What is WPS in UAE?

WPS or Wage Protection System has been around since the year 2009, facilitating easy and timely wage distribution in the UAE. 

Though it’s been a while since it came into force, not everyone is aware of its functionality and importance. Employers and employees alike have a hard time keeping up with this evolving salary transfer system which was built to make their lives easy.

Not only does WPS lay down employees' rights but also makes it easy for employers to build an easy salary disbursement system that’s compliant with labor laws.

Curious to know more? This guide answers all your questions about the wage protection system in the UAE.

What is the Wage Protection System (WPS)?

Simply put, the Wage Protection System, most commonly referred to as WPS is an electronic medium to transfer salaries in the UAE. The Ministry of Human Resources and Emiratisation (MOHRE) and the Central Bank of the UAE came up with this system in the year 2009 to practice timely and precise salary disbursement. 

This system aims to not only protect the interests of the employees but also help ease business practices and their legal obligations. This system ensures whatever is promised to the employees, is fulfilled, and employers can do it seamlessly. The system went on to become a crucial factor in the UAE’s labor market.

What function does WPS serve?

UAE, the most popular choice for expats, had a grave concern - irregular salary brackets and disbursals. The need of the hour was a uniform system of salary disbursal and thus WPS came into being. This framework had just one ask - for the employers to disburse salaries electronically via authorized financial institutions. This centralized system also made it easy for the concerned authorities to monitor and control wage disbursement. 

What’s in it for the employers, you ask? Well, moving the disbursal process to an electronic medium gave employers the best of what automation had to offer. Companies started saving a lot of time, effort, and resources while also enjoying efficiency. 

Other perks of this system were slashed disputes and salary disagreements. Employers and employees had proof of legal evidence which uplifted the integrity and efficiency of the payment process. This simultaneously brought down labor conflicts and legal liabilities.

As for employees, their rights are now recognized. They are compensated appropriately and timely without having to ask for or fight for it.

How did the Wage Protection System Evolve?

The history of the Wage Protection System (WPS) goes back to July 2009. It was formed as a part of Ministerial Decree No. 788 to ensure employee wellbeing. This system was initially formed to help fight inappropriate practices employers used to escape paying wages, like having offshore accounts and other common instances such as wrong or delayed payments.

But the labor market has been evolving. To match the needs, the authorities have been fine-tuning this system to introduce new regulations or make enhancements to the current ones. 

The system saw fresh updates in Ministerial Decree No. 739 of 2016, 2019, and 2022. The new updates have massively contributed to the system, strengthening its power and adaptation to the needs of human resources. Fresh perspectives from the employers’ angles have also been introduced to help businesses. All these efforts have only made WPS more reliable, relevant, and important to employers and their employees.

What are the key components of WPS?

WPS is a huge contributor to enhanced financial stability and confidence in the UAE’s labor market. Precisely, these components were the key contributors:

1. Efficiency in payouts

As the prime objective, WPS ensures diligent observation and supervision of wage payments by employers. It ensures the incorporation of best and fair wage disbursal practices. 

As a rule of thumb, employers need to upload the required information and documents to verify the agreement terms signed with the employee. The system also scans the documents to ensure the stated terms and conditions are compliant with the labor laws and secure employees' interests. It is compulsory for all private organizations in the UAE to adopt this practice to ensure employee protection. 

2. Punctuality in disbursement

Another core objective of WPS is timely salary disbursals with no delays. With the verification of documents, information, and employees' salaries, a set of payment instructions is released to the financial institution responsible for the disbursal. 

These institutions confirm that wages are complaints and then implement the process of transferring funds to the employees’ accounts. Employees' experience boosted confidence with timely disbursals and employers enjoy the reputation of being compliant. 

3. Structure in disputes

Not only does the system lay down terms and conditions for timely and appropriate wage disbursals, but it also lays down a structure to address and resolve wage-related disputes. The framework dictates MOHRE as the decision-making authority of the initial stage. 

MOHRE helps conflicting parties negotiate and find a common ground for resolution. Otherwise, the issue can then be escalated to Labor Disputes Settlement Committees. With the power to issue binding rules, these committees further help solve the dispute. This proposed approach drives peace by preserving and enforcing employees’ rights.

4. Improvement in compliance

It is compulsory for employers to adopt WPS and be compliant. Otherwise, this system also lays down ground rules for punishment if there’s a violation. Non-compliant employers have to face severe penalties such as operational restrictions and fines. 

What are the benefits of WPS?

WPS enforces transparency for both employers and employees as a common benefit. This collectively uplifts the nation’s growth and broadens the possibility of foreign investment. Here are the other benefits:

For employees:

• Timely payout of wages
• Fair salary brackets and wages
• Reduced wage-related labor disputes
• Safeguarded rights in the private sector
• A productive work environment for employees

For employers:

• Better & efficient payroll management
• Reduced administrative burdens
• Time savings with automation
• Compliance with labor laws
• High reputation that attracts skilled labor

How to prepare for the Wage Protection System?

Before you kick start the process of adopting the WPS system (which is a must if you want to do business in the UAE), here’s a pre-to-do list you must complete: 

• Have a corporate bank account registered in the UAE
• Sign a contract with a WPS agent (a bank, exchange house, fintech, or any other financial institution)
• Create a payroll cycle according to Ministerial Decree No 788
• Confirm to pay 70% of all staff or 75% of wages or salaries
• Agree to pay fees, charges, or any other WPS expenses

When you are all done with the list, follow it up with a 4 step framework to register for WPS:

1. SIF - get started with preparing a SIF or Salary Information File. This file should provide employer and employee details like CTC, Basic Pay, perks, deductions, etc. Make sure you submit this file every time you release a payroll. 
2. Verification - MoHRE in partnership with the central bank will now go through the file and give you a go-ahead. Make sure you adhere to all the rules, regulations, and compliance requirements.
3. WPS agent buy-in - if approved, MoHRE and the central bank will now notify the WPS agent to go ahead with payment processing. You will be notified in case of discrepancies, but it is smart to avoid them as they may come with penalties and fees.
4. Payment - for the last step, the WPS agent now disburses the salary from the employer’s account onto the employee’s account.

The WPS framework is the perfect win-win situation for employees and employers. As a company owner, you must register with WPS to comply with labor laws, enjoy automation support & efficiency, and uphold a high reputation.

To know more, read this guide to know the nitty-gritty of WPS.

Need help with WPS registration and compliance? PayBy can help. 

We offer digital solutions for payroll integrations and wallets. This comes with the benefit of instant salary disbursals to wallet cards that are compliant with major UAE regulations. Above all, you can enjoy digital onboarding, payroll transfers, tracking, and more.

Get started with PayBy today. 

FAQs

What is WPS in the UAE?

WPS or Wage Protection System is a framework to secure the interests and rights of employees in the UAE. It mandates electronic wage transfer for private-sector employers. 

What is the importance of WPS Salary in the UAE?

It is mandatory for every MoHRE-registered employer to adopt WPS and practice WPS-compliant salary disbursal methods.

How to know if my company is WPS compliant?

Anyone can check the WPS status of an employer by visiting MoHRE’s official website.

Are companies with few employees required to register with WPS?

If your company has a headcount of minimum 10 employees, you must register with WPS.