plays a major role in streamlining the payment processes.

To pay your employees accurately on time, Akrivia HCM has built a global payroll solution to eliminate the stress of payroll management.

By following the information outlined in this guide, HR and payroll managers can efficiently contribute to legal compliance of WPS requirements and promoting a trustworthy workplace for all the employees in the UAE market.

What are the other best practices you want to implement in WPS? Let us know in the comments below!