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Penalty for Late Payment of Salary in the UAE

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00

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non payment of salary uae, UAE government, Late Payment of Salary in the UAE, Penalty, Late payment

Late payment of salary is naturally a cause for concern among the salaried employees. The UAE has established clear cut rules for non payment of salary on time.

Workers in the UAE are entitled to a ten-day grace period if their employers fail to pay their wages on time.

If a company fails to pay its workers on time in the United Arab Emirates, they might face penalties of up to 50,000 Dirhams (Rs 10,06,713). Work permits might potentially be revoked as well.

Compensation for employees in the UAE is governed by a 10-day grace period after the due date, beyond which employers are regarded to be defaulting.

As the UAE's labour legislation evolves, all businesses, employers, and employees must be informed of the changes. Otherwise, any of them could unwillingly make mistakes and be penalised, which could result in hefty fines. In addition, there are new fines for corporations that do not pay their employees on time.

The following sanctions will be taken against enterprises with more than 100 employees that do not pay their salary on time:
 As of the 16th day after the date of the postponement, they will no longer be eligible for work permits.
 Legal action will be taken against the firms in question.
 No new business may be registered by the owners.
 Employers' bank guarantees will be cancelled.
 Employees will be free to switch jobs.
 Companies who fail to pay salaries for more than 60 days risk penalties of up to 50,000 Dirhams, according to the law. If wages aren't paid on time, companies with fewer than 100 employees risk penalties and legal action.

Wage Protection

A ‘Wages Protection System’ (WPS) is necessary in the United Arab Emirates for companies registered with the Ministry of Human Resources and Emiratisation.

According to the UAE government, workers' wages will be deposited into their bank accounts or financial institutions that have been approved by the Central Bank of the UAE to offer the service.

A spokesman for the Ministry of Human Resources and Emiratisation said that it would not do business with any firms that are not members of the Wages Protection System.

Establishments were urged by the government on January 10 to commit to paying their employees on time using the system.

Official Maher Al Obedn stated, "The establishments' commitment to pay wages on time would enhance the stability of the contractual relationship between its parties and greatly contribute to increasing the productivity of workers as a result of payment of wages on time and in the specified amount".

Information about the Payment of Salaries in the UAE
It is important to understand the fundamental ideas before learning about late salary fines in UAE. If you work for an annual/monthly salary, your employer must pay it on time. They must be paid within 10 days of the wage period ending.

For non-contractual employees, the business must pay them every 14 days. Payment must be made in AED, the UAE's native currency. The minimum wage, basic and total incomes are also important.

In this scenario, the UAE labour regulations do not provide a minimum pay figure. Regardless, every employee must be paid enough to meet their fundamental necessities. All employers must comply with UAE labour legislation.

UAE Labour Law stipulates that minimum wage and cost of living index differ. In general, they may be determined or particular to a field or career. A Cabinet directive made this possible. A percentage of the base pay is not specified by law and is left up to the employer to negotiate.


Employers’ Compensation to Workers in the UAE

WPS is required for the processing of wage payments by any private sector enterprise registered with the MOHRE. Because of this arrangement, firms may send their workers' paychecks directly to their bank accounts. Employers must follow these measures when it comes to the payment process:

 If they don't already have a bank account, open one with an authorised bank.

 Become a member of a WPS arrangement with the bank of their choice.

 Employers may choose the bank to which their employees' wages should be sent.

WPS in the UAE has to be notified by the bank so that the data of the workers, their pay, and instructions for salary transfer may be sent. The Central Bank of the UAE receives this data through an electronic system.

The MOHRE receives all of that data from the Central Bank for cross-checking.
WPS also allows the employer's bank to pay wages, which is subsequently transferred to the workers' bank accounts by the bank's authorization.

New Penalties for Late Payment of Employees’ Salaries

The MOHRE has published a new regulation regarding increased penalties for late salary payments. To avoid these fines, corporations must pay workers on schedule. Otherwise, they risk significant legal troubles and hefty penalties that will not benefit them.

Employers that fail to pay workers on time face various repercussions. They may include the suspension of new work permits, a notification to the prosecutor, and penalties. Employers will be alerted on the 3rd and 10th day following the due date for payment of wages.

One example is when companies with over 50 workers fail to pay salaries 17 days late. They will thereafter be subject to MOHRE field inspections and warnings. Work permits will be suspended for smaller businesses. Also, late payment penalties increase with time.

The new resolution intends to strengthen penalties for late salary payments in the UAE. There will be penalties if an employer does not pay wages within 15 days. If the employment contract provides additional due dates, the penalties may be reconsidered.

Sanctions Applicable if Employers Fail to Pay Wages on Time

Now, it's essential to point out the specific penalties stipulated by the legislation on late wage payments. When an employer pays a late paycheck in Dubai, you'll be informed of the possible outcomes. As a result, we'll take a look at this list of penalties in the United Arab Emirates for late salary payments:

Employees' salaries will be officially reminded to be paid on the third and tenth days after the due date.
 17th day after the due date: As a result, new work permits will not be issued in this situation. In addition, the MOHRE will issue warnings and conduct inspections of businesses with more than 50 employees.
 Within 30 days of the due date, organisations with 50 to 499 workers will be subject to legal action. The government will label businesses with more than 500 workers as "high-risk."
 New work permits for the firm will no longer be issued once 60 days have passed after the due date. Companies that share an owner with the infringing corporation might also be subject to this penalty.
 After three months have passed since the due date, all requests for new work permits and extensions will be put on hold. It is also possible to have the firm prosecuted and penalised by the public prosecutor. After six months of noncompliance, an inspection can uncover the lack of a productive partnership.
 Repeated non-compliance will result in more severe penalties if the corporation breaks the law again. Furthermore, it might face several penalties and perhaps a fall in classification from the MOHRE.


Conclusion:

Employees in the UAE are protected by this law to enhance their productivity and safeguard them from defaulting employers. The law has been made on lines with international standards to help maintain efficient human resources in the UAE.

It is imperative that employers take a note of this law and adhere to it. The employees on the other hand, have to be well informed about this law so that they are not exploited.

For any enquiries or information, contact info@thelawreporters.com or call us on +971 52 644 3004 

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