UAE | Dubai Payroll Outsourcing Alert

UAE | Dubai WPS Compliance Alert

Mercans’ UAE & Dubai Payroll Outsourcing solutions guarantee compliance.

UAE & Dubai payroll outsourcing leader Mercans has issued the following Wage Protection System (WPS) compliance-related alert to the companies operating in the United Arab Emirates. Mercans offers legally compliant payroll outsourcing and PEO solutions in the UAE, that ensure full compliance with the complex WPS and payroll processing regulations. Consider Mercans’ UAE & Dubai payroll outsourcing solutions for the guaranteed fulfillment of all legal requirements established by the UAE Ministry of Labor.

WPS Compliance Actively Enforced by the Ministry of Labor in the United Arab Emirates

The UAE Ministry of Labor (MOL) introduced WPS in 2009. Currently, all companies operating outside the free-zones or in Jabal Ali Free Zone are required to follow and comply with the WPS requirements in order to avoid penalties by the MOL. The below Frequently Asked Questions, prepared by Mercans’ UAE & Dubai payroll outsourcing specialists, will provide you the must-know information regarding the WPS process in the UAE and Dubai.

What is the Wage Protection System (WPS)?

The WPS regulations were introduced to ensure, that all employers pay their employees on-time and fully. The WPS process allows the MOL to centrally and electronically monitor in real time the salary payments of the participating employers and take enforcement actions if the salary payments are not made in accordance with the Labor Law and employment agreements.

What is required for the WPS registration?

The Employers, that are subject to WPS, are required to process all of their salary payments through the WPS system. For this, the employer has to complete the following actions:

• Complete the legal entity registration process in the UAE, including the registration with the Ministry of Labor;
• Obtain the company MOL card;
• Open a corporate bank account in the UAE and activate the WPS services by signing a respective agreement with their bank;
• Generate the WPS files in the format mandated by the bank;
• Ensure that all employees have been registered with the MOL and have obtained their MOL cards;
• Confirm that all employees have opened local UAE dirham denominated bank accounts.

How does the WPS process work?

The objective of the WPS process is to monitor the salary payments by the employers and ensure, that all employees receive their full salaries. In order to accomplish this objective, the employers are required to comply with the following WPS processing steps on a monthly basis:

• Complete the payroll calculations, which match the salary information provided to the MOL in the employees’ employment agreements;
• Generate electronic WPS files in the format prescribed by the company’s bank in the UAE;
• Upload the WPS file(s) to the designated online portal of the bank. The WPS file(s) will be used by the bank to execute the salary payments to the employees. Multiple WPS files may be processed by the employer during any month, provided that the WPS files include different groups of employees;
• Ensure that the WPS information has successfully been received by the MOL.

How is the WPS information used by the MOL?

The MOL records all salary payments made by employers and compares these amounts with the information provided by the employers in the employment agreements provided to the MOL. During this process the MOL completes the following verifications:

• Verifies that all employees registered with the MOL are also included in the WPS files and that the WPS files do not include any other employees;
• The salaries reported in the WPS files match the contractual salaries identified in the employment agreements;
• Employees are paid on time; i.e. not more than 7 days from the respective month-end.

What are the common issues with the WPS payments?

There are a number of common issues, which may lead to inadvertent non-compliance with the WPS reporting requirements. Some of the most common issues have been summarized below:

• Not all the employees registered with the MOL are included in the WPS files. This may include the following scenarios:
  • Starters – employees who started after the payroll cutoff date and were not included in the regular payroll cycle. The salaries for these employees should be processed through off-cycle payrolls, with separate WPS files being generated for the off-cycle payments.
  • Deductions – The MOL monitors the amount of salaries paid though the WPS and compares these amounts with the salaries reported to the MOL. Ensure that the deviation between these amounts is less than 20%.
  • Unpaid Leaves – The WPS files must include the number of days worked by the employees during a month.
  • Local Bank Accounts – employees cannot be paid to non-UAE bank accounts. All salary payments must be made in the UAE dirhams to the local accounts.

Employers should ensure that they avoid these common pitfalls when processing salaries through the WPS process.

What are the consequences of the non-compliance with the WPS procedures?

The MOL is actively monitoring and enforcing the compliance with the WPS processes. In the case of non-compliance, the employer’s MOL services will be suspended until the company processes at least three sequential WPS files.

Please contact Mercans’ UAE and Dubai payroll outsourcing specialists at [email protected] for additional information regarding the WPS compliance requirements or to discuss Mercans’ UAE and Dubai payroll outsourcing solutions. Mercans’ UAE and Dubai payroll outsourcing services are the best approach for legally compliant payroll operations in the UAE.