The Wages Protection System (WPS) in Saudi Arabia

The Labour Ministry of Saudi Arabia has implement the Wage Protection System (WPS) in 2013, it became mandatory for all Saudi companies .

The Wage Protection System, which was first introduced in Saudi Arabia became mandatory for all Saudi companies with over 3,000 employees on 1 September 2013 . Its a financial system made compulsory to regularize and monitor the salary payments by company. The system will be linked with Ministry of Labor website to monitor the companies timely payment of salaries as agreed in the work contract. 

Under the WPS, companies are required to submit wage information to the Ministry of Labour via the e-service program. The WPS will help to ensure that employee rights are protected and that salaries are paid according to agreed terms of employment contracts that identified in the ٍSaudi Social Security . The Ministry also aims to identify illegal workers and streamline the labour market.

What are the consequences of non-compliance?No ministerial services will be available for companies that fail to implement the WPS (with the exception of labour permit renewal services). Where a company continues to delay implementation, the Ministry will suspend all of its services and will allow employees of the company to transfer to another company without having to seek consent from the employer.

What practical steps should employers take?Companies that fall within the scope of the WPS should:

• open local bank accounts for their employees
• open a payroll file which will need to be authenticated by the bank (Technical Specification)
• register with the WPS
• submit all information relating to the monthly payment of wages to the Ministry using the e-service.

Employers are also encouraged to keep the Ministry informed of any changes in information relating to their employees in order to avoid any penalties being imposed. Compliance with the regulations by smaller companies with between 1,000 and 3,000 employees became mandatory on 1 October 2013 (Saudi Arabia’s wage protection scheme comes into effect).

Requires companies in the private sector to submit employees’ wage data to the Ministry electronically and pay employees their wages through local banks. It has been implemented gradually and as of February 1st 2015 affects all companies with 320 employees or more. From April 1st 2015 all companies with 240 employees or more will be covered by the program.

Those who fail to comply with the requirements of the System within two months of it becoming compulsory will be denied the services of the Labour Ministry with exception of the issue and renewal of work permits.

The system is being implemented in stages follows: 

• June 2013 compulsory for companies over 3,000 Employees
• September 2013 compulsory for companies over 2,000 Employees 
• December 2013 compulsory for companies over 1,000 Employees
• November 2014 compulsory for companies over 500 Employees
• February 2015 compulsory for companies over 320 Employees
• April 2015 compulsory for companies over 240 Employees
• June 2015 compulsory for companies over 170 Employees
• August 2015 compulsory for companies over 130 Employees
• November 2015 compulsory for companies over 100 Employees

The Ministry of Labor and the Saudi Arabian Monetary Agency (SAMA) is jointly working on the system.
It aims to ensure private sector employees are paid correctly and to create a database of information to allow authorities to track wage differences between nationals and expats.
Most construction and maintenance companies already have put the new regulations in place but private schools concerned about being unable to pay female teachers the minimum salary of SR5600 ($1500) do not support the system, according to Arab News.