Labor Reforms Sweeping the Gulf: The Wage Protection System

GCC and the Wage Protection System

Recent years have seen sweeping reforms in labor protection laws, as Gulf States make efforts to attract and retain foreign talent. In the UAE, many professionals and celebrities are being offered “10 year golden visas”. In addition, the UAE and Bahrain allow service based professionals (as well as other businesses) to set up companies with 100% ownership. One reform which will assist workers across the board, and which may improve workplace equity, is the wage protection system. Under this system, employers are required to provide payments to employees via bank transfer. A failure to do so would lead to a legal presumption of non-payment of wages, and would subject the employer to hefty fines. The law aims to combat the non-payment of wages, and the violation of labor contracts by recalcitrant employers. As such, it offers a sense of security to even low wage earners, as it allows all employees to raise claims against their employers if the employer fails to pay the wage by bank transfer on time. The law is also simple in its essence, and therefore most employees, whether professional workers, trades people, or construction workers, will not find it difficult to report a violating employer, as all that needs to be shown is that the employer failed to transfer the worker’s salary to their account on time. This would be considered prima facie evidence of a violation of the employment contract, and would subject the employer to hefty fines. In this article, we take a look at how this system is being implemented across the GCC.

KSA:

In 2013 the Labour Ministry of Saudi Arabia implemented the Wage Protection System in the Kingdom. Since December 2020 it is mandatory for all businesses to register with WPS. Earlier businesses with five or more workers were required to register. As per the latest regulations, employers who fail to pay their workers for two months will be penalized with a fine of SR 10,000 each month until due wages are paid.

Bahrain:

Earlier this year Bahrain introduced a wage protection system for private sector employees. The Ministry of Labour and Social Development had issued a decree to protect wages of private sector employees and limit labour disputes. The first and second phase of the decree has already been implemented from May and September respectively, and the third phase will come into effect from 1st January 2022. The first phase covers private sector institutions that employ 500 workers or more, the second phase covers employers of 50 to 449 workers and the third will cover employers of 1 to 49 workers. Mr. Jamil Bin Mohammed, the kingdom’s Minister of Labour and Social Development said "This decree comes as part of the Kingdom of Bahrain’s commitments to preserve labour rights in line with the national codes conforming to international labour standards". The official warned that employers who fails to pay their employees on time will be punished by gradual legal penalties.

UAE:

The WPS in UAE came into force in July 2009 and was further upgraded in 2016. Though there is no minimum wage set out in the UAE Labour Law, salaries must cover basic needs of the employees. As per the Ministerial Decree No. 739 of 2016 Concerning the Protection of Wages, all employers registered with Ministry of Human Resources and Emiratisation (MoHRE) must subscribe to Wages Protection System (WPS) and pay their employees through the WPS, as per the due dates. If an employer fails to pay on due dates through the WPS, a fine of AED 1000 is charged per employee and AED 5000 per employee if the employer forced the workers to sign fake pay slips.

Qatar:

In 2015, the WPS was introduced in Qatar to ensure that all private companies pay their workers on time. The WPS is applied to all private companies whereas, QFC entities, embassies, government and public sector organisations are exempted.

Oman:

In November 2017, the Ministry of Manpower in coordination with the Central Bank of Oman initiated the WPS. The objective is to safeguard employees rights. Since February 2018, it is mandatory for all private sector employers to register on the WPS and provide up to date information on the job and wage information of their workforce. If employers are late to pay the wage or fail to pay the wage, a fine up to OMR 500 will be charged.
Kuwait:

In 2015, Kuwait's government also introduced the WPS to the country. Employers are required to pay their workers through the local banks.