Salary to be paid in banks

Abu Dhabi: Starting from January 1, salaries and wages of all private companies will be distributed through banks to ensure workers are paid regularly and on time, a minister said yesterday.

A Cabinet decision to this effect was meant to ensure that all legal workers would enjoy the full and appropriate benefits relating to their salaries, healthcare and housing, Dr Ali Abdullah Al Ka'abi, Minister of Labour, told Gulf News yesterday.

"The [Labour] ministry will inform all private companies that, with effect from January 1, the salaries and wages of their staff must be paid through banks," he said.

The Labour Minister said the move is meant to counter employers' withholding or failing to pay wages of low-income workers, especially in the construction sector, the biggest employer in the country.

Many construction firms withhold workers' first two months of wages and thousands of workers are sometimes faced with employers who fail to pay wages for longer periods of time, leading them to leave their jobs and return home with huge debts.

Dr Ahmad Saif Belhasa, Chairman of the UAE Contractors Association, praised the move, which he said will ensure regular and timely payment of wages to all workers.

Fazul Haque P.A., a marketing manager, said the move is extremely beneficial for workers and will help monitor companies and stop those firms, which used to break the law.

This move, he said, will help introduce electronic payments to a large portion of the workforce in the UAE, many of whom do not have access to financial services.

Shamsuddine, an electrician with an Abu Dhabi-based construction company, said he welcomes any measure that will ensure workers, especially those with low incomes, receive their salaries and wages on time.

However, he expressed fears that banks will charge them big fees and that workers may need to pay for transport to reach a bank to withdraw salaries. He called on banks to open branches in workers' compounds and to offer a convenient and affordable banking solution to workers in the low-income segment.

Huge cost implications for the banks

A number of banks said yesterday that compulsory salary transfers for all expatriate workers through bank accounts is a positive move but it will have huge cost implications for the banks.

The bulk of these accounts belong to low-income groups earning salaries in the range of Dh700 to Dh1,500 a month. Many bank officials Gulf News contacted yesterday said servicing this group of customers is often a loss making proposition as many of them remit all their earnings to their home countries and are unable to maintain any balance.

"There is hardly any incentive to service this group because they just add to the costs while the banks have little earning potential from these accounts. Such a move if compulsory will have to be discussed between banks and the government," said an official with a leading local bank.

In the past, a few local banks such as Emirates Bank, First Gulf Bank and Mashreq Bank tried to include the low-income groups in their customer base. Officials of many local banks said the government should work out special packages to make these accounts viable and attractive to banks.

Nimesh Shah, General Manager of ICICI Bank, said it is possible for ICICI bank to offer accounts for all workers and make money from it.

- Babu Das Augustine, Banking Editor