The Ministry of Labour is bracing for a last-minute rush by tens of thousands of small businesses in the UAE to register by a July 1 deadline for the third and final phase of the government's Wage Protection System (WPS), said a senior official.
Payroll and exchange companies say they are already working overtime to handle a flurry of requests by private small businesses to help them pay workers on time as dictated by the new law.
Mohsin Al Nasee, Manager of the Inspection Department in the Ministry of Labour, said the final implementation of Category 3 will see that all small businesses with a maximum of 14 workers on the payroll are registered under the system.
Under Category 3 of the WPS, the Ministry of Labour estimates there are 220,000 small businesses in the UAE that must register by the latest deadline in order to pay one million workers the proper specified monthly salary.
The first two WPS category deadlines have passed for an estimated 38,000 larger businesses that have already signed on in order to pay roughly three million workers since the WPS law was first enacted last year.
The latest phase-in deadline comes after reports first emerged globally several years ago that some companies within the UAE were not paying workers or were delaying paycheques for months at a time.
The federal government answered with new measures to protect vulnerable migrant workers from abuse by implementing the new WPS in which companies must forward their payrolls in a timely manner.
The Labour Ministry is working in tandem with the UAE Central Bank, 55 banks, 24 exchange companies and four financial organisations to enforce wage protection across the country.
Businesses that ignore the new rules will quickly find themselves cut off from future government services until they are officially registered.
"We will stop all of their files [for government services] from the Ministry of Labour by July 1 if they don't send in the information," Al Nasee said in an interview with Gulf News from Abu Dhabi.
Renewing work permits or worker visas will be denied until each company demonstrates to the government that it is paying its workers the full amount on a regular and timely manner, he said.
Vulnerable workers often do not have the wherewithal, education or knowledge of local laws and customs to fight defaulting employers, Al Nasee said.
"Some workers cannot read or write, but sign documents saying they were paid when they weren't," Al Nasee said, while "some employers will say they already gave that employee his salary.
"Now with this system, we can legally prove whether a worker has been paid a salary. Now we can show who has paid their employees and who hasn't."
No more delays
Under the new WPS, if a registered company fails to follow through with cash on payday, that company will be flagged and the Labour Ministry will investigate.
"When a salary hasn't been paid, we send an inspector to the company to find out why," he said.
Delays should also become a thing of the past, Al Nasee said, after small businesses sign up for the last phase of the law because payrolls will automatically be generated and paid out electronically through the UAE Central Bank.
"The salaries go in mere seconds now. There is no delay," he said.
Safer Driver is a Dubai-based chauffeur service that transports motorists who are unfit to drive safely to their homes. Hassan Lazem, Sales and Marketing Manager at Safer Driver, said there were some hurdles to registering for the WPS at first, but they have been ironed out and the company's 250 drivers are now being paid much more quickly.
"In the beginning of the wage protection system there was a teething stage," said Lazem.
"There were little things like a few incorrect bank account numbers. It's been relatively painless and our workers are now being paid within 24 hours rather then three or four days."
Lazem said Safer Driver did its own paperwork and submitted it to the Ministry of Labour choosing "to do it directly" rather than hiring a third-party payroll company.
Meeting the new demand
Federal laws stipulating that all UAE employers must remit monthly wages have created some challenges for firms not equipped for such a large task, said Al Nasee.
Some larger companies in the construction sector, for example, have over 14,000 employees in the UAE who are housed in labour accommodations, do not own vehicles and for the large part are unbanked — banks won't open accounts for workers earning Dh500 a month.
But one man's trials quickly turn out to be another's opportunity, said Al Nasee, with exchange houses and financial firms moving in to fill a niche market to electronically deliver payrolls nationwide.
Abu Dhabi-based Lari Exchange has been providing remittance services since it was founded in 1969 and has recently adjusted its business model to serve UAE companies seeking help to disburse electronic payments to workers.
Fuaad Lari, General Manager of Lari Exchange, said his firm is an "authorised agent at the Central Bank and Ministry of Labour" to provide financial services to firms regarding new payroll regulations.
"The WPS is there to guarantee that all employees in the UAE will receive salaries on time. Companies can't delay because they are being monitored," he said. "We now have more than 1,000 companies [as clients] with close to 70,000 employees," said Lari in an interview with Gulf News.
"There are still some companies waiting for the last moment to register. When they see that they cannot renew labour cards they will register now. Today, there is a rush to register with the WPS."
The 11th-hour rush of small businesses to register is translating into yet another wave of demand that could triple business activity in 2010 for Lari Exchange, he said.
"We are targeting for the end of the year to have 200,000 customers [employees of UAE client firms]," Lari said, "up from 70,000 customers we now have."
Mirroring efforts by other companies, Lari Exchange has provided its individual employee customers with debit cards that can be used at 17 Lari Exchange automated teller machines across the UAE.
"We now have 17 ATMS in place in Abu Dhabi, Dubai, Al Ain and Fujairah," Lari said.
Lari is working on a plan that would actually bring mobile banking tellers to labour camps, noting "very soon we will be in the market".
The idea of mobile ATMs is certainly not new with other firms such as Al Ansari Exchange gearing up to also bring the bank machine to the worker. The firm set up more than 18 stationary ATMs at its exchange stores earlier this year.
Mohammad Al Ansari couldn't be reached for comment by press time but a company staffer confirmed the company will unveil mobile banking soon.
Taking the ATM to workers
Other firms have already been providing the mobile ATM service well before wage protection regulations came into effect.
According to Anas Zaidan, General Manager of C3 Card, his firm began bringing specialised mobile ATM trucks to labour camps for customers in June 2008.
"We provide a debit card to labourers. We have 27 ATMs and we have two mobile ATM trucks. Each truck has four ATMs to go into labour camps."
C3 Card already provides regular mobile ATM visits to labour camps in Sonapur, Jebel Ali Village, Dubai Industrial City, Al Quoz, Sharjah and Abu Dhabi.
"For some of them, it's hard for the company to take them [debit-card carrying customers] to an ATM downtown," said Zaidan. "It's working very well."
The Dubai-based payroll service provider was well-prepared for the new WPS when it was rolled out last year and has now amassed one of the largest rosters of clients in the country.
"We have more than 1,000 clients with 300,000 labourers," said Zaidan. "And we will be signing new companies."
Early in the game, C3 Card went to various banks and "signed with them to outsource payroll to us" so when the new wage protection system came in and companies needed a third-party payroll distributor, banks referred them to C3 Card for unbanked workers.
Each C3 Card Mastercard debit card can be used only in the C3 Card's ATMs to draw money deposited in the worker's personal account. "It's a UAE switch card and will work outside the UAE on the Mastercard platform," Zaidan said.
With a rush of last-minute companies rushing this week to meet the final phase of WPS, Zaidan said he expects yet another surge in customers and a boost in the number of worker customers the company serves.
Remittances
With tens of thousands of new customers holding personalised ATM cards, exchange houses are expecting up to a six per cent increase in remittances sent home from the UAE by migrant workers after a six per cent downturn in the industry in 2009 due to the world financial crisis.
Despite the fact that the number of money transfers in the Middle East fell by eight per cent last year, there were still 2.5 million individual remittances originating each month in 2009 from the UAE's 110 money-transfer companies with more than 550 outlets in the country.
Last year, an estimated $20 billion (Dh73.4 billion) was sent through money transfers from exchange houses from UAE migrant workers representing a large portion of the world's total of $319 billion in remittances.
A large portion of the UAE remittances last year are believed to have been sent to India which receives the highest amount of money transfers in the world, more than $50 billion annually from Indian workers living abroad who help support their families back home.
According to a World Bank April 2010 report, remittances are expected to climb by 6.2 per cent this year despite numbers that show remittance flows dropped markedly from the GCC to countries such as Pakistan and Bangladesh in the first quarter.
The World Bank report said Dubai's "slowdown in new construction projects" has led to less demand for migrant workers which have shifted to "other oil-rich emirates and neighbouring countries where huge infrastructure investments are going on". However, the report said that some migrants "have stayed on in Dubai during the crisis …Many are coping with the crisis by cutting consumption and sharing accommodation. Many have sent their families back home so the funds spent in Dubai are now remitted home."
The World Bank said many workers earning less than Dh900 have yet to pay off an average Dh12,000 in recruitment fees and are waiting it out in Dubai although "rising living costs in Dubai have also reduced remittances".
"The price of rice, a staple for many migrants, more than doubled in the last two years. Earlier, a construction worker spent roughly Dh150 a month on food; now he is spending between Dh350 and Dh400. Also this has increased the time it takes a migrant to pack back the recruitment fees," the report stated.
The World Bank report claims that following the financial decline of 2009, it's now less expensive to send money home from the UAE.
"Many banks and operators are cutting remittance fees. This is partly because of the global financial crisis," the report said, "which has caused the market to shrink in several corridors [especially from US to Latin America], and more intense competition".
"For example, remittance fees from the UAE to South Asia, a high-volume corridor, are often under $1 per transaction," said the World Bank.
Has your company switched to the wage protection system? What do you think of the new system? How will it impact businesses in the UAE?
