New UAE Ministerial Decree – Delay in paying employees’ wages could mean penalties for UAE Employers

The Ministry of Human Resources and Emiratisation (“MOHRE”) (formerly known as the Ministry of Labour) has issued a new Ministerial Decree (739) of 2016 Concerning the Protection of Wages (“the New Decree”) which is reported to come into effect in October 2016. All UAE employers registered with the MOHRE should be aware of the implications of this New Decree as they could be penalised if they do not pay their employees’ wages through the Wage Protection System (“WPS”) in time.

The New Decree provides that employers will be deemed to be late in paying their employee’s wages if payment is not made within 10 days from the registered due date in the WPS. In this regard, differing penalties for late payment of employees’ wages depending on the workforce of the employer are then set out in the New Decree.

UAE employers with over 100 employees

Pursuant to the New Decree, where a UAE employer with over 100 employees fails to make payments of employees’ wages in a timely manner, the MOHRE can refuse to grant that employer additional work permits starting from the 16th day past the date which payment was due in the WPS. The New Decree sets out that, as of the 16th day, the violating employer’s company shall be suspended from the WPS and given a notice that: i) the judicial authorities and other relevant authorities will be informed to take punitive procedures against the violating company; ii) the suspension can be extended to the other companies of the employer; iii) prohibits the employer from registering any new companies; iv) starts procedures to liquidate the letter of credit; and v) the company’s classification will be decreased to the third class category (of the MOHRE establishment classification).

Accordingly, such penalties could have wide reaching implications for UAE employers. Further, in circumstances where the delay in paying employees’ wages continues 60 days past the registered due date in the WPS, then the New Decree provides that administrative fines shall be applied to the violating company in addition to the provisions of i) to v) above.

UAE employers with under 100 employees

The New Decree also sets out that where a UAE employer, who has under 100 employees, fails to make payments of employees’ wages in a timely manner, the MOHRE shall continue to apply the rules that already apply to late payments through the WPS. However, if the failure to make such payments is repeated more than once in one year, then the MOHRE will follow the above process and the implications will be the same as those for employers with over 100 employees.

As the New Decree has not come into effect yet, it is difficult to say how strictly the MOHRE or the WPS will apply its provisions. However, it would be prudent for all UAE employers registered in the MOHRE, to pay employees’ wages in a timely manner to avoid violating the WPS and facing penalties that may be imposed under this New Decree.