If there is one thing that binds businesses to ensure they operate in a fair manner, upholding ethical practices, it is the statutory framework of a country. The WPS (wage protection system) is the anchor that guides an organisation to carry out its functions in a way that protects the rights of all its stakeholders, most importantly, the human resources, partners, and suppliers

The wage protection system also has a crucial role in maintaining a market with healthy competition and limits the creation of a monopoly.

One distinctive factor about laws that affect businesses is they have a significant influence from the cultural, religious, and ethical values of a given community in a country.

As a result, while laws are centred on a common goal, they may differ from one country to another or, in some cases, within different states in the same country.

All organisational functions, from launch to market exit, are governed and exposed to statutory compliance. WPS is an initiative introduced by the UAE that affects an organisation’s payroll function.

The primary goal of WPS is to ensure a fair and transparent payroll accounting process that preserves employees' rights to timely, accurate payments and gives them the confidence of a transparent employer relationship.

Let’s break down what WPS is in the UAE and how it impacts payroll.

The History of WPS

The Wages Protection System (WPS) in the UAE was introduced in July 2009 under Ministerial Decree No. 788 to address common HR challenges, including incorrect or delayed wage payments and the use of offshore accounts to avoid salary obligations. These unfair practices had a significant impact on employer-employee relationships and contributed to a negative perception of the country’s labour market as a whole.

WPS was initiated by the Ministry of Human Resources Emiratization (MoHRE), together with the Central Bank of UAE, to focus on solving the recurrence of these issues.

Over the years, this system has been refined with new regulations to enhance its effectiveness, such as the Ministerial Decree No. 739 of 2016 and further updates in 2019 and 2022. All the amendments enacted since have played a vital role in strengthening the system and ensuring it adapts to the evolving demands and dynamics of the labour market.

What is WPS (Wage Protection System) in the UAE

WPS is an advanced electronic salary transfer system that protects the pay rights of UAE employees. It ensures that employers process salaries in a timely and transparent manner, preventing unjust, unfair, or unethical payroll practices that violate employment contracts.

WPS has a dedicated database where employers in the UAE are required to upload the salary details of their employees. This allows the Ministry of Human Resources and Emiratisation (MoHRE) and the Central Bank to verify and validate the information.

How Does WPS Impact Payroll?

Any organisation registered to operate in the UAE must comply with the Wage Protection System (WPS) and its obligations. This means that all private sector employers in the UAE, excluding those based in free zones, are mandated to implement WPS and operate within its regulatory framework.

To ensure full compliance, employers are required to enroll new hires into the WPS and other financial institutions within the first few months of employment. This mandate guarantees immediate wage protection and demonstrates adherence to UAE labour regulations. 

Registration for the WPS is completed through the MoHRE website. Employers will be required to provide details of their corporate bank account and enter into an agreement with a licensed WPS agent who will facilitate salary transfers.

Employers must compile and submit a Salary Information File (SIF) containing all required information and payroll data for the MoHRE to review. Once the SIF is approved, the employer instructs the WPS agent to proceed with disbursing salaries. 

Employers are also highly recommended to use customised payroll management software to 

streamline compliance with WPS regulations and minimise the risk of errors that could result in penalties.

Any organisation not registered with the WPS system will be subject to penalties and fines. However, certain groups are exempt from the WPS requirements. These include employees involved in wage disputes. Additionally, certain employers, such as UAE nationals with specific business operations, are not obligated to comply with WPS..

Examples of recognised exceptions are:

• Fishing boats owned by nationals

• Public taxis owned by nationals

• Banks

• Houses of worship

Integrating WPS with Payroll Accounting

The WPS in the UAE upholds its primary objective of ensuring timely and fair salary payments.  According to the wage protection system, salaries should be disbursed no later than the day after the date specified in the employment contract. It is also stipulated that 90% of the workforce must receive their pay within the specified pay period each month. Moreover, employers are also obligated to pay at least 80% of an employee’s wage in any given month.

By linking WPS directly into payroll accounting software, employers can simplify the processing of salaries, ensuring punctual and accurate payments in line with regulatory requirements. Data integration helps prevent errors, reduces administrative burden, and guarantees transparency in wage distribution, ultimately supporting compliant and consistent payroll practices across organisations.

What to Expect with Non-Compliance

Grace Period

Employers are granted a 30-day grace period from the effective contract date to register new employees into the WPS in the UAE. Failure to do so will result in non-compliance with the expectations and regulations stipulated under WPS.

Payment Delays

Delayed salary payments are automatically considered non-compliant with the WPS in UAE, resulting in penalties and fines based on the organization's size.

For companies with 100 or more employees, failure to pay wages within 10 days of the due date specified in the employment contract may result in the following consequences:

• Ineligibility to obtain new work permits for salary payments delayed over 15 days.

• The organisation will be restricted from setting up any new companies.

• The organisation will be downgraded to the third category of MoHRE’s class system.

• MoHRE can take action against other companies owned by the same organisation.

• Employees are allowed to terminate their contracts and seek alternative employment.

Falsification of Information

Any organisation that deliberately provides false information to avoid paying salaries may be fined up to AED 5,000 per affected employee, with penalties reaching up to AED 50,000 if multiple employees are involved.

Non-compliance with WPS can also result in severe repercussions, including prohibitions on work permits, legal action, monetary fines, and the potential forfeiture of bank guarantees.

Investing in the Right Payroll System

Compliance with the WPS in the UAE ensures that an organisation's payroll processes align with the country’s legal frameworks. It is also crucial for their eligibility to apply and renew their business licenses.

Investing in a customisable payroll system can automate and streamline the processing of employee salaries. You can also outsource payroll services and leave it to the experts to compile and manage requirements to adhere to WPS regulations.

An effective payroll management system will help you save time and prevent costly fines. It will allow organisations to focus their efforts on projects or tasks that require human skills.

Why the Wage Protection System Is Important

The Wages Protection System (WPS) is a vital framework for businesses in the UAE. It is designed to ensure fair and timely salary payments while fostering trust between employers and employees. By enforcing transparent payroll operations, it not only upholds workers’ rights but also strengthens the overall integrity and global reputation of the country’s labour market.

Compliance with WPS not only avoids penalties but also enhances an organisation’s credibility. It fosters a positive workplace culture and supports ethical business operations. Partnering with professionals at BSH or utilising a payroll management software ensures your business complies with WPS in the UAE.

Frequently Asked Questions

Who administers the wage protection system in the UAE?

The Ministry of Human Resources Emiratization (MoHRE) and the Central Bank of UAE manage the wage protection system.

What is a Salary Information File (SIF) in WPS?

A SIF is a document employers submit via the wage protection system, containing employee payroll data for MoHRE review.

Can employees check their WPS payment status?

Yes, employees can verify their salary payments through the wage protection system via MoHRE’s online portal or app.

What happens if an employer misses the WPS registration deadline?

Missing the 30-day WPS registration deadline may result in fines and restrictions under the wage protection system.

Are part-time workers covered by the wage protection system?

Yes, part-time workers are included in the wage protection system if employed by registered UAE private sector companies.

How does WPS handle overtime payments?

The wage protection system requires employers to include documented overtime payments in the SIF for transparent processing.

Can WPS agents charge fees for salary transfers?

WPS agents may charge minimal fees, but the wage protection system ensures transparency in any deductions.