UAE: New penalty for companies that don’t pay salaries on time

Abu Dhabi - Employers who fail to do so have to pay more than double the insurance policy of employee.

Empowering the UAE labour force, the Ministry of Human Resources and Emiratisation (MoHRE) has introduced a new penalty for private sector companies that don’t pay salaries to its employees on time.

“MoHRE calls establishments to pay salaries through the Wages Protection System, in light of raising the insurance cost from Dh120 to Dh250 for violating establishments with 30 days insurance coverage,” the ministry tweeted on Monday.

Employers have been reminded that employees must be paid only through the wages protection system. And any employer failing to pay their employees on time, will have to shell out more than double the insurance policy of an employee.

The new directive is in line the timely welfare reforms carried out by the ministry. In 2018, the ministry announced a new insurance policy ‘Taa-meen’.

Accordingly, upon recruiting a new employee, the employer has the option to either submit Dh3,000 as bank guarantee on behalf of the employee, as per the rules and regulations of the bank guarantee system, or insure them under the new insurance policy, which costs Dh120 for two years.

In case of company’s bankruptcy or failure to pay the employees’ benefits, the new policy will provide a maximum insurance coverage of Dh20,000 per employee against the following benefits in the workplace: unpaid entitlements, end of service benefits, vacation allowance, overtime allowance, unpaid wages, return air ticket and work injury after it is determined by a court ruling.

On Monday, state-run news agency WAM mentioned that the new insurance policy covers the financial entitlements of the employees of relevant companies for 30 months.

Private sector companies said the legislation will ensure that the rights of the employees are protected, and a world-class talent pool is retained and attracted to the UAE.

“This is a very positive directive as the current conditions evolved by the Covid-19 pandemic have made the labour market worldwide so volatile and the employees are vulnerable to lose their financial rights. By this action, private sector companies will be urged to make the wages payments to their employees on time, in order to curb their recruitment and maintenance costs. In case of non-compliance of this rule, the affected employees will be safeguarded of their rights,” said K.K. Thomas, group HR head, Hotpack Global.