In Brief:
- Ministerial Resolution No. (598) of 2022 (Resolution) was issued in December 2022 reinforcing an employer’s duty to pay employees through the Wages Protection System (WPS).
- The Resolution stipulates the repercussions of non-compliance which include financial penalties, the suspension of work permit issuance, warnings, inspections and referral to the public prosecutor for criminal prosecution.
- The Resolution follows a staunch increase in inspection visits across the private sector and a clamp down on non-compliance with UAE labour and immigration laws.
What is WPS?
WPS is an electronic wages transfer system set up by the Ministry of Human Resources and Emiratisation (MOHRE), whereby wages are paid through a clearing system maintained by the Central Bank and onwards to employees to ensure timely payment of wages in the private sector. Subscription to the WPS is mandatory for all employers registered with MOHRE and certain free zone employers.
Earlier this year it was announced that companies registered with the Dubai Multi Commodities Centre (DMCC) are required to pay wages through the WPS. Employers in the DMCC will be subject to fines for non-compliance from January 2024.
Key take away:
- Employers will be considered to be in default if wages have not been paid to employees within 15 days of the due date, unless the employment contract specifies otherwise.
- Reminders and notifications may be sent to defaulting establishments on the 3rd and 10th days following the due date.
- An employer will be considered compliant where at least 80% of the minimum salary stipulated in the MOHRE employment contract is transferred. Whilst the Labour Law permits a number of lawful deductions (which can be up to 50% of the total monthly wage), WPS must be informed of the same in advance to avoid significant disruption and difficulties for the employer.
- Employers must notify WPS before any employee is removed from payroll. There is a grace period for new employees, however they must be paid within thirty days of the due date (as stipulated in the contract).
- Employees on periods of unpaid leave are exempt from the WPS requirements, provided MOHRE has been notified in advance enabling the employee to be formally excluded on the system.
- Certain categories of employees (including absconding employees and those with wage related labour cases) are exempt from WPS.
- MOHRE has announced a substantial increase in inspection visits in the past year, with penalties being levied against non-compliant employers. The increase demonstrates the UAE’s commitment to strengthening protection for employees and enhancing the labour market in the private sector by raising awareness regarding the implementation of the labour laws.
- In the absence of a valid reason for any breach of the Resolution, MOHRE may levy financial penalties, suspend work permit permissions, carry out inspections and issue warnings. MOHRE may also refer non-compliance to the public prosecutor for criminal prosecution.
Conclusions / Recommendations:
Relevant employers must subscribe to the WPS and they should ensure the timely payment of wages to their employees in compliance with the Resolution to avoid penalties and significant disruption to business continuity.
Many employers in the region offer employee loans and salary advances, which are repaid by way of deductions from wages on a monthly or other agreed basis. Any deductions must be permitted by the Labour Law and evidence of the same must be presented and agreed by the WPS in advance of payment of wages, even where the employee has consented to the deduction.
For more information, please contact Rachel Hill, Partner, Head of Employment, r.hill@hadefpartners.com or any of our Employment team.