Labour Law: New penalty for salary late payment in UAE

As per the latest announcement new penalties will be imposed on companies for late payment of salaries in UAE.

The Ministry of Human Resources and Emiratisation said that the on time payment of wages improves the stability of work relations. 

The Ministry of Human Resources and Emiratisation (MOHRE) issued a decree on Feb 2022 which has introduced new penalties against sponsors or employers who fail to make payment of the wages on time.

With the new rules employers will be notified on the 3rd and 10th day after the due date for payment of wages before heavy penalties and fines - including suspension of new work permits, a notice to the public prosecution and fines - are applied.

Employers with 50 or more workers will be subject to field inspections from the ministry and warnings if wages are not paid 17 days after the due date. For smaller establishments, the issuance of work permits will be suspended. Penalties escalate with further delay in paying wages.

Dr Hasan Elhais of Al Rowad Advocates said while the wage protection system (WPS) has been in place in the UAE since 2009, the new resolution seeks to implement stronger measures against non-payment of wages to ensure enhanced compliance.

"If wages are not paid to employees within 15 days from the due date, the employers will be considered late in paying, unless otherwise is specified in the employment contract,” he said.

Under the new decree, an employee’s wage shall be due starting from the first day of the month following the registered payday as specified in the employment contract. If the due date is not mentioned in the employment contract, workers must receive their wage at least once a month.

Elhais added that the new decree, which applies to all companies registered with the ministry in the UAE, annuls the previous resolution No. 739 of 2016. "Therefore, rules and penalties stated in the new decree will apply to violations related to late or non-payment of wages,” said Elhais.

All companies registered with the ministry have a three-month grace period time to comply with the new resolution and avoid possible sanctions.

In a statement, the ministry urged all private companies and firms to pay wages on time through WPS, an electronic salary transfer system that allows institutions to pay wages via banks or exchanges and other approved financial service providers. Other payment systems are approved for certain free zones.

All companies and businesses registered with the ministry must sign up with the WPS, which enables the ministry to monitor wage payment for the entire private sector and, thus, ensuring timely and complete payment of wages.

They are also required to provide all supporting documents requested to prove the payment of wages to their employees.

Timely payment of wages, the ministry said, improves the stability of work relations and contributes to increased productivity in the employees, which has a positive impact on the broader workplace in the UAE.

Applicable sanctions:

Lists of sanctions and fines that can be imposed against a company that fails to pay wages on time:

- Third and 10th day after the due date: Companies will receive official reminders to pay wages.

- 17th day after the due date: Issuance of new work permits will be suspended. Companies with 50 or more employees will be subject to inspections from the ministry and warnings.

- 30 days after the due date: Notification to be issued to the public prosecution for the legal measures to be initiated against the company. These measures will be initiated against companies employing 50 to 499 workers, firms with 500 or more workers and those that have been classified as high-risk establishments by the ministry.

- 60 days after the due date: Issuance of new work permits is suspended for the breaching establishment, as well as any other firm exclusively under the same owner of the breaching establishment.

- For repeated non-compliance: In case a company repeats any of the violations or accumulates more than one violation, then it can be subject to inspections from the ministry, a downgrade to a lesser category and fines.

- Three months after the due date: Requests for issuing or renewing work permits shall be suspended. Company to be referred to public prosecution and fined if an inspection visit after six months of non-compliance reveals the absence of a work relationship.

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