The Wage Protection System (WPS) in Saudi Arabia became mandatory for all Saudi companies with over 3,000 employees on 1 September 2013 (Ministry starts the mandatory application of “Wage Protection Program” by the end of Shawwal). The objective of the WPS is to minimise any delay and issues in the payment of salaries.
Under the WPS, companies are required to submit wage information to the Ministry of Labour via the e-service program. The WPS will help to ensure that employee rights are protected and that salaries are paid according to agreed terms of employment contracts. The Ministry also aims to identify illegal workers and streamline the labour market.
What are the consequences of non-compliance?
No ministerial services will be available for companies that fail to implement the WPS (with the exception of labour permit renewal services). Where a company continues to delay implementation, the Ministry will suspend all of its services and will allow employees of the company to transfer to another company without having to seek consent from the employer.
What practical steps should employers take?
Companies that fall within the scope of the WPS should:
- open local bank accounts for their employees
- open a payroll file which will need to be authenticated by the bank (Technical Specification)
- register with the WPS
- submit all information relating to the monthly payment of wages to the Ministry using the e-service.
Employers are also encouraged to keep the Ministry informed of any changes in information relating to their employees in order to avoid any penalties being imposed. Compliance with the regulations by smaller companies with between 1,000 and 3,000 employees became mandatory on 1 October 2013 (Saudi Arabia’s wage protection scheme comes into effect).