employee recognition

The UAE government prioritizes protecting the rights of its workforce above all else. There are many policies currently in effect that ensure the region’s diverse and inclusive workforce is taken care of in terms of salaries, benefits, and other basic employee rights.

One big step in this regard is the implementation of the Wages Protection System (WPS) which is an electronic system that ensures the fair and timely payment of the salaries of the workers in the UAE.

The WPS system facilitates transparency and fosters trust between employers and employees by streamlining payroll processes and safeguarding workers’ rights.

This blog takes a closer look at the WPS in the UAE in detail. So, if you are new to the region and have no idea what WPS is in UAE and wish to learn more about the ins and outs of this innovative system, then keep on reading till the end.

• An Introduction to the WPS in the UAE

• Benefits of the WPS

• The WPS Registration Process

• How Does the Wages Protection System Work?

• The WPS SIF Format

• Rules for Naming Your SIF

• Tips to Ensure Compliance with the WPS System in the UAE

• Consequences of Non-Compliance

An Introduction to the WPS in the UAE

WPS Full Form

WPS stands for Wages Protection System. This innovative system was first launched in July 2009 as per the Ministerial Decree No 788. This initiative resulted from the combined efforts of the Ministry of Human Resources and Emiratisation (MoHRE) and the Central Bank of UAE.

This system was further reinforced in 2016 as per Decree No 739. In 2019, additional regulations and guidelines were introduced to increase the scope as well as the effectiveness of this system.

The WPS system refers to a digital salary transfer system that facilitates fair and timely payment of salaries for workers via financial institutions like exchange houses or banks.

WPS UAE protects the wage rights of employees by ensuring transparency as well as proper compensation every single time. WPS gives employers a single centralized database where they can upload the salaries, which MoHRE and Central Bank can validate to ensure fairness.

This system acts as an effective deterrent against fraudulent practices including intentional salary delays, illegal funding sources, and unfair compensation.

WPS mandates that every employer must pay salaries through accredited financial institutions, which ensures better monitoring of wage payments, thus promoting transparency.

This way, WPS prevents labor disputes by addressing every payment-related issue on time. For employers, this system automates payroll processes, saving time, and facilitating better record keeping, which helps in case of disputes.

Benefits of the WPS

WPS has a lot of benefits both for employers and employees. Here are some notable ones that you need to know:

• It facilitates accurate tracking of fund movements like cash inflow and outflow, which eliminates fraudulent or illegal sources from your business.
• WPS ensures transparency in terms of salary details by validating the data and forwarding it to a financial organization that disburses the funds.
• This system ensures that salaries are paid on time, which safeguards employees’ finances and rights.
• The timely salary payments give the workforce financial stability, which also reflects positively on their productivity.
• WPS processes ensure your business shows compliance with the UAE labor laws.
• The WPS streamlines the salary disbursal process by automating payroll tasks and eliminating manual errors, which saves time.
• It gives employers hardcore proof that they can use to settle fraudulent non-payment cases.   

The WPS Registration Process

Every employer must register for the WPS if he or she wishes to show compliance with the labor laws and avoid potential penalties. However, before registering to this system, there are some requirements that you need to keep in mind.

• The employer needs to have a corporate bank account registered within the UAE.
• Your business must have a valid contract with a WPS agent, which can be a bank, exchange house, fintech, or any other financial institution. This agent will carry out the payment of the wages to the employees.
• The wages must be paid according to the schedule stated in Ministerial Decree No. 788 as amended in Ministerial Decree No. 739 of 2016.
• Every employer must pay at least 70% of all staff and at least 75% of wages or salaries.
• Employers have to pay bank fees, provider charges, and other expenses related to payment costs or WPS.

After considering these requirements, you can proceed with the registration process. Employers can use MoHRE’s official website to register for the WPS. For registration, you have to add company details provided by the ministry.

After registration, you have to enter the following information into your portal:

• Bank account details
• List of employees
• Details of the bank or agent you have a contract with 
• The bank where the employees have an account
• The dates on which salaries are to be paid
• Payroll details

How Does the Wages Protection System Work?

Following are a few points that explain the working of the WPS:

• Employer Registration

Businesses first need to register with MoHRE and an approved WPS agent.

• Preparation of SIF

Employers then have to create SIF files in an approved format. These files must include employee information and salary details and must be submitted to a WPS-approved agent.  

• Salary Check by MoHRE and Central Bank

After submission, the MoHRE and the Central Bank do a salary check. This ensures the data in SIF files is accurate and according to the WPS guidelines.  

• Issuance of the Payment Order

After the WPS salary check and verification, the payment order is issued by the MoHRE and the Central bank to the WPS agent. In case of issues, the employers receive an email stating the errors that they need to remove.

• Transfer of salary

After the issuance of the payment order, the WPS agents transfer the salary to the bank account of the employees. Some WPS agents issue a WPS payroll card which works like a regular debit card. This further facilitates better transfer and withdrawal of salaries   

The WPS SIF Format

SIFs are salary information files that are a must to ensure accurate payment processing and transfers. A SIF file is created in Excel using a very specific format. You need to add EDR or Employee Details Records to an SIF file. In this file, every employee has a row that starts with a separate EDR column.

Here is the general format of an SIF file:

You also need to add your company’s details or the Salary Control Records to the SIF file. Here are the main things you need to add:

• Company name and ID
• Payroll period (month and year)
• Total number of employees
• Total salary amount
• Employee name and labor card number
• Bank account or wage card number
• Salary amount
• Number of days worked
• Overtime hours and the amount
• Allowances and deductions

Rules for Naming Your SIF

Here are some important points you need to consider when naming your SIF file:

• The name must be a combination of the MoHRE employer ID and the date and time.
• The first 13 digits of the name must be the employer’s ID.
• These digits should be followed by a date in the YYMMDD format.
• The last six digits should represent the time in hhmmss format. 
• All of these combined will give you the 25-digit SIF file name followed by .SIF extension.

Tips to Ensure Compliance with the WPS System in the UAE

Following a few things you can do to show compliance with the WPS system in the UAE:

• Communicate the requirements, policies, and impacts of the WPS system clearly with your employees.
• Ensure timely and accurate preparation and submission of SIF files.
• Register with approved financial institutions.
• Use payroll software to ensure accurate record-keeping.
• Conduct regular audits to show WPS compliance.
• Adopt transparent practices to reduce payment disputes.

Consequences of Non-Compliance

The failure to meet the WPS requirements opens you up to fines, penalties, and other legal complications. This is done to protect workers’ rights and prevent fraudulent practices. The fines for payment delays vary based on the size of your company.

Here are the consequences of non-compliance when it comes to WPS:

Companies with 100 or More Employees

• If a company has 100 or more employees and they fail to pay the salary within 10 days of the due date, they will not get further work permits.
• The second violation will result in complete work permit suspension. The third violation means the company must pay a fine of AED 5,000 per every unpaid worker.
• Employers will not be able to issue other companies and the MoHRE can take actions against all other companies that they own.
• The organization will be downgraded to a third category and the employees will be allowed to move.

Companies with less than 100 Employees

• The first violation results in a warning from the MoHRE.
• The work permit restrictions are applicable after the second violation.
• The third violation will lead to fines and administrative closure in some cases.

Other Penalties

• If the salaries are delayed for 30 days, the company will be referred to the juridical authorities by the MoHRE. 
• Not paying for 60 days will lead to a fine of AED 5,000 per affected worker. The fine can also reach a maximum of AED 50,000 for multiple workers.
• Providing incorrect information to evade salary payments will lead to a fine of AED 5,000 per affected worker.

Conclusion

Compliance with the WPS is the only way employers can ensure timely and fair payments of employee wages, safeguard employees’ rights, and protect themselves from severe penalties.

The WPS’s robust framework creates a fair and transparent working environment where every employee feels valued and appreciated. This is why every employer needs to implement this system if they wish to minimize salary disputes and take the productivity and efficiency of their operations to a whole new level.

Contact HRSG if you are looking for wages protection system implementation services for your business to streamline payroll processes and ensure timely and accurate payments to your employees.