Qatar: Wage protection system poses a challenge
Ongoing cash flow problems and payment issues in Qatar's construction sector are impacting negatively on the Wage Protection System (WPS)
In the wake of the oil price drop, companies are finding it increasingly difficult to pay workers on time via direct bank deposit, as per the mandated Qatar’s new Wage Protection System (WPS).
The system was signed into law by Qatar’s Emir in February 2015, and it came into effect in November of that year.
While the system has ensured that workers are paid on time, disputes around contracts and financing have increased as work on key projects halt, severely affecting cash flow, with $(QAR1bn) mired in ongoing disputes throughout the GCC, according to Qatar International Center for Conciliation and Arbitration (QICCA).
Speaking to Doha News, Zeyad Al Jaidah, managing director and co-founder of Qatar-based systems integrator TechnoQ, explained: “When the contractor runs dry on funds due to payment delays, he doesn’t have any choice but not pay the workers.
“They simply can’t pay money they don’t have. Bank finances have a limit and wages mostly (are) financed by the project cash flow.”
According to the State’s labour ministry, as of June 2016, while approximately 1.5 million residents were covered under WPS, thousands of workers continue to wait for the system to become operational within their companies, who are holding back as they cannot afford implementation.
Vasanth Kumar, CEO of Qatari contracting company Arabian MEP explained to Doha News that while he welcomed WPS and pays his employees on time, some companies are struggling financially owing to expansion without planning for client payment delays.
He points out there are also companies that have been awarded contracts based on low cost, leaving them too cash-strapped to pay bills, while some firms are struggling owing to clients postponing contracts that have already been awarded.
The subsequent loss in revenue and negative cash flow is exacerbated when companies hold on to surplus manpower and continue to incur expenses, Kumar outlines.
However, according to Kumar, the major difficulty comes from delayed payments to contractors, affecting everyone down the chain as holdups are experienced.
He suggested that a possible solution to the ongoing dilemma would be the client and construction company using International Federation of Consulting Engineers (FIDIC) contract forms, which empower the engineer (or the client representative) to certify completed works onsite on a fair assessment basis and issue payment certificates on time.