A company’s payroll system can have a strategic business impact, especially for larger enterprises that pay the salaries of hundreds of employees. The easier and more straightforward it is to use, the better for the company and its employees.
Around the world, businesses can pay their employees through various ways: check, cash, direct deposit, or payroll card. However, in the United Arab Emirates, there are rules in place that determine possible salary payment methods.
Private enterprises on the mainland are required to use the government’s electronic salary transfer system. Companies in free zones, except Jebel Ali Free Zone, can use other payroll solutions in the UAE.
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The WPS Compulsory Payroll Method for UAE Mainland Private Companies
Any private company in the UAE that hires employees must register with the Ministry of Human Resources and Emiratisation (MOHRE) to get the necessary work permits. Subsequently, any company registered with MOHRE must process their employee salaries through the government-mandated electronic salary transfer framework, the Wages Protection System or WPS.
What Is the WPS?
At its core, the WPS is an electronic transfer payment system. It is compulsory for private companies in the UAE that operate outside the various free zones.
Introduced in 2009, the WPS is implemented by the Central Bank of the UAE (CBUAE) in accordance with the objectives laid out by MOHRE. WPS is a transparent and streamlined system that helps the government protect the rights of the UAE workforce.
The WPS enforces compliance with salary payment regulations, particularly regarding timings and payment due dates. It also makes it easier to penalize companies that default on their salary obligations.
High-Level Functions of the UAE WPS
The UAE WPS serves the following specific functions:
- Monitor Fund Flows
The system continuously tracks the movement of funds, providing an unambiguous record of all employee payment transactions. This ensures transparency and accountability on all fronts.
- Accept Transfers
The system facilitates fund transfers from the employer’s corporate bank account to its designated wage payment services agent and from the WPS agent to individual employee accounts.
3.Transmit Employee Salary Details
The employer submits salary information to the WPS. The employer-designated agent uses this to pay employee salaries and ensure everyone receives the correct amount.
4.Receiving and Processing Confirmations and Requests
The WPS actively handles receipt confirmations and disbursement information from agents and employer refund requests.
5. Data Sharing With the LRA
The WPS actively shares its data with the Labor Regulatory Authority (LRA). This ensures the agency has the information it needs to monitor the compliance of private companies to labor regulations, particularly those pertaining to salary payments.
The WPS Process
To use the WPS to pay your employees, you must have a corporate account with any UAE-registered bank. Next, you will need to sign a contract with a salary disbursal provider, i.e., a WPS agent.
The WPS agent may be a bank, exchange or any financial institution that the Central Bank of the UAE has authorized and approved to offer salary/wage payment services via the WPS. The CBUAE regularly issues an updated list of accredited WPS agents.
Once your WPS account is ready and you have met all WPS requirements, paying employees their salaries is pretty straightforward and involves these steps:
- Prepare and submit your salary information file (SIF).
The SIF contains information about every employee’s pay, including the salary breakdown. Upload it to the WPS portal. Of course, you should also transfer funds from your payroll bank account to your WPS account.
- MOHRE and the Central Bank check the accuracy of the details on your SIF.
MOHRE and the CBUAE check the salary information to ensure it is accurate.
- MOHRE and the Central Bank issue a payment order.
If everything is in order, MOHRE and the CBUAE will issue a payment order authorizing the WPS agent to disburse salaries.
- The WPS agent disburses salaries to employee accounts.
Once the WPS agent has the payment order, it transmits the salaries to individual employee accounts.
WPS Solution: Payroll Cards
WPS agents typically issue payroll cards to the employees of the companies with which they have WPS agency agreements. Payroll cards make it a lot more convenient for employees to access their salaries.
Non-bank agents (e.g., exchanges) typically issue one of two types of pay cards: co-branded and employer-branded.
Co-Branded Automatic Teller Machine (ATM) and Debit Cards
A co-branded ATM and debit card is like a traditional bank account card. It is connected to the employee account maintained by the WPS agent, but the employee may access their salary through the WPS agent’s partner bank or banks.
The co-branded card provides these benefits:
- Accessibility: Salaries can be withdrawn from partner bank ATMs.
- Debit card functionality: The card gives employees access to extensive networks (e.g., MasterCard); thus, it permits use as a debit card in places that accept debit card payments.
- Security: Cash withdrawals require a PIN code.
In-House Payroll Card
The in-house payroll card is usually tailored to the employer’s requirements and may carry the name of the company for which the card has been created. It is just as secure as the co-branded card, but it may be limited in functionality; it may be just for cash withdrawals, not debit card payments.
In-house cards are usually not connected to banking networks. Funds may be accessible only through the WPS agent branches. This should be fine with exchanges that have many branches.
Their primary advantage is their cost-efficiency, as they may have no issuance fees. Imagine the cost savings for a company with hundreds of employees. With a co-branded (or linked) card, a company may have to pay a significant amount in fees just to get payroll cards issued. Check Babajitone.Com blogging.
The WPS: Efficiency, Transparency and Convenience
The WPS is an excellent system. By providing the government oversight on the salary disbursement process, it protects employees, ensuring they get paid what they are owed on time. By providing a streamlined payroll payment process and the help of WPS agents, employers can be more efficient at fulfilling their payroll obligations to their employees.