NOW Money blog

WPS: Everything You Need to Know About the UAE’s Wages Protection System in 2021

Katharine Budd 16th Nov 2021

This is the definitive guide to the UAE’s Wages Protection System (WPS) in 2021.

If you are looking to:

  • Understand how WPS works.
  • Learn how to comply with WPS.
  • Avoid fines and penalties of non-compliance with WPS.

Then this is the guide for you.

Let’s get started.

Contents

Chapter 1: The Basics of WPS.

Chapter 2: How WPS Works.

Chapter 3: How to Create and Submit a Salary Information File (SIF).

Chapter 4: Bonus Information.

 

Chapter 1: The Basics of WPS

In this chapter, we are going to cover the basics of WPS.

Including, what it is and why it exists.

So, whether you are new to WPS or a seasoned professional looking to find out more information, then this chapter is a good place for you to begin.

Let’s dive in.

What is Wages Protection System (WPS)?

WPS was introduced by the UAE Government in 2009. It is an electronic checking system that was brought into the private sector to guarantee the timely and full payment of agreed upon salaries.

WPS is owned by the Central Bank of the UAE and the Ministry of Human Resources and Emiratization (MOHRE).

Essentially, it safeguards the rights of all workers in the UAE.

But why does WPS exist?

Let’s find out…

Why Does WPS Exist in the UAE?

In 2021, WPS remains a critical part of the payroll system in the UAE.

Historically, many companies across the GCC failed to protect the rights of their workers.

For example, business owners often failed to pay their staff on time or fell short of paying them the agreed salary.

And it was also discovered that some businesses used offshore bank accounts to pay salaries in the UAE as a means of swerving required payments or using up funds from undesirable sources.

Ultimately, this created multiple issues, including endless labour disputes pertaining to wages.

Plus, it left employees exposed to unfair treatment.

So, Ministerial Resolution No. 788 was introduced to tackle these issues head on and it has been an effective means of protecting workers rights in the UAE since.

Is WPS Mandatory?

In short.

Yes.

WPS is mandatory.

As a business in the UAE, you cannot escape the requirement of WPS.

The WPS is compulsory for all onshore companies in the UAE and Jebel Ali Freezone (JAFZA).

However, other free zones are exempt and some royal or UAE government owned companies are also exempt from WPS.

Ministerial Decree No.739 of 2016 Concerning the Protection of Wages, states that all employers registered with the MOHRE must subscribe to WPS.

And with that, we have reached the end of the chapter on the basics of WPS.

If you want to find out about how WPS works and the steps you need to take to comply, then the next chapter is for you.

Keep reading.

 

Chapter 2: How WPS Works.

In this chapter we are going to cover how WPS works.

Including – how to ensure your business is set up to comply with WPS, and the process of WPS.

Let’s dive in…

Ensure You Are Set Up to Comply With WPS.

All employers registered with the MOHRE must register to process payroll via WPS.

In fact, MOHRE will not process any transactions or deal with companies that are not registered with WPS.

The good news is that the entire system is available on MOHRE’s official website, and it is easy to access.

However, you do need to ensure your business is set up to comply.

Let’s look at the essentials…

Firstly, you need to have a UAE corporate bank account registered in the same name as your company.

That’s because all WPS salaries must be paid from the UAE corporate account of the company the employee works for.

If you do not have a UAE corporate bank account registered in the same name as your company, you need to open one right away.

You can open a corporate bank account with the Commercial Bank of Dubai (CBD), or any other registered UAE bank.

Secondly, to process WPS correctly, payments must be made through the financial system, via a WPS agent, such as a UAE bank, exchange house, or other authorised financial institution.

You cannot pay your employees in cash, which means that all employees who work for your company must be paid into a UAE account.

But what if one, or some, of your employees do not have, or do not meet the financial requirements to open, a bank account?

Well, if your staff do not earn enough to qualify for a traditional bank account, you will need to source an account provider for them.

You may already be registered with a corporate bank that provides accounts for people who are on a low-income.

If you are not, our accounts solution for low-income workers is a great place to start.

Get in touch with us via our contact form and ask us how we can help you with WPS.

Thirdly, you must agree to meet the deadlines for payment as outlined in Ministerial Resolution no.788 of 2009, and as amended by Ministerial Decree 739 of 2016.

And finally, you must agree to make the salary payment at least once a month within 10 days of the payment being due.

Note, the salary payment can be made more frequently on specific dates if this has been stipulated within the worker’s contract.

A Short Summary of the WPS Process.

WPS can be a tricky system to understand.

And that’s partly because there are multiple organisations involved in the process of WPS compliance.

Whilst you don’t necessarily need to understand exactly what goes on behind the scenes, it is worth getting to grips with the basic process.

Let’s take a closer look at the two steps you are involved in.

#1: Submit a Salary Information File (SIF) to WPS.

When you pay your staff at the end of each month or week, you are required by the UAE government to fill out and submit a SIF.

The SIF is a standard template which contains specific information about your business and your employees.

There are, however, some exceptions to the rule.

For example, additional commissions, bonuses, expenses, end of service benefit and gratuity do not require a WPS check.

You may work with a payroll provider who can process these for you.

In fact, some of the best payroll providers will make non-WPS payments for you, free of charge.

Even better.

Note: If you want to find out more about SIFs including how to create and submit a SIF, keep reading. I cover everything on SIFs in the next chapter.

#2: Government authorities will review your submission.

So, you’ve completed the step of submitting your employees’ basic salary through the WPS.

Then what happens?

Government authorities will digitally check your submission the same day your salary payments are made.

If your submission returns a positive result and does not include any errors, it will trigger the release of the salaries. There’s more on how to avoid errors in the next section.

And your employees will be paid the correct money, into their account, on-time.

AMAZING.

 

Chapter 3: How to Create and Submit a Salary Information File (SIF).

Let’s face it:

WPS is not the most interesting topic in the world.

But in my opinion, knowing how to submit the required information accurately is THE most important part of WPS.

After all:

If you fail to comply or submit incorrect information, you could end up with a crippling fine or penalty.

In this chapter, we’re going to look at SIFs in detail.

Specifically, we’re going to look at the exact information you need to include in a SIF.

Essentially, this is a free template you can use to build your own.

So, if you’re looking for a step-by-step guide to create a SIF, then this chapter is for you.

Why Do You Need to Submit a SIF?

Here’s the thing, as an onshore UAE company or a company registered in JAFZA, you are required to create and submit a SIF.

In fact, it is a requirement from the Ministry of Labour that companies use a SIF to upload payroll through WPS to distribute salaries to employees.

For you, this means completing important information in a standard template when you pay your staff at the end of each week or month.

Let’s look at exactly what you need to include in a SIF…

A Step-by-Step Process to Create a SIF.

Start by collecting the information you need to build out your SIF.

This basic information includes your employees’ MOHRE number and their International Bank Account Number (IBAN).

Plus, your SIF must detail payroll information for each of your employees.

The payroll information you will need at hand to build your SIF includes:

  • Basic salary figure.
  • Deductions or additions for living allowances.
  • Overtime payment.
  • Bonus payment.

Make no mistake, incorrect SIF files will be rejected.

Which can cause delays to your payroll process.

So, it is essential that every record and information point in your SIF document is correct.

Then, fill out your SIF accurately with this information (I’ll explain how to create a SIF in the next section. Keep reading).

When you are happy that you have filled out your SIF accurately you must send the completed file to your payroll provider.

(This may also be your corporate bank).

Along with the total sum of your employees’ salaries.

Then, your payroll provider will review the content of the SIF with the UAE Central Bank and the Ministry of Labour.

Your SIF is reviewed to ensure two things:

#1: The information you have submitted is accurate.

#2: Everyone in your organisation is being paid close to the amount stated on their labour contract when they were hired.

It’s worth noting here that every time WPS is processed, it allows for discrepancies.

For example, at least 70% of your workforce should be paid.

(Which allows for some employees to be on unpaid leave).

And at least 75% of their salary must be paid.

(Which allows for some deductions).

Finally, let’s assume your SIF has been reviewed and accepted by the UAE Central Bank.

What happens next?

Your payroll provider will release the funds into the accounts of your employees.

How to Create an Accurate SIF.

In this section I am going to walk you through the steps you need to take to create a SIF.

In fact:

This is exactly how we create and submit our own SIF.

And it has never failed.

Note: I always recommend you check with your payroll provider for any specific nuances related to their format.

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 thing’s first, you need to start by opening a blank Excel file.

Second, filling out the SIF starts with entering the Employee Details Record (EDR).

In other words: the basic information you need to include for each of your employees.

Here’s how the EDR should be laid out in your SIF.

Each employee detail makes up the EDR rows of the file.

And only one EDR row should exist per employee, like this example:

SIF example_EDR one employee per row.

The information below details the information you need to enter, listed by column.

  • Column A – Employee Details Record (must read EDR, indicates this row is part of the EDR section).
  • Column B – Employee 14-digit labour card number (provided to you by MOHRE when you secured 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):

SIF example_EDR all employees

Third, you may need to include Employee Variable Pay details (EVP) in the pay of an employee.

If an employee has a component of their pay which is variable e.g. overtime or bonuses, then you will need to include these details in the SIF.

Firstly, these values would need to be input 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.

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:

SIF example_EVP records

Note: the sum of the values in the EVP row, match the variable pay details included in the EDR.

Finally, it is time to include your company details (the employer) which are also known as the Salary Control Record (SCR).

And these details should sit in the very last row of your SIF.

Here is the SCR information you need to include in your SIF and which column you need to include the information in:

  • 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 have finished, your SCR row will be formatted like this:

SIF example_SCR row

In situ, your SCR will look like this example below.

SIF example_SCR

What to Name Your SIF.

Once you have entered all the correct information points into your document, 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:

SIF example_file name

The first 13 digits are the MOHRE employer I.D. This is 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 is 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.

This combines to make a 25-digit file name – followed by “.SIF”.

I recommend you always ask your payroll provider to clarify the file name.

That way, you’ll avoid any mistakes and subsequent delays.

 

Chapter 4: How to avoid WPS Penalties and Fines.

The fact is, if you fail to comply with WPS you risk facing severe penalties.

So, in this chapter, I’m going to take you through the consequences of not complying with the rules and regulations of WPS.

If you are someone who wants to understand how to avoid making costly mistakes and wasting time, this chapter is for you.

Enter All Records and Information Accurately.

I cannot stress this enough.

It is essential that you enter every record and information point in your SIF correctly.

Why?

Incorrect SIFs will be rejected.

And rejections could cause delays, which may result in you receiving a fine or penalty.

Let’s find out what happens if your SIF is rejected.

What Happens When a SIF is Rejected?

Sadly, mistakes can happen.

If your SIF is rejected for whatever reason, you will be notified through a system-generated email.

This system generated email will be sent on to the registered email I.D.

And will include instructions on the steps you need to take to rectify the problem.

Hopefully the issue with your SIF can be resolved quickly.

But what happens when a business fails to comply with the requirements of the WPS?

What Are the Consequences of Failing to Comply with WPS?

Now it is time to look at the penalties you could face if you do not comply with WPS.

For example, deliberate avoidance or misuse of WPS could result in a fine ranging between AED 1,000 to AED 5,000, per employee.

And that applies to companies of all sizes.

However, the consequence of non-compliance is not always the same for every company.

The size of the fine for non-compliance with WPS depends on the size of the company and the error made.

Let’s start by looking at a company with 100+ staff members.

If a business with 100+ staff, delays salary payment by more than 10 days past the salary due date, they will:

  • Face a new visa issuance ban from day 16 past the salary due date.
  • Be referred to judicial authorities for punitive measures.
  • Face action against all companies owned by the official owner of the company. The owner will also be banned from registering new companies.
  • Find their bank guarantees are liquidated.
  • Have their company status downgraded.

And, if a business with 100 staff or more delays salary payment by more than 30 days past the salary due date, they will also be considered by the authorities as “refusing payment”.

Then, if salaries are delayed by more than 60 days past the salary due date, the company will face up to a maximum of AED 5,000 fine per worker whose salary was delayed.

Now let’s look at the consequence of non-compliance of WPS for a company with fewer than 100 staff.

If a business with 100 staff or less delays salary payment by more than 60 days past the due date, they may:

  • Face a new visa issuance ban.
  • Be issued with a fine(s).
  • Be referred to court.

And, if any company fails to comply with WPS twice in a 12-month period, MOHRE will apply all the penalties we listed above for companies that employ 100+ staff members.

As you can see, the penalties for non-compliance with WPS are severe.

So, if you’re worried about fines or you are struggling to pay your salaries on time…

Reach out to me and the team and ask us for advice.

Plus, the MOHRE website hosts the most up-to-date information on WPS and non-compliance.

Make sure to visit the MOHRE website for official updates.

 

Chapter 4: Bonus Information

O.K., so we’ve covered a lot of ground in this definitive guide to WPS.

But there is one more thing that I want to talk to you about before we finish.

You may remember that in Chapter 2, I mentioned that to process WPS correctly – and on time – you will need to choose a professional payroll and salary transfer provider, also known as a WPS agent.

So, in this bonus chapter I am going to talk to you about what makes for a good WPS agent, and how one can provide benefits to you beyond WPS compliance.

What Makes a Good WPS Agent?

A good WPS agent will not only help you validate your SIFs and ensure you avoid making costly errors, like missing deadlines…

But they will also take care of providing digital accounts for your staff who do not qualify for a traditional bank account.

In other words, they will provide you with an all-in-one service that gives you an easy-to-use payroll system and your employees mobile bank accounts.

The truth is:

Both you and your staff will benefit enormously from this type of setup.

Why?

Well, providing your staff with digital bank accounts will:

  • Reduce your operational costs because you will not need to spend time supporting your staff with accounts.
  • Remove the need for you and your staff to handle cash, which ultimately reduces risk in your workplace and improves security in staff accommodation.
  • Prevent unexplained absences which happen when your staff travel to exchange houses and branches to manage their personal finances.
  • Pay staff bonuses more frequently.

Each of these benefits will help improve the overall productivity of your staff.

And it is no secret that an increase in productivity will help increase your bottom line.

Now, you may be thinking:

“Great. But how do I find a WPS agent like this that I can trust?”.

I have good news. This is exactly the service we provide here at NOW Money.

For more than six years, we have worked with the UAE’s most successful companies to ensure they are WPS compliant.

If you think working with us could be of benefit to you too, don’t hesitate – get in touch with us today.

 

Conclusion

I really hope you found this guide to Wages Protection System (WPS) in the UAE, useful.

Now I’d like to hear from you:

Do you find WPS confusing and don’t know where to start?

Are you going to use the template SIF in this guide to create your own?

Or maybe you have faced a fine before and want to avoid that happening again?

Either way, let me know by emailing me on