Dubai: From November 30, all business organisations with 100 or more employees must channel their workers' salaries through the banks — a marked shift from the current system of cash payments to blue-colour workers.

Gradually, by May 2010, all employers must channel salaries through the Ministry of Labour-backed Wages Protection System (WPS).

Workers who are used to getting paid in cash will undergo a cultural shift in how they handle salaries. This is also a cultural shift for many companies that are not used to transferring so many salary files electronically.

The WPS, which has been made mandatory by the Ministry of Labour to ensure fair and timely wages to all employees, requires every employer to choose any registered agent (banks, exchange houses and financial institutions) to join the WPS. Each month, on receiving a detailed statement of each worker's wages, the agent will send the information electronically to WPS. The WPS will then send the salary file to the agent for payment. Each employee, who will be issued an electronic card, will then withdraw the amount from the agent's cash dispensing machines.


The deadline for implementing the WPS depends on the size of the company. Firms with more than 100 workers should register before November 30; companies with a workforce of 15 to 99 by February 28, 2010; and companies with less than 15 workers before May 31, 2010. Companies failing to meet the deadline will be denied new work permits and employees will not have any means to draw their salaries.

Bankers say the move will boost transparency as the employee salary file will go through the UAE Central Bank, which will have access to the salaries of individuals.

"It will streamline the process of delivery and receipt of salaries and help the stakeholders," Shaikh Abdul Karim, vice-president of Sharjah Islamic Bank, told Gulf News.

"The Central Bank is ensuring that the workers are paid on time. The scheme will help protect the workers from exploitation."

But it isn't foolproof. "If the employer deprives the employee from full salary as per the labour card, the system won't be able to track that violation by the company," Karim says.

"Despite the limitation, it's a good step forwards towards full transparency."

The UAE has come a long way over the last 38 years following independence in improving labour rights and living conditions. Gone are the days when these contract labourers, mostly from South Asia, were smuggled into the region to be used as cheap manpower to help build roads, highways, lakes, infrastructure and towers. During the last ten years, the government and the private sector worked together to improve their living conditions.

However, large-scale exploitation by some employers continued until recently. In the absence of a basic minimum wage, a large number of employers exploit workers by denying them salaries and benefits according to their contracts.

The WPS is a step forward in plugging these loopholes. As the deadline for companies to pay salaries through the WPS draws near, employers are increasingly turning to technology to ensure that the salary payment records sent to the bank are accurate and fair.

The WPS has put the spotlight on technology as far as the employers are concerned. Some solution providers specialising in attendance management, payroll and human resource management systems are reporting a sudden surge in enquiries.

"The WPS is a laudable initiative from the government. However, companies need to upgrade their attendance management systems in order to ensure that employees are paid exactly for the hours they worked, nothing more, nothing less," says Praveen Bhandari, Director, Adventure Middle East, a leading IT solution provider.

"The WPS system has put the focus on new-generation attendance management systems that allow a company to exercise firm control of monthly payroll bills by accurately capturing the attendance of each employee and the number of hours he clocks in, through an Automated Attendance Management System," said Bhandari.

How it works

The Automated Attendance Management System not only saves a lot in monetary terms by generating accurate payrolls, but also strengthens employee/employer relations.

One can make substantial savings by not paying for ‘uninformed absenteeism' and ‘unauthorised overtime' — which can be as much as 20-30 per cent of the total payroll bill. This way WPS will also help safeguard the interests of both parties.

"The WPS system will mean the end of manual payrolls for companies. Manual payrolls can cause different problems, including dependence on dedicated staff for payroll, and human error," added Bhandari.

Employers are now keen to upgrade their salary calculation systems, as a dedicated WPS office in the Ministry of Labour will monitor all salary payouts. The system will feed the Ministry with the necessary database and information on all salary and wage payments in the private sector to enable the Ministry to have credible information on salary payments.

In order to comply with the WPS, a company must open an account with any WPS agent (bank, exchange centre or any other financial institution). The company then enters into an agreement with a WPS agent that is approved and authorised by the Central Bank to provide this service.

The employer will issue instructions to its bank to transfer wages to workers, accompanied by a detailed wage list and a copy of the list should be sent to the agent.