Everyone has to be paid, and smart office payroll now offers the flexible solutions needed to make the process as simple as possible.Continue reading...
While the UAE’s Wage Protection System (WPS) has been an important part of the country’s labour relations since 2009, many new and old employers and employees still struggle to understand what it is all about. Consequently, answering the question “what is WPS in the UAE” in a comprehensive manner is important for both employers and employees.
As an employer, understanding the system is essential since failure to comply with some of its regulations can result in fines and penalties.
Also, as an employee, understanding the system is a prelude to knowing your rights and holding your employer(s) accountable.
In this article, we’ll do a deep dive of what the WPS is all about.
Here, we’ll focus on:
- What is WPS in the UAE: Introduction, origin, and benefits
- How to register for WPS
- How the WPS works
- Fines and penalties for non-compliance
- How to get the best value out of WPS
At the end of this article, you will have a strong grasp of the ins and outs of WPS.
1. What is WPS in the UAE: Introduction, origin and benefits
The WPS became a reality in July, 2009 with the Ministerial Decree No. 788.
It was an innovation of the Ministry of Human Resources and Emiratisation (MOHRE) in association with the Central Bank of UAE. The rules and regulations guiding its operations were further strengthened by the Ministerial Decree No. 739 of 2016. On September 1, 2019, the MOHRE issued further regulations to update the WPS regime.
Basically, the WPS is an electronic wages transfer system that oversees the payment of workers’ salaries in the UAE. It ensures that UAE workers are paid the right wages or salaries (based on their employment contracts) and in a timely fashion.
The WPS has an electronic database where UAE companies must upload their Salary Information Files (more on this later) for the MOHRE and the Central Bank of UAE to confirm and validate every detail before giving permission for the onward transfer of money to employees.
Such a system became necessary due to the unscrupulous actions of some employers in refusing to pay the correct wages or salaries, delaying such payments, using offshore accounts as a way to avoid required payments, or using funds from illegal sources.
These unfair activities often led to unending labour and industrial disputes and a breakdown of trust between employers and employees.
To solve these problems, the MOHRE introduced the WPS and mandated all companies in the UAE and the Jebel Ali Free Zone (JAFZA) to adopt it (other free zones and some royal or UAE government-owned companies are exempt).
By October, 2015, 3.5 million of the 4.6 million migrant workers in the UAE were already benefiting from the WPS, according to the International Labour Organisation (ILO).
Benefits of WPS
By ensuring that UAE companies pay agreed-upon wages in a timely fashion, the WPS ensures that cases of labour and industrial disputes are minimised. The system upholds workers’ rights and ensures transparency in the employer-employee relationship.
However, employers also benefit from it. For one, the automation and streamlining of their payroll process saves time and money. Furthermore, in the event that a worker is wrongly claiming to be underpaid, the WPS records can be used as legal proof for employers.
2. How to register for WPS
As long as you are an employer of labour in the UAE and JAFZA, you must be on the WPS. And as we have seen above, the system offers protection to you as an employer and to your employees.
Rather than an inconvenience, it has been proven to improve efficiency.
So, how can you register for WPS?
Before registering for WPS, you must be aware of the following requirements:
- You’ll need to have a corporate bank account with any bank registered in the UAE.
- You must have a contract with a WPS agent who will be responsible for the payment of wages to your employees. A WPS agent can be a bank, exchange house, fintech or any other financial institution registered with the MOHRE.
- You have to transfer wages through the WPS by the deadlines stipulated in Ministerial Decree No. 788 as amended in Ministerial Decree No. 739 of 2016.
- You must pay at least 70% of all staff (which allows for some level of unpaid leave) and at least 75% of their wages or salaries (which allows for some levels of deductions on salaries).
- You must agree to meet any bank fees, expenses, provider charges, and other related payment costs.
Now that you are aware of the requirements, you can visit the MOHRE website to set up your account and receive your login ID for the WPS e-portal.
3. How the WPS works
Once you have met the above requirements and registered an account, using the WPS is easy.
There are only four simple steps involved:
A. Preparation and submission of a SIF
A SIF (salary information file) is a standard form that contains information about you and your employees. It includes relevant information about the wages or salaries (basic salary, deductions, allowances, overtime payment, additional bonus, among others) of each employee.
Anytime you are ready to pay wages or salaries, you must fill out and submit a SIF on the WPS. The file first goes through your WPS agent who checks for errors before submission to the WPS.
However, you don’t need to fill out a SIF when you are paying commissions, bonuses, expenses, end of service benefits, and gratuity.
At Now Money, we can swiftly handle all such non-WPS payments for you free of charge.
B. WPS salary check by the MOHRE and the central bank
Once you have submitted the SIF to the WPS, the MOHRE, in collaboration with the central bank, will conduct a WPS salary check to ensure that all the details in the SIF are accurate and meet the WPS requirements.
For example, the MOHRE will check if you are paying at least 70% of your staff and at least 75% of their salaries.
C. Issuance of payment order to your WPS agent
If the WPS salary check returns a positive result, the MOHRE and the central bank will issue a payment order to your WPS agent.
In the event that there are errors on the SIF, you will receive an email requesting you to update the SIF and correct the identified errors. You need to avoid errors so as to prevent incurring fines and penalties for payment delay.
D. Transfer of money from your WPS agent to employees’ accounts
Once they receive the payment order, the WPS agent will transfer the money you have provided to the bank accounts of your workers. Many banks, acting as WPS agents, issue a special WPS payroll card specifically for the employees of companies registered with them. The WPS payroll card works like any other debit card.
For maximum efficiency, you should ensure that your employees have a bank account and a normal debit card or a special WPS payroll card they can use to withdraw and transfer money.
[We all know it is difficult for some low-income employees to meet the requirements for a traditional bank account. Now Money has solved this problem through its free mobile bank app and debit card, which are available for anyone in the UAE regardless of income.]
Many WPS agents will charge you for these services. However, WPS charges vary from agent to agent. For example, the Dubai Islamic Bank has WPS charges of AED 200 for every SIF you upload and AED 0.50 for every record (employee) inside a SIF. So, if you have 200 employees and you upload a SIF for them, they will charge you AED 300 (AED 200 + 0.50*200).
For Emirates Islamic Bank, the charge is AED 57.75 for every SIF submitted through the electronic platform and AED 3.15 for every record on the SIF file (however, transfers to an Emirates Islamic Bank account are free).
In contrast, salary transfers from a Now Money employer account are free of charge.
E. How to prepare SIFs
As evident from the above, the preparation of error-free SIFs is crucial to the use of the WPS. Consequently, let’s consider how to create error-free SIFs that get quick confirmation and validation from the Central Bank of UAE and the MOHRE.
The following process is the same we use to create and submit our own SIF and it has never failed.
However, if you are using another payroll provider, you should check with them for any special nuances.
Are you ready? Let’s dive right in.
The WPS SIF Format
First, let’s start by clarifying that all SIFs start life as an Excel document. So, first things first, you need to start by opening a blank Excel file.
Second, you will enter the Employee Details Record (EDR), which is the basic information you need to include for each of your employees. So, every employee will have a row that starts with the EDR column (only one EDR for one employee).
Here is an example:
The following is the information you will enter in each column for each employee:
- Column A – Employee Details Record (must read EDR, which indicates that this row is part of the EDR section).
- Column B – Employee 14-digit labour card number (provided to you by MOHRE when you secure a visa for the employee).
- Column C – Bank routing code (provided to you by your payroll processor, who may also be your bank).
- Column D – Employee bank account number (IBAN).
- Column E – Start date of salary (the start date of the week or month the employee is being paid for).
- Column F – End date of salary (the end date of the week or month the employee is being paid for).
- Column G – Number of days salary paid (calculated field; column F-column E).
- Column H – Fixed or Basic Salary of employee.
- Column I – Variable Salary.
- Column J – Number of leave (holiday) days per year.
When you have filled out the EDR rows for all of your employees, the format in your SIF will look like this (note: the number of rows you have will depend on how many employees are in your company):
Third, you may need to include Employee Variable Pay details (EVP) for an employee. The EVP is necessary if an employee has a component of their pay, which is variable; e.g. overtime or bonuses.
You’ll need to input these values into Column I, as detailed above, as part of the EDR process.
Similar to the EDR process, there can only be one EVP record per employee. Also, the sum total of all values in Column I for the EDR records, should agree to the sum of the EVP records.
So, let’s look at how to display EVP in your SIF.
Once you have input the relevant details, your SIF should look like this example below:
Note: the sum of the values in the EVP row matches the variable pay details included in the EDR.
Finally, it is time to include your company’s details (the employer), which are also known as the Salary Control Record (SCR). These details should sit in the very last row of your SIF.
Below is the SCR information you need to include in your SIF and the columns where you will put them:
- Column A – Salary Control Record (must read SCR; indicates this row is part of the SCR section).
- Column B – 13-digit Agent ID (provided to you by your payroll processor, who may also be your bank).
- Column C – Bank routing code (provided to you by your payroll processor, who may also be your bank).
- Column D – File creation date.
- Column E – Time of file creation.
- Column F – Payroll month and year.
- Column G – Number of records in the file (EDR only).
- Column H – Total amount of salary paid (both fixed and variable).
- Column I – Payment currency which is in AED.
- Column J – Optional field.
When you are done entering these values, your SCR row will be formatted like this:
In situ, your SCR will look like this example below:
What to Name Your SIF
Once you have entered all the correct information, you will need to save and name your file in a specific way.
The name of your SIF will be a combination of your MOHRE employer I.D and the date and time.
Plus, it must be saved as a “.SIF” file type, like the example below:
The first 13 digits are the MOHRE employer I.D, which should be consistent with what is entered into Column B of the SCR record, as mentioned above.
This is followed by the date, which is written in the YYMMDD format. In this example, the SIF was created on 31 August 2021 and so it’s written as 210831.
Finally, the last six digits represent the time, including hours, minutes and seconds. In this example, the SIF was created at 10:29:51 and is written as 102951.
All of these combine to make a 25-digit file name followed by “.SIF”.
We recommend you always ask your payroll provider to clarify the format for the file name. That way, you’ll avoid any mistakes and subsequent delays.
4. Fines and penalties for non-compliance
Refusal to conform to the requirements of WPS comes with certain penalties and fees.
In the case of payment delays, the penalties and fines vary by the size of the company.
For companies with 100 or more employees, the following apply if they fail to pay employees’ wages or salaries within 10 days of the wages or salary due date (based on the employment contract):
- Starting from the 16th day from the date of the delay in wages or salaries (which is the 26th day from the wages or salaries due date), the company will not get any work permits.
- The owner(s) of the company cannot register new companies
- The MOHRE will take actions against other companies owned by the owner(s) of the defaulting company.
- Employees’ bank guarantees will be liquidated
- The company will be downgraded to the third category
- Workers will be allowed to move
If the delay extends to 30 days, the MOHRE will refer such companies to the relevant judicial authorities. And if it extends to 60 days, the company will pay a fine of AED 5,000 per affected worker, up to a maximum of AED 50,000 for multiple workers.
When companies with less than 100 employees delay payment for up to 60 days, the following penalties will apply:
- Work permits ban
- Referral to court
If such a delay (up to 60 days) occurs twice a year, MOHRE will treat the companies like those that have more than 100 employees.
Other forms of non-compliance
For companies that intentionally provide incorrect data for the purpose of evading wages or salary payment, there is a fine of AED 5,000 per affected worker, up to a maximum of AED 50,000 for multiple workers.
Similarly, companies that force workers to sign a fake payment slip as a way of avoiding wages or salaries payment will pay a fine of AED 5,000 per affected worker.
5. How to get the best value out of WPS
In addition to conforming to the stated requirements, you can maximise the value of the WPS by choosing the right agent.
The right agent will check your SIF for mistakes and ensure you don’t miss payment deadlines.
In addition, the right agent will help you make payments to your staff in a cheap, fast, easy, safe, and reliable way. Making revenue is enough stress, paying salaries should be stress-free.
Also, good agents will ensure all your staff has accounts they can use to receive payments, irrespective of their income level.
At Now Money, we seek to give you the best value out of the WPS by providing your employees with a mobile banking app and a debit card, irrespective of their income level. With that account, they can receive and send money in minutes at zero cost.
We also provide you, as the employer, with an account from which you can make cheap (zero fees), fast, easy, safe, and reliable transfers to your employees.
Contact us to learn more about how we are helping employers and employees get the best out of the WPS.
- The UAE’s Ministry of Human Resources and Emiratisation (MOHRE) introduced the WPS to protect employees’ rights and prevent labour disputes between employers and employees.
- WPS is compulsory for all private sector companies in the UAE and the Jebel Ali Free Zone (JAFZA).
- To participate, companies must meet certain requirements and follow certain procedures and mechanisms.
- Failure to comply with WPS requirements incurs various fines and penalties.
- Companies must ensure they get the best value out of the WPS by choosing the right agents.
Even without the largest of budgets, you can set up a simple, efficient, cheap, and flexible payroll system for your SMB.Continue reading...
Effective and efficient payroll management must be beneficial to both employers and employees.Continue reading...
A successful payroll process in the UAE must consider WPS compliance, accurate employee master files, and transparent payslip generation.Continue reading...