The Ministry of Labour of the United Arab Emirates (UAE) has recently launched the new Wage Protection Service (WPS), designed to protect, document and oversee the payment of salaries in the UAE. The WPS is a program charged with safeguarding the payment of wages via transfers through elected financial institutions (“Registered Agent”) that will be authorized as well as regulated by the UAE Central Bank. This new program requires that all UAE businesses adhere to timely wage payments at the exact amounts agreed upon with the employee in their employment contract. One feature of this program is that employees will not incur any charges for participation in the WPS.
In addition to facilitating the payment of employee wages, this new program will also allow the UAE Ministry of Labour to track, in real time, whether salaries have been paid out in full in a timely manner. Defaulting employers can then be easily identified and penalized. Compliance with the WPS is mandatory for all UAE businesses.
Employers in the UAE can select from any Registered Agent to participate in the WPS. Registered Agents include authorized banks, money exchanges and other financial entities. Once the employee’s bank receives information about the employee’s wage, this information is sent to the WPS office within the UAE Central Bank. The WPS will then send the salary file electronically to the registered agent and the registered agent will pay the employee.
The following deadlines have been set by ministerial decree:
- Business with 100+ employees had to comply with the WPS by the end of November 2009.
- Businesses with 15-99 employees had to comply with the WPS by the end of February 2010.
- Businesses with fewer than 15 employees must comply with the WPS by the end of May 2010.
Penalties and Obstacles
Penalties for noncompliance with the WPS include defaulting employers not being issued new work permits to recruit new workers. Repeat offenders will have their work permit rights revoked for a period ending 30 days after they have become compliant with the regulations of the WPS.
Some practical obstacles to this new program have already been raised, specifically the unwillingness of some banks in the UAE to open accounts for low income workers. The UAE Ministry of Labor is addressing these concerns to help streamline the WPS system.
There have been concerns within the UAE professional expatriate community that the WPS is overbroad. It is widely understood that the aim of the WPS is to act as a safeguard to ensure that laborers and foreign workers are fairly paid in a timely manner according to the requirements of their employment contract. As a result of this, and in an effort to exclude professional expatriates who are working in the UAE but being paid elsewhere, there has been a push to convince the UAE Ministry of Labour to curtail the scope of the WPS. If or when the WPS’s scope will be narrowed is unknown. Until then, the WPS is effective for all businesses and employees in the UAE, regardless of position, nationality or remuneration.