Saudi Arabia has traditionally been a labor-intensive market, with the majority of workers employed in the construction and service sectors. Typically, Contractors or sub-Contractors engaged in these sectors retain migrant workers from outside of Saudi Arabia to be paid on a fixed rate basis but engage them for work on-site for up to sometimes 6 years. This situation prohibits the worker from being able to switch jobs due to not being paid by the same employer for an extended period of time.
The Wage Protection System is an electronic payment-based mechanism that enables a worker to change employers without losing wages or entitlements if there are any. This initiative is administered by the General Directorate of Passports for all workers in Saudi Arabia. The system was implemented as part of KAPSARC’s agreement with the Government of Saudi Arabia; whereby, 100% of all wages are paid electronically through banks and financial institutions, which results in monthly bank statements and transaction history being automatically issued to all workers classified as salaried employees.
Wage Protection System (WPS) was recently launched by the Saudi government, the purpose of which is to ensure timely salary payments to private sector employees. Saudi Vision 2030 and the Ministry of Labor and Social Development (MLSD) have announced a major initiative to establish the Saudi Wage Protection System, which will be implemented in two phases.
First Phase: Companies with more than 100 employees and non-profit organizations with more than 50 employees must sign up for WPS in the first phase. By the end of 2018, non-profit organizations and companies with less than 100 employees will be required to register.
In an attempt to improve the working conditions of Saudi workers, the WPS initiative was introduced as part of the Saudization policy reform. Foreign workers will be protected under the new system, as will domestic employees. Employers whose wages are delayed or not paid on time will be fined for not paying on time.
How does the Wage Protection System work?
- Private companies with at least 10 employees are required to register with their banks’ payroll programs.
- A payroll file will be filled out by the establishment and uploaded to the bank system.
- Upon receiving the WPS file, the bank will send it back to the company.
- During the first 10 days of each month, the company will upload the WPS file received from the bank to the government’s portal.
- Salary date for Saudi Arabia: 10th of the following month.
- MOL forwarded the names of those employees to the employer who had not been paid their salaries.
- Ministry of Labor will have to provide explanations for the non-compliance. Alternatively, employers will be fined heavily.
How to Register on WAGE Protection System?
- The first step for an employer is to register for WPS, which is administered by the UAE’s Central Bank.
- During registration, details such as name, address, and bank information for all employees must be provided, along with salary amounts and payment dates.
- Once this has been completed and approved by the bank, employers can begin making wage payments via direct deposit or EFT (Electronic Funds Transfer).
- These payments must be made at least once every 30 days or they will be in violation of MOL regulations.
Benefits of the Wage Protection System
Employers in Saudi Arabia can now use the Wage Protection System to pay their workers, a system that provides many benefits to both employers and employees.
A number of benefits are associated with the WPS:
First, This ensures that all payments are handled through banks. As a result, employers and employees are able to track payments easily, preventing late or missed payments. If necessary, workers can also borrow against their future wages.
Second, You can rest assured that your wages will be paid on time through the WPS. You cannot be withheld or delayed payment by your employer-they must pay you within 24 hours of the work being performed unless both parties have agreed otherwise beforehand! They could face fines of up to SR 5 million ($1.3 million USD) if they do not follow this rule.
Employers can easily track payments made to their employees through the Wage Protection System, which allows payments to be automatically transferred to employee bank accounts on a regular basis. Through this innovation, employers can no longer concern themselves with the loss or theft of cash.
The Wage Protection System ensures that employees will receive payments on time and never have to worry about not getting paid. This also means that they can borrow money if they need it through loans secured by future earnings.
Ultimately, the Saudi Wage Protection System adds efficiency, transparency, and security to the Saudi labor market. Cuts off the flow of money between workers and their employers, making it harder for employers to engage in unethical or unfair business practices.
These changes will also encourage more companies to access the system. In the past, Saudi Arabia has successfully encouraged investment in employment-related services, and this recent initiative has proved that the government is dedicated to creating a modern work environment.