The Wages Protection System (WPS) has been in place in the UAE since September 2009. As of 2010, all employers who are registered with the Ministry of Labour are required to comply with the system, regardless of size.
The WPS was brought into effect by a federal decree issued by the Ministry and, in 2011, the UAE Central Bank made the move to expand these measures to apply to free zones as well.
Under the law:
- Companies must transfer wages to their employees at least monthly, or on dates specified in the employment contract.
- In order for companies to join the system, they will need to first register with the Ministry and have an account with one of the banks operating in the country.
- The bank must be licensed by the UAE Central Bank to provide the WPS service.
- There must be a contract signed between the employer and the bank outlining the services and associated fees.
- The employer must provide the bank with a list of employees approved to receive monthly wages, as well as up-to-date instructions on electronic salary transfers.
This information is monitored by the Central Bank, as well as the Ministry of Labour, to ensure that the process is transparent and that all wages are paid in a timely manner.
[Related: What insurances for SMEs? | What free zone?]
Free zone alternative
Some free zones are exempt from using the government scheme; however, they usually have their own systems in place to govern payroll. For these institutions, an alternative is the Funds Transfer System (FTS), which enables wages to be paid more quickly online.
The FTS is most effective for bulk processing of dirham transfers within the country. Every transaction issued using this system is given a Central Bank reference number, which can be used in case there are any payment issues.
WPS compliance
All other organizations are required to comply with the WPS system. Not doing so could result in the denial of any new work permits from the Ministry. For a small- to medium-sized enterprise (SME), this would be especially awkward, as it would limit the business from expanding.
If a company using the system delays payment to an employee for more than one month, they will be also be blocked from being issued new work permits.
In addition, the employer would be prosecuted in court, and any bans will not be removed until the wages are transferred.
Pros and cons of WPS
For SMEs, the pros largely outweigh the cons of using the WPS or FTS. These systems have become a standard for employers in the country, and businesses cannot afford not to have such controls in place.
For smaller businesses and start-ups, they provide a useful tool for attracting talent, too. In the event that an employee wants to make the switch from a larger company to a smaller one, it’s a given that they would expect to be paid using such a system. It assures employees that they will be paid on time and according to their contract.
The wage systems are also important for boosting transparency and accountability within organizations, and can be seen as a metric for corporate governance performance. In addition, such financial statements are critical if a small business wants to secure a loan from a bank or financial institution in the future.
List of approved banks providing WPS services
- Abu Dhabi Commercial Bank
- Al Ahli Bank of Kuwait
- Al Ansari Exchange Abu Dhabi
- Al Bader Exchange
- Al Dhafrah Exchange
- Al Falah Exchange Company
- Al Fardan Exchange Abu Dhabi
- Al Fuad Exchange Dubai
- Al Ghurair Exchange Dubai
- Al Hilal Bank
- Al Jaber Exchange
- Al Khaliji France Bank
- Al Rostamani International Exchange
- Bank of Baroda
- Bank of Sharjah
- Banque Misr
- Barclays Bank
- Blom Bank France
- BNP Paribas
- Citi Bank
- Commercial Bank of Dubai
- Deutsche Bank
- Doha Bank
- Dubai Bank
- Dubai Exchange Center
- Dubai Islamic Bank
- Emirates Islamic Bank
- Emirates NBD
- First Gulf Bank
- HSBC Middle East
- Lloyds Bank
- Lulu Exchange
- Mashreq Bank
- National Bank of Dubai
- National Bank of Fujairah
- Noor Islamic Bank
- RAKBANK
- Royal Bank of Scotland
- Samba Financial Group
- Sharjah International Exchange
- Sharjah Islamic Bank
- Standard Chartered
- United Arab Bank
- Union National Bank
- Western Union
