Beware the penalties of not paying staff on time in the UAE - Wage Protection System
2nd August 2022
If your organization has a reputation for paying wages late, or worse still, not paying wages at all; then, under the revised provisions of the Wages Protection System in the UAE, it is in jeopardy of not only harming its reputation, but damaging it's performance and ultimately ruining it's business.
What is the wages protection system?
The Wages Protection System (WPS) was introduced in the UAE in 2009 to ensure all mainland companies registered with the Ministry of Human Resources and Emiratisation (MOHRE) paid their employees on time.
If you decide to pay your employees' wages late, or not at all, this will happen
For mainland companies in the UAE which fail to pay their employee's wages on time, under Ministerial Resolution No. 346 of 2022, MOHRE will implement a series of administrative procedures.
MOHRE will be monitoring all establishments through its electronic WPS system, as well as site visits. Companies which do not pay on time will receive reminders and notifications from MOHRE. If they continue to take no action they will be penalized with the suspension of new work permits. Public prosecution, local authorities and federal authorities will be notified for further legal action.
Additionally, companies not paying wages for four months will not only face a suspension on their new work permits, but their non-compliant actions will penalize all other mainland companies owned by the same partners, which are registered with MOHRE.
If a company repeats the same violation within six months, as per Cabinet Resolution No. 21 of 2022, they will be fined AED1,000 per employee (up to a maximum of AED20,000) and downgraded to tier 3 in MOHRE's classification system, which in turn will increase the amount they have to pay for work permits in the future.
Schedule of actions to be taken against companies which don't pay wages in the UAE
Deadline | Establishment Size | Action |
1.On the due date | All Establishments | Establishments will be monitored electronically to ensure compliance with paying wages to workers. |
2. On the 3rd & 10th day after the due date | All Establishments | Reminders and notifications to pay wages will be sent to non-compliant establishments. |
3. On the 3rd & 17th day after the due date | All Establishments | Suspension of issuing new work permits to all non compliant establishments. Notification of the reasons will be sent to the owner. |
3. On the 3rd & 17th day after the due date | Establishments employing more than 50 workers | Listing in the electronic monitoring system & inspection visits scheduled. Inspections will be conducted and warnings issued as necessary. |
4. 30 days from the due date | Establishments employing more than 50 workers | Public Prosecution and competent authorities at federal and local level will be notified for further legal actions. The establishment will be followed up by the concerned department in the Ministry. |
5. 4 months after the due date | All Establishments | Ban on new work permits remains in effect for non-compliant establishments. Similar penalties are extended to other companies operated by the the owners, after notifying them. |
6. If the company repeats the same violation within 6 months | All Establishments | ● Fine will be imposed in accordance with Cabinet Resolution No. 21 of 2022. ● Downgraded to category 3 in accordance with Ministerial Resolution No.(209) of 2022. |
7. Failure to pay a worker's wage for more than 3 consecutive months. | All establishments | ● Electronic notification will be sent to the establishment. ● Ban on new work permits remains. ● Renewal of the work permit of a worker who has not received his wages shall be suspended unless his/her status is duly modified. ● If the failure to pay wages continues, an inspection will be conducted after 6 months from the date of non-payment to ensure the existence of the employment relationship. In the absence of an actual employment relationship, the violating establishment will be referred to Public Prosecution and fined in accordance with Cabinet Resolution No. 21 of 2020, and coordinate with other concerned authorities regarding imposition of fines as per the rules. |
Are there any exemptions from paying wages through WPS?
Yes. The latest revisions add a further two exemptions from WPS compliance, bringing the total to six:
Fishing boats owned by nationals
Public taxis owned by nationals
Banks
Houses of worship
Seamen / sailors working on board vessels / ships
Workers of foreign establishments or their subsidiaries operating in the UAE who receive their wages outside the country (subject to the workers' consent).
Can your business afford NOT to pay it's employees wages?
Businesses are reliant on their staff for their smooth day-to-day operations. Imagine, if your business wasn't able to hire new employees when it needed to. What would that impact be? Unable to meet contractual obligations? Reduction in the quality of customer service experience? Short-staffed-related injuries? Increased stress levels? Over-worked employees? Bad morale? More mistakes? Business can't grow?
Not being able to hire staff when you need to can quickly change the dynamics of a business. And, if not managed, can impact the performance of the company, which in turn will affect the bottom line of the business and could lead to its closure.
Gateway Group's opinion on the revisions of the provisions of WPS
We totally agree that sanctions should be implemented for companies not paying their employees.
However, whilst anyone with a mainland company reading this article might initially be thinking these revisions won't affect them if they always pay their wages on time and have no intention of not paying, they should think again.
These revisions affect all mainland companies, particularly if your organisation has a local sponsor or service agent. If one of the companies they partner in or act as a local service agent for doesn't comply with the WPS regulations for four months or more, then your organisation will suffer the same consequences and not be able to get new work permits.
This is another reason to conduct due diligence when appointing your local sponsor for mainland companies in both Abu Dhabi and Dubai. If your local sponsor partners with hundreds of companies then you organization is potentially at a higher risk because you are reliant on each of those companies adhering to the regulations. Questions to ask are:
1) How does your local sponsor / service agent manage their relationships with each of the companies they are partnering?
2) What measures do they have in place should one of their companies get penalized and take no action?
Is it time to change to a new sponsor or service agent?
If your business is at risk of the above penalties through no wrong doing on your part, then maybe it is time to move away from your current sponsor or service agent to avoid the risk. At the Gateway Group, we don't sponsor hundreds of companies and those that we do are carefully scrutinized before we engage into such a relationship to ensure they don't cause unnecessary disruption to either our own businesses of those of our clients. We purposely have close relationships with our clients to ensure they're aware of regulatory changes and comply accordingly.
Gateway Group's concierge on-the-ground business support services are designed to provide a seemless extension to our client's in-house teams helping them to be compliant and managing their government transactions so they never over look an expiry date again. Connect with us to discuss how Gateway Group's sponsorship and support services can provide reassurance to your business in Abu Dhabi and Dubai.
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Gateway Group Of Companies
With offices in Abu Dhabi and Dubai, Gateway Group helps international companies get registered to do business in the United Arab Emirates (UAE). We are the authority on business licenses and visas for expats in Abu Dhabi and Dubai.
Founded and headed up by British husband and wife team, Nathan and Jenny Hunt, Gateway operates with it's core values at heart: Honesty. Trust. Integrity. We do what's in the best interests of our clients rather than what's best for our bottom line. After all, we are just like our clients - we've invested our own money into our business licenses, so we fully appreciate what a big investment a commercial license is. We believe this uniquely positions us to provide our services with understanding and empathy.
From our own first-hand experience and knowledge, generated from living and working in the UAE, as well as setting up companies and building relationships here, we are able to offer unique insight and guidance to help our clients successfully step into the market and do business in the UAE.
We value long-term relationships and our incredible client retention is one of our strongest assets, which is extremely rare in our industry.
Founding Partner, Jenny Hunt, has been setting up businesses in Abu Dhabi and Dubai for over 10 years and is ranked in FORBES' Top 100 Most Influential Women In The Middle East!
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Written by Jenny Hunt
Founding Partner, Gateway Group of Companies, Abu Dhabi & Dubai, United Arab Emirates
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