Qatar: A New Rule About Salary Payments

The new rule

Until recently, salaries and any other sums payable to employees under their contract of employment were paid to an employees' account at a bank agreed by the parties, or to an agent appointed by the employee. However, this is being changed so that payment will have to be made directly from the employer's local Qatari account into a Qatari account in the name of the employee. The new system effectively creates a Qatar to Qatar based transaction between the employer and employee, and applies to employees whose employment is governed by Qatar Labour Law No. 14 of 2004.

What has not changed is that salaries must continue to be paid in Qatari currency, and, if they are employed on an annual or monthly basis, employees must be paid at least once a month and all other employees must be paid at least every two weeks. The material change is that employers will be obliged to transfer salaries directly into employees' Qatari accounts within the designated time periods.

When does it take effect?

This change was originally scheduled to come into force from 18 August 2015, six months after it was first issued on 18 February 2015. However, the date of enforcement has been pushed back to 2 November 2015.

Given that we are in the introductory phase of a new system, we understand that the Labour Department of the Ministry of Labour and Social Affairs will provide sufficient time for those companies that have not yet been able to implement the necessary measures. This goes alongside our understanding that the Labour Department plans to enforce the new rule in various stages, with companies employing five hundred or more employees being the first to come under close scrutiny, followed by companies with between one and five hundred employees and finally companies with one hundred or fewer employees.

Until this change has been fully implemented it is difficult to say with any real certainty how the changes will operate in practice on a day to day basis. However, we would advise all employers to put measures in place to comply with the new rule as soon as practicable and where, for whatever reason they cannot do so, that they open a dialogue with the Labour Department before the threat of penalties is imposed.

The process

The Minister of Labour and Social Affairs recently issued a Decision setting out both the controls and procedures required to apply the new rule which it refers to as the Wages Protection System (WPS).

The WPS's stated aim is to ensure employers pay their employees' salaries on the specified dates and in accordance with their employment contracts and the applicable laws of the State of Qatar.

The Minister's Decision requires employers to transfer salaries via WPS to the appropriate Qatari banks and financial institutions a week before the date on which salaries are due to be paid. An employer will only be relieved of its payment obligations after the transfer has occurred and the monies have been received by the Qatari banks and financial institutions.

The Labour Department may also request that a detailed report is submitted by an employer, in the form prepared by that department and approved by the Minister, showing the employer's approval of the payment of all of its employees' salaries for a specified period of time.

Penalties for non-compliance

If an employer believes that it does not have sufficient time to put the necessary measures in place to accommodate this change and implement the WPS, they are entitled to request an extension. Whether or not it is granted will depend on the specific facts and circumstances of each case, but will ultimately rest on the discretion of the Minister. The process for submitting an extension request and how it will be received is unclear at this stage.

Employers will be liable to a penalty if they fail to comply. The penalty may constitute imprisonment of up to one month, and/or a fine of between QAR 2,000 and QAR 6,000 (USD 550 and USD 1,650) per employee. For an imprisonment penalty to be issued to a corporate employer, an individual would need to be joined as a party to the claim, and this would usually be the general manager or an authorised signatory of the employer. The employee is also entitled to bring a claim in the Labour Court.

Further, if an employer fails to transfer its employees' salaries via WPS within seven days of the date for payment, the Minister may either suspend the issuing of any new work permits for the employer and/or suspend all of the employer's transactions with the Ministry, provided that the suspension does not include the authentication of any employment contracts. The suspension will only be lifted on the decision of the Minister, or his designee, once the employer shows evidence that all unpaid salaries have been transferred and received.

Practical considerations

We understand that the Ministry has been consulting with both banks and employers in recent months in relation to the detail of the proposed changes.

We are not aware of any specific documentary or practical requirements which should be put in place or actioned as evidence of compliance apart from those already referred to, however from an internal governance perspective and to demonstrate good business practice, we would advise employers to maintain current and accurate records of the salaries it transfers to each of its employees together with a clear written record showing the transfer which may be stamped by the appropriate bank or financial institution. Evidence should contain key information about each employee and their salary, e.g. deductions, etc.

Employers with internationally mobile employees who are sponsored and employed in Qatar while on assignment from their home country will need to consider carefully the implications of the new rule on the payment of these employees' salaries during that period.

Note: Qatari laws (save for those issued by the Qatar Financial Centre to regulate internal business) are issued in Arabic and there are no official translations, therefore for the purposes of drafting this article we have used our own translations and interpreted the same in the context of Qatari regulations and current market practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.