This has been reflected in the UAE Labour Law from 1980. Initially, the Wage Protection System was implemented solely within Mainland companies, however, subsequently, it broadened up to Free Zones too. In this article, we would like to cover the principles of the Wage Protection System and its increasing exertion over the broader range of jurisdictions within the UAE. 

Before we continue, it is worth noting what the Wage Protection System or WPS is. It is the system, which obliges employers in the private sector to transfer the salary to all employees of the company through authorized agents. An authorized agent can be either bank, or exchange house, assigned by the Ministry of Human Resources and Emiratisation (MoHRE), and authorized by the Central Bank of the UAE (CBUAE). They report the volume of monthly salaries to MoHRE and charge each company a fixed monthly rate. Employers might transfer salaries either via bank, or exchange house, both options are always open for them.

If the employee has not yet opened his/her bank account, receiving monthly payroll would differ, compared to receiving a payroll directly to his bank account: in the first case he will receive the cash at the counter in any of the exchange houses. The process of accruing payroll, when all bank accounts are ready is simpler, and can be done online. In any of the options, WPS grants each employee in the company a Salary Information File (SIF), containing details about the employee, and employer. On each occasion of accruing monthly salary, banks and exchange houses identify each employee through this file. The monthly payroll process via WPS is mandatory for all private companies within MoHRE jurisdiction, and several Free Zones of Dubai. Evasion or entering false data in the WPS files might lead to fines: AED 5,000 for each employee, and AED 50,000 for multiple employees. 

Wage protection system in Free Zones

As mentioned previously, WPS in the past was mainly a prerogative of Mainland companies, while Free Zones were not obliged to accrue monthly payrolls via the system. Jebel Ali Free Zone Authority (JAFZA) is among the first Free Zones, which responded to the integration of the WPS, as a sign of cooperation and support of a transparent labor ecosystem in the country. Another Free Zone, which has been compelled to adopt WPS, is DMCC. By 15 February 2023, DMCC had developed the infrastructure and standardized the codes, according to MoHRE’s requirements. While 2023 carries preferentially testing character in DMCC, registering WPS will become mandatory from January 2024. In case of failing to adhere to the requirement, there will be penalties. 

If you would like to have advice or assistance with registering a WPS in your entity in the UAE, please contact us.

Marsel Shadmanov

Head of Corporate Services at Garant Business Consultancy DMCC

Phone +971 4 421 4335

Email info@garant.ae