Reem Saad / Doha News
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Qatar’s new Wage Protection System (WPS) has helped ensure hundreds of thousands of blue-collar workers are finally getting paid on time.
But it has also brought to light a longstanding payment crisis across the country, contractors said.
For years, finance-related contract disputes have halted work on key projects, as companies faced off with clients on late or non-payments.
This problem has grown acute in recent months as oil prices plummet, making it harder for companies to pay workers via direct bank deposit in a timely fashion, as the new law mandates.
Shabina S. Khatri
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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 in not paying 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.”
Lacking cashflow
Qatar’s Emir signed WPS into law in February 2015, and it came into effect in November of that year.
As of June 2016, approximately 1.5 million residents were covered under the system, according to the country’s labor ministry.
But thousands of workers continue to wait for WPS to be implemented at their companies, many of whom have not complied with the law because they can’t afford to.
This is for several reasons, according to Vasanth Kumar, CEO of Qatari contracting company Arabian MEP.
Though he welcomed WPS and pays his employees on time, he told Doha News that some companies are in the red because they expanded too fast without planning for client payment delays.
Omar Chatriwala / Doha News
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Others have taken on projects at very low prices and are losing money, so they have no cash to pay their bills.
And some firms are struggling after clients postponed contracts that have already been awarded. This leads to loss of revenue for companies and negative cash flow as they hold on to surplus manpower and continue to incur expenses.
According to Kumar, the biggest problem is delayed payments to contractors, which triggers holdups down the chain.
Possible solutions
To resolve some of these issues, Kumar suggested that the client and construction company utilize FIDIC (International Federation of Consulting Engineers) contract forms.
These empower the engineer (or the client representative) to certify completed works onsite on a fair assessment basis and issue payment certificates on time.
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However, Al Jaidah said the largest obstacle remains a lack of legal penalties for late payers.
He advocated including fair compensation terms into Qatari law, saying this would be especially helpful for companies contracted by the government.
“All government contracts are totally one-sided with an attitude of ‘take it or leave it,’ ” he said.
Kumar further recommended that the government implement regulations that require funding guarantees.
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This strategy, which has been adopted in the UAE, would help ensure projects are completed as scheduled without any financial issues.
“This takes care of adequate fund flow through the life cycle of any project,” Kumar said.
Finally, the government should publish guidelines outlining the standard minimum rates for different categories of construction.
“This will do away with the current practice of awarding projects simply based on the lowest bid value,” Kumar said.
Unless the issue is tackled, many companies will continue to be unable to afford WPS, and face penalties from the government that could further imperil their business and those who work for them, experts added.
Thoughts?
(The post Qatar construction firms struggling with new wage protection system is from Doha News.)
