Wage protection systems: Their importance for organizational productivity

The business development we have encountered in the UAE is impressive. Since the beginning of 2000, the rise of firms and businesses in the UAE has been exponential. Since 2009, the UAE government has created the Wage Protection System to enhance worker relations. But with the 2019 modifications announced by MOHRE, many individuals still do not comprehend the WPS meaning in the UAE.

That is why in this article, you will grasp the organizational value of WPS to enhance productivity. You will also learn about the UAE WPS rules. From an employer’s point of view, understanding the system and its laws is crucial to prevent fines and penalties for non-compliance. Likewise, it is essential for employees. Without further ado, the points to be explained in the article are:

  1. What is the WPS in the UAE?
  2. What are the steps to enroll in the WPS?
  3. How does the WPS work?
  4. Is it important to use the WPS within a company to increase productivity?
  5. What are the different fines and penalties for non-compliance?
  6. How to get the most out of the WPS in the UAE?
  7. Connect HR offers you the perfect connection between the WPS in Dubai and your company

1. What is the WPS in the UAE?

As indicated above, the UAE business market has risen dramatically. To fulfill the requirements of an expanding market, corporations were obliged to recruit additional workers. This contributed to a rise in income for these organizations. However, it was also a reason for issues not remedied until July 2009.

With a high number of employees, these organizations were prone to be exceedingly irregular or abusive with wages. Therefore, owing to Ministerial Decree No. 788, the Wage Protection System in the UAE was founded. A computerized system that guaranteed the rights and income of employees. It also enables organizations to be informed of the norms and decrees of salaries payment.

The WPS is an electronic wages transfer system that manages the payment of workers’ paychecks in the UAE. It guarantees that UAE workers are paid fair pay (based on their contracts) and in a timely way. This was an invention of the Ministry of Human Resources and Emiratisation (MOHRE) in cooperation with the Central Bank of UAE.

This system was modified in 2019 by MOHRE. MOHRE issued new regulations to modernize the WPS regime. Such a system became required due to the illegal activities of some employers in refusing to pay good salaries. These unjust acts often led to ongoing labor and industrial conflicts and a lack of confidence between employers and employees.

2. What are the steps to enroll in the WPS?

Even in 2022, many enterprises in the market are not registered in the WPS in the UAE. When MOHRE launched the Wage Protection System in the UAE, they compelled all enterprises to apply it. Both those in the Jebel Ali Free Zone (JAFZA) and all enterprises in the UAE. However, old and new firms must register in the system despite this.

As long as you are an employer in the UAE and JAFZA, you must be on the WPS. Not just for the reasons described above, but for the number of short, medium, and long term advantages. Despite being a regulated system, the UAE government has proved that it enhances the efficiency of workers.

To register with the WPS, each firm must complete the necessary conditions to choose for registration. These needs are:

  • You must have a contract with a WPS agent who will then be responsible for paying salaries to your employees. A WPS agent might be a bank, exchange house, fintech, or other financial firm registered with the MOHRE.
  • Need to have a business bank account with any bank licensed in the UAE.
  • You must agree to bear all bank fees, expenditures, provider charges, and other relevant payment costs.
  • You must pay at least 70 percent of all personnel (which allows for some degree of unpaid leave). Also, you have to spend at least 75 percent of their earnings or salaries (which provides some levels of deductions on wage) (which allows for some levels of deductions on paychecks).
  • You have to transmit salaries through the WPS by the dates stated in Ministerial Decree No. 788 as revised in Ministerial Decree No. 739 of 2016.

3. How does the WPS work?

In brief, this technique is a means to take care of the employee’s and the company’s back. Since the WPS’s purpose is to pay the right wages or salaries on time and be up to date with the appropriate payments. This is because the database of WPS in the UAE is directly linked to the MOHRE and the Central Bank of the UAE. But how does it work?

The activity of the Wage Protection System is separated into four simple functions: Preparation and submission of the company’s FIS; verification of the WPS salary by the financial institutions; payment order to the WPS agent; and transfer of the money from the WPS agent to the company’s employees. We will carry out WPS correctly by following these 4 UAE WPS rules.

3.1 Preparation and submission of the company’s SIF

The Salary Information File, or SIF, is a standard document that includes information about you and your workers. It offers crucial information regarding each employee’s pay or salary. It might already be the base salary, deductions, allowances, overtime pay, extra bonuses, and more.

You must complete and submit a SIF into the WPS every time wages or salaries are paid. The file initially travels via your WPS agent, checking for problems before sending it to the WPS. However, you do not need to complete a SIF when paying commissions, bonuses, costs, end-of-service benefits, and gratuities.

3.2 Verification of the WPS salary by the financial institutions

After sending the SIF to the Wage Protection System, you must complete a WPS salary check. MOHRE will do this in coordination with the central bank. These two organizations will carry out a salary check of the SIF. Companies will confirm that all SIF information is correct and fulfills the WPS standards.

3.3 Payment order to the WPS agent

After your WPS salary check is good, you may proceed with the WPS procedure. After that, the MOHRE and the central bank will issue a payment order to your WPS agent. This is because the WPS agent is in charge of creating the link between the payment and the workers.

If there is a mistake in your WPS, do not fret. You will get an email inviting you to update the SIF and address the discovered problems. In this manner, you will transmit the payment order to the WPS agent without complications. You need to avoid mistakes to avoid paying fines and penalties for payment delays.

3.4 Transfer the money from the WPS agent to the company’s employees

Once the payment order is received, the WPS agent will transfer the money to the workers’ bank accounts. Not only that, they ensure that each employee has received the money successfully.

Many banks function as WPS agents. They also issue a specific WPS payroll card to the bank workers as a WPS agent. This card functions like any other debit card. However, it is suggested to select this option. Employees might receive the cash in an account distinct from their account.

4. Is it important to use the WPS within a company to increase productivity?

Sometimes, starting up and operating a company is not a simple undertaking. In the UAE, it might be a little more complex than in other nations. Especially if you have to comply with all the legal obligations. That is why more and more organizations are making sure to use the WPS in Dubai fully. The UAE government designed this mechanism in 2009 to safeguard an organization’s workers.

The WPS in the UAE, which was modified in 2019, was designed to assure the payment of workers. Under this technique, corporations pay their workers the exact amount that fits the original offer letter and local employment contract. After years of numerous corporations doing the contrary with their workers, the WPS meaning in the UAE has risen.

For example, if your firm has workers from Dubai or Abu Dhabi, it must pay using WPS in the UAE. Although it may be tiresome for some, it is a highly effective method to enhance their work experience. Therefore, by increasing the work experience, we promise to improve the company’s output.

In addition to the previous, the Wage Protection System carries a variety of advantages with it. Benefits that boost the company’s human capital. These advantages are:

4.1 Improving employee satisfaction at the company

Employee engagement is the unique approach to know the productivity of the firm. With workers pleased with the firm, output tends to be more significant. How can we accomplish this with the WPS? The WPS legally obligates your organization to pay workers according to the employee’s contract and salary due date.

This regulatory obligation maintains your HR and payroll procedures more streamlined, efficient, and structured. This guarantees that payments to workers are paid correctly, therefore enhancing the organization’s productivity. As a consequence, employee engagement with your organization will increase.

4.2 Disagreements are avoided

Disagreements over payroll processing and fixing payroll problems may lead to various inefficiencies in your firm, reducing your organization’s productivity. The WPS meaning in the UAE makes sense in this scenario. WPS boosts payroll accuracy and dependability in combination with the proper HR software.

In addition, it provides improved profiling of employee rights. This is done through managing clear salary information. Since the legal foundation of the WPS would operate in case of discrepancies or inequalities in terms of payroll processing.

5. What are the different fines and penalties for non-compliance?

Despite gaining advantages under the WPS, non-payment and late payment will entail a succession of fines and penalties. The Wage Protection System in the UAE is taken extremely seriously by the government, and non-compliance entails repercussions. These fines and penalties will vary based on the size of the firm.

Therefore, it is your job to inform them before infringing the WPS rules.

5.1 Companies with more than 100 employees

Companies with more than 100 employees who do not pay workers’ salaries within ten days may face:

  • From the sixteenth day from the date of the delay in payments or salary, the firm will not get any work permit.
  • If any, MOHRE will take action against other firms held by the proprietors of the defaulting company.
  • The business proprietors will not be able to register any further firms or join companies in the registration process.
  • Workers’ bank guarantees will be liquidated.
  • The workers will be permitted to leave.
  • The firm will be relegated to the third category.

If the delay continues beyond 30 days, the MOHRE will bring the firm before competent legal authorities. In addition, if it continues beyond 60 days, the sanctions will be more substantial. The corporation will have to pay a fine of AED 5,000 per impacted worker. This may be up to a maximum of AED 50,000 for several employees. This guarantees the usage of the WPS in the UAE.

5.2 Companies with less than 100 employees

Companies employing fewer than 100 workers will incur reduced fines. Depending on the circumstance of late payment, the penalties may escalate. For example, a corporation utilizing the WPS in Dubai, if it waits 60 days in completing the payment, may suffer these penalties:

  • Indefinite work permit bans.
  • Fines.
  • Referral to the authorities in court.

The genuine concern arises if the 60-day delay occurs again in the same year. MOHRE will take action and impose the sanctions as if it were a corporation with more than 100 workers. Making these tiny enterprises have to pay the penalty indicated earlier.

6. How to get the most out of the WPS in the UAE?

In addition to completing the standards, the value of the WPS may be increased by picking a suitable agent. For example, while registering WPS in Dubai, few organizations select the correct Wage Protection System agent. This, while it may not seem like it, may drastically impair WPS throughput.

The proper agent will review your WPS for inaccuracies and guarantee that you do not miss payment deadlines. In addition, the correct agent can assist you in making payments to your personnel inexpensively, swiftly, and consistently. Otherwise, Companies might misinterpret the genuine WPS meaning in the UAE. Thus, generating cash is worry enough; therefore, salary payment should be stress-free.

7. ConnectHR offers you the perfect connection between the WPS in Dubai and your company

Ensuring employee involvement in your organization is the key to success. The WPS in the UAE, which was formed as government legislation, gives many advantages to your organization. By adopting the WPS, you are not only complying with government-required requirements, but you are also increasing your company’s human resources.

Applying the WPS correctly in your firm is essential. Therefore, you must accomplish it using a suitable WPS agent, such as Connect HR. Our agency has been cooperating with enterprises for WPS in Dubai since 2009. Not only that, but it has 20 years of expertise in the HR industry serving firms in the UAE.

Connect HR’s essential services are Payroll-WPS and HRMS. This would provide your firm the choice to be up to current with the WPS. In addition to performing the bulk of your company’s administration in one program. Do not risk your business, and comply with Wage Protection System requirements using Connect HR.

Would you like to contact Connect HR for more information about the services offered by our company? If you have any questions about this service, please send us an email at contact@connecthr.ae

Do you want to join our team? Enter thetalentpoint.com and upload your resume or CV. You can also send your CVs and resumes to contact@thetalentpoint.com. We will be waiting to meet you!

Author avatar
Sahiba Maini is the Finance Head in Connect Resources who specializes in Managing finance functions involving determining financial objectives along with designing & implementing systems, policies & procedures, preparing financial reports to facilitate internal financial control. She is capable of Monitoring receivables through a team to ensure credit terms are properly authorized. She is in charge of overseeing the payroll department

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