In line with the labour markets of other GCC states (Wage Protection System – Saudi Arabia) the UAE Ministry of Labour (Ministry) has introduced an electronic transfer system called the Wage Protection System (WPS).  The WPS was principally introduced in an effort to protect manual labourers and lower income earners in the UAE by ensuring, amongst other things, that salaries are paid accurately and on time.

The system, which was largely driven by the UAE Central Bank, is compulsory for all private sector companies within the UAE who are registered with the Ministry and whose labour relations are regulated by the Ministry.  

What practical steps should employers take?

Under the system, companies are required to submit certain wage information to the Ministry so that it can monitor the accurate and timely payment of wages.  This is achieved via an electronic salary transfer system that requires companies to:

  • open a bank account with a bank operating in the UAE
  • create salary files (SIF) using the tool on the eNetwasal Services (United Arab Emirates: Ministry of Labour) page of the Ministry’s website (the SIF contains salary information in respect of the employees and should be sent by companies to their respective banks)
  • enter into an agreement with an authorised WPS agent in the UAE; broadly these are financial institutions approved by the UAE Central Bank and include, amongst others, local banks and currency transfer providers in the UAE (for those employees who have their salaries transferred directly to their home country) – any service fees and charges will need to be agreed directly between the employer and the WPS agent. 

Thereafter, the employer will need to issue monthly instructions to its bank to transfer wages.  The instructions will need to be accompanied by a detailed wages list and a copy must be sent to the WPS agent. 

These payment instructions will then be sent electronically to the UAE Central Bank which in turn will send them on to the Ministry – allowing it to create a database recording the timing and payment of wages.  In addition, the WPS agent will electronically be sent the approved information in order for it to commence the actual payment of wages.

What are the consequences of non-compliance?

Failure to adhere to the WPS (and to enter into the arrangements outlined above) may result in the authorities refusing to grant or renew work permits and relevant trade / commercial licenses.  Any delay in paying salaries exceeding one month may result in financial penalties being imposed and may, ultimately, result in court action being taken.

For more information visit: The Ministry of Labour: Wage Protection System Guideline