Key Takeaways

• The UAE’s WPS ensures timely and transparent salary payments, protecting employee rights in the private sector.

• WPS registration is mandatory for all private sector employers in the UAE, excluding most free zone companies.

• WPS fosters trust between employers and employees, helping to maintain the UAE’s reputation for a fair labour market.

If there is one thing that binds businesses to ensure they operate fairly and uphold ethical practices, it is the statutory framework of a country. The WPS (Wage Protection System) serves as the anchor that guides an organisation in carrying out its functions in a manner that protects the rights of all its stakeholders, most importantly, its human resources, partners, and suppliers.

The wage protection system also plays a crucial role in maintaining a market with healthy competition, thereby limiting the creation of monopolies.

Cultural Influence and UAE-Specific Implementation of WPS

One key aspect of business laws is their strong influence, shaped by a country’s cultural, religious, and ethical values. While they share a common goal, laws can vary between countries or even among states within the same nation.

All organisational functions, from launch to exit, are subject to statutory compliance. WPS, introduced in the United Arab Emirates (UAE), directly impacts an organisation’s payroll operations.

Its primary purpose is to ensure fair and transparent payroll processes, protecting employees' rights to timely and accurate payments, and building trust in the employer-employee 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. 

Such payroll-related violations 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 and Emiratisation (MoHRE), in collaboration with the Central Bank of the UAE, to address the recurrence of these issues.

Evolution and Strengthening of the WPS Framework

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

Fair Compensation

The Wages Protection System (WPS) supports fair and equitable employment practices by ensuring timely and accurate salary payments. This boosts employee satisfaction and morale while minimizing wage-related grievances.

Minimising Wage-Related Conflicts

WPS, when integrated with payroll management software, enhances transparency and accountability in salary disbursement. This helps prevent disputes related to underpayment or non-payment, fostering a more stable and cooperative work environment.

Regulatory Compliance

WPS enables employers to align with labor laws more effectively. Its structured approach to salary disbursement reduces the risk of non-compliance and potential legal issues.

Operational Efficiency

Electronic payroll processing through WPS streamlines administrative tasks, replacing manual systems and lowering costs for businesses and financial institutions.

Insightful Data

The system provides valuable data on wage trends and employment, supporting informed policymaking and labor market analysis by governments and regulators.

Economic Impact

By ensuring wage security and supporting fair labor practices, WPS enhances workers’ financial stability, boosts consumer spending, and contributes to broader economic growth.

Payroll Exceptions Under 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 organisation'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 permitted to terminate their contracts and seek alternative employment opportunities.

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 licences.

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 practices. Partnering with professionals at BSH or utilising a payroll management software ensures your business complies with WPS in the UAE.