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Tue 27 Sep 2016 01:43 PM

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UAE's new wage protection law to be effective from October

New law will place further obligations on employers in the UAE to pay workers’ wages on time

UAE's new wage protection law to be effective from October
(Image for illustrative purpose only - Getty Images)

The UAE is about to introduce a new law that places further obligations on employers to pay workers’ wages on time.

The UAE Ministry of Human Resources & Emiratisation’s (MOHRE) Ministerial Decree No (739) of 2016 Concerning the Protection of Wages, which will become effective from October 2016, also sets out sanctions for violators.

The legislation is intended to offer enhanced protections to employees, and to seek to prevent exploitative practices. The decree will repeal Federal Ministerial Decree No 788 of 2009.

Rebecca Kelly, partner, and David McDonald, associate, at Morgan, Lewis & Bockius LLP, told Construction Week that the law will allow the MOHRE to effectively monitor the salary payments of construction professionals.

“The payment of salary is considered late if it has not been paid within 10 days of the due date registered in the Wage Protection System (WPS),” they explained.

“WPS is a compulsory electronic salary transfer system that allows the ministry to monitor wage payments in theprivate sector so as to ensure the timely and full payment of wages.”

Kelly and McDonald also pointed out that, in some cases, the MOHRE will have the capacity to prohibit the issuance of additional work permits and suspend the violators’ licences.

“There are a number of sanctions that the degree allows the authorities to impose,” they said. “With respect to companies with more than 100 employees – or companies with fewer than 100 employees that have accrued more than one violation in a year – if wages are not paid for 16 days from the due date, the ministry will send a notice that no additional work permits will be granted and the violating employer’s licence suspended.

“If the late payment persists for a month, then the ministry will inform the judicial authorities and any other bodies that may take punitive actions. This could include suspension of other companies connected to the same employer, and refusal to register any further establishments in the name of the employer,” Kelly and McDonald noted.

The Morgan, Lewis & Bockius LLP experts added that, in such circumstances, the MOHRE will be able to enforce the employer’s bank guarantee, downgrade the establishment to a restricted type of company, and even allow affected workers to transfer to another employer.

“In addition, if wages are not paid for 60 days from the due date, a penalty of AED5,000 ($1,360) per worker will be imposed, which could rise to a maximum of AED50,000 ($13,600) in the case of multiple workers,” Kelly and McDonald concluded.

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