The wage protection system or WPS is an innovative approach that ensures every employer in the UAE pays wages to their employees on time. This system aims to improve employee care and prevent violations of basic UAE labor laws.
WPS streamlines the payroll process which leads to greater transparency. It also fosters trust between employers and employees.
This blog explores the WPS in the UAE in detail. It highlights several key points that can help you master this essential system. So, let’s jump right ahead to see how you can better manage WPS in your business.
- What is WPS in the UAE?
- How to Register for WPS in the UAE
- How Does WPS Work
- The SIF Format for the WPS
- Mastering the Wage Protection System (WPS) in the UAE: Expert Insights
- Penalties for Non-Compliance
What is WPS in the UAE?
The Wage Protection System (WPS) in the UAE refers to an initiative that is the result of the mutual efforts of the Ministry of Human Resources and Emiratization (MOHRE) and the Central Bank of the UAE.
This electronic salary transfer system facilitates the payment of workers’ wages through banks or other financial institutions. These financial institutions have the approval of the authorities to provide this service to businesses.
This system was introduced in July 2009 as per the Ministerial Decree No. 788. It aims to safeguard the rights of the employees in terms of their wages.
This system focuses on correct as well as timely payments to every single employee in the private sector, both in mainland and freezone areas of the UAE. The WPS system monitors these payments through its huge database, which promotes transparency.
In simple terms the UAE employers submit the wage files to the database of the MoHRE. The MoHRE and Central Bank validate the information to ensure compliance.
Here is what makes the WPS system effective.
- It tracks all salary transfer processes. In case of delays or wrong payments it alerts the relevant bodies in real-time.
- It helps safeguard employees’ interests.
- It eliminates the risks of wrong salary payments.
- It also reduces payday delays.
- It guarantees that every employer upholds their part of the contract in terms of monthly salaries.
- Reduces labor disputes related to wages by storing data in a comprehensive database.
- It helps authorities ensure employer compliance with UAE labor laws.
How to Register for WPS in the UAE
Every employer needs to register for the WPS to show compliance. This section covers some key steps that you can use to go through this process.
Documents You Will Need
Here are some standard documents that you must possess when you apply for the WPS registration.
- Proof of a UAE-registered corporate bank account
- Valid trade license
- Company registration documents
- Employee list along with their bank account details
- Authorized signatory documents
Registration Process
- First, the employers need to ensure they pay 70% of all staff and at least 75% of wages.
- Then they must hire payroll services or a WPS agent that handles the payroll. Remember that you need a corporate account with the same bank or agent to initiate the process of salary transfer.
- They must pay fees as well as any other expenses incurred in WPS.
- To register or open an account you can visit the MOHRE website
- Then you need to submit the required documents. The documents you have to provide vary based on your industry.
- Complete the WPS registration form provided by the chosen agent.
- Sign the WPS service agreement with the agent.
- You will receive your login ID for the WPS portal after registration.
How Does WPS Work
Here are the Steps that a typical WPS process follows after a company registers for this system.
- The employer prepares and submits an SIF or Salary Information File to the WPS agent when they pay wages. This file lists information like the basic pay, benefits, and deductions.
- The WPS agent checks the SIF for errors and makes necessary edits before you submit it.
- Next up the MoHRE and the Central Bank of the UAE conduct a salary check based on this file to ensure information accuracy.
- Then these authorities issue a payment order if the verification leads to zero discrepancies.
- The employer will receive an email if there are any errors in the file. This email requests an update to the records.
- Once the payment order comes, the agent transfers the money to your employees. WPS banks or agents issue unique WPS payroll cards, which work much like debit cards that you use normally.
The SIF Format for the WPS
In order to ensure WPS compliance, you need to pay extra attention to the SIF file. Make sure this file follows an accurate format that has the approval of MoHRE.
You can start with a blank Excel document. Enter a section with the title Employee Details Record (EDR) in this file. This section lists key information about every employee who is on your payroll.
Apart from the EDR column, you also need to add additional columns for the following data.
- 14-digit labor card number of the worker
- Start and End dates of salary
- Number of days for which the employee owes the salary
- Bank Routing Code
- Bank Account details of the employees
- Fixed or Basic Salary
- Variable Salary
- Number of leaves
This file also contains a Salary Control Record (SCR), which gives you the information on the employer.
The SCR details include
- Salary Control Record
- Bank routing code
- 13-digit Agent ID
- File creation date
- Time of file creation
- Number of records in the file (EDR only)
- Total amount of salary paid
- Payroll month and year
- Payment currency
- Optional field
After you add this information to the SIF Excel file you need to come up with a name for it. The name of an SIF file is a combination of your MoHRE employer ID, date, and the time.
The first 13 digits of the name are from the employer’s ID on SCR. Then you need to add the date in the YYMMDD format. For the last six digits you can enter the time in hhmmss format. This gives you a unique 25-digit file name for your SIF files.
Mastering the Wage Protection System (WPS) in the UAE: Expert Insights
These expert insights will help you do well during audit and compliance checks so keep on reading till the end.
- Educate Yourself On WPS
Look into MoHRE and Central Bank regulations about WPS. Make sure to understand payment deadlines as well as compliance thresholds. Also keep up with the penalties and regulatory updates. This can help you avoid violations that result from inadequate WPS knowledge.
- Create WPS Aligned Employment Contracts
Your employee contract should match the WPS requirements in terms of basic salary or allowances thresholds. There should be no undocumented salary changes in this contract.
In case of promotions or increments, make sure to update this contract accordingly to avoid salary mismatches on WPS.
- Use Payroll Systems that Comply with WPS
Your payroll system must have approval from MoHRE. This system should facilitate automatic SIF generation. You still need to validate the SIF before submission since it ensures fewer errors.
- Compensate The Employees On Time
Make sure you pay the salary to your employee on the exact date that the contract entails. The delay should never be beyond the 15-day threshold. You can use a compliance calendar to track pay cycles to stay on the safe side. You can also initiate the payroll processing at least 5–7 days before the due date on the contract to avoid delays.
- Partner with the Right WPS Bank or Agent
Make sure to pick a WPS agent who has a lot of experience in WPS processing. Expert agents ensure a much faster SIF validation. These professionals also give you the integration capabilities with your existing payroll systems, which streamlines the WPS processes.
- Monitor WPS Compliance Metrics Every Month
You need to examine things like the percentage of employees paid (minimum 90%) as well as the percentage of salary paid (minimum 80%) every single month. You can also look at rejected SIF files to further streamline the process. The analysis of these metrics helps you correct issues quickly, which helps with compliance in the future.
- Train HR and Finance Teams Regularly
You need to train your accounting and bookkeeping teams in payroll accuracy and MoHRE compliance standards. Your HR or finance teams should also be able to handle MoHRE notices and employee disputes quickly. Regular training of the employee in the best WPS practices can eliminate operational bottlenecks, which translates into greater productivity.
- Plan Cash Flow Around Payroll Obligations
Proper cash flow management is essential to WPS compliance. Make sure you maintain a dedicated payroll account without errors. You also need to forecast salary obligations monthly to avoid surprises. Make sure you do not use the payroll funds for operational expenses, as it can result in delayed or missed salaries, which makes you liable to penalties.
Penalties for Non-Compliance
Here are some potential fines or penalties that businesses must pay if they fail to comply with the WPS regulations in the UAE.
- First noncompliance results in warnings and work permit restrictions.
- The second violation subjects you to a work permit suspension.
- For third violations, the authorities charge you an AED 5,000 fine per employee.
- Late salary payments lead to an AED 1,000 fine per employee.
- Inaccuracy in the SIF file submission leads to a fine of AED 5,000.
- If you do not register with the WPS altogether, you become subject to fines as well as work permit restrictions.
Conclusion
The WPS in the UAE fosters a transparent and secure payment method, which leads to a more productive as well as harmonious workplace.
To master the wage protection system, every business must strive to display a certain level of discipline. Entities that behave proactively can earn employee trust and avoid hefty penalties at the same time.
For employers, this system ensures full compliance with the UAE labor laws, which translates into greater operational discipline and efficiency.
Visit HRSG today to get the best finance, accounting, and facility management solutions for your businesses to ensure full compliance with the WPS and other regulations in the UAE.
FAQs
How many employees does a business need to register for WPS?
Your workforce must include at least ten employees for mandatory WPS registration.
Which entities are exempt from the WPS in the UAE?
Small companies with fewer than 10 employees do not need WPS registration. UAE domestic workers are also not a part of the WPS framework. Some government and semi-government entities are also exempt.
How can I check the WPS status of my business?
Use the company’s credentials to log in to the MoHRE website. Go to the “Inquiry Services” option. Choose the company information option. Enter the company details. You can submit the information, and the website will give you the WPS status of your company.
How can you fix errors in the Salary Information File (SIF) as an employee?
You can contact your WPS agent who will stop this transaction at once. They make the necessary edits and resubmit the SIF to avoid delays.
Does the WPS cover part-time employees in the UAE?
Part-time workers who work with registered UAE private sector companies come under the umbrella of WPS.
