Indemnity Kuwait – Question and Answers

Indemnity Rules

1. The worker deserves 15 days indemnity during the first five years, and increases to one month after the first five years.
2. An employee who resigns, but does not complete three years with the employer, does not deserve an indemnity.
3. But if the employee completes three to five years and resigns, the employee then deserves half of the indemnity, if he completes five to 10 years, then he  deserves two-thirds of the indemnity.
4. If the worker completes 10 years of work then resigns, he deserves full indemnity which is one month salary for each year spent at work, according to Article 51 of Labor Law in the private sector, and should not exceed 18 months.

 

Question and Answers

 

1. If company does not give the indemnity to an employee, what can the employee do?

Question – I have an inquiry about indemnity amount as I have plans to resign after 12 years service. I have been working in the same company from November 2004.

Now I want to join another firm and I will tender my resignation from my current firm, effective from November 2016. So please advise how much money, as indemnity and annual leave pay, will I get from the company as per the current Kuwait Labor Law.

Please be informed that my current salary is KD 325, and I have 30 days annual leave balance.

If company does not give the indemnity to an employee, what can the employee do?. And which supporting documents need to be presented to the Labor Office against the company so that this office can take the required action against company and ensure the employee gets his indemnity.

Ans –  just file a complaint with the, through the Labor Office in your area

First of all, we will talk about the question of what to do if the company refuses to give or doesn’t give the indemnity to an employee: well the answer is simple — just file a complaint with the Ministry of Social Affairs and Labor or the Public Authority for Manpower, through the Labor Office in your area. The ministry is very strict on this issue these days and will take measures to ensure that you get your indemnity. The company could also face severe legal action, including suspension of its license, until all the dues of the employees are paid.

Now let’s calculate your indemnity.
Service: 12 years
Salary: KD 325
You will get 15 days pay for each of the first 5 years = 75 days pay But these 75 days must be first divided by 26 (working days in a month) = 2.88 months salary
You then get one month’s salary for each year after the first 5 years = 7 months salary
Total indemnity = 9.88 months salary = 9.88 x KD 325 = KD 3,211

Now, as you have over 10 years service you are entitled — according to the Kuwait Labor Law enacted on
Feb 20, 2010 to the full indemnity regardless of whether you resign or your services are terminated.

Now coming to the calculation of payment for the balance of annual leave.
Balance of leave = 30 days
Salary = KD 325
But these 30 days must first be divided by 26 (working days in a month) = 1.15 months salary
= 1.15 x KD 325 = KD 373.750
Now your total dues will be as follows Indemnity + payment for leave balance = KD 3,211 + KD 373.750
= KD 3,584.750

 

2. Indemnity calculation for less then 5 years – Resigned

Question : I would like to ask about the legal calculation of my indemnity. I have been working for this company for the last three and a half years and I have already resigned. My last day of duty was April 31, 2016 and I joined the company on Dec 12, 2012. I would like to know how much will be my indemnity.

Ans – Calculation
Service = 3.5 years
Salary = KD 100 (hypothetical)
So, you get 15 days pay for each year of service = 3.5 x 15 = 52.5 days
But these 52.5 days must be first divided by 26 (working days in a month) = 52.5 / 26 = 2.019 months pay = 2.019 x KD 100 = KD 201.900

We can’t calculate your indemnity because you have not mentioned your salary in your question. We will, however, show you how to calculate the indemnity using any salary as an example so that you can do the exercise yourself. As you served for over three years but less than five years, you will be entitled to only half the indemnity as you have resigned. Had your services been terminated you would been entitled to the full indemnity.

(Please remember that this calculation is based on a hypothetical salary and not actual as the same has
not been supplied to us)

Now if your services had been terminated you would have got the above full amount but as you have
resigned you are allowed only half of the indemnity = KD 201.900 / 2 = KD 100.950

So, using the above method, you can easily work out the indemnity yourself.

 

3. End of service benefits ( Indemnity & Leave Balance)

Question : I joined my company on 01-1- 1995. I resigned on 20-3-2016 and my last working day was 11-5- 2016. You are kindly requested to calculate my end of service benefits (monthly salary KD 300). Leave with pay I got until June 2013. I asked for a release also but employer is not agreeing to the same … in fact he told me to go back to India and then come back on a new visa/work permit. I can arrange a sponsor from a new company. So, you are kindly requested to give your advice what to do next.

Ans :  Well, your sponsor is totally wrong. Nowadays, if you have even been hired from abroad and worked for a company for over three years, the Ministry of Social Affairs and Labor sanctions your transfer. Otherwise, if you join a company on a local transfer you can leave that firm after one year unless you sign a time-bound contract.

As things stand, you have worked for this company for over 21 years and you can’t be stopped from transferring to another company, regardless of any reason. The law is on your side. If your sponsor insists on not giving you a release, you should approach the Ministry of Social Affairs and Labor or the Public Authority for Manpower through the Labor Office in your area.

Seeing the years of service that you have put in this company, your transfer will quickly be sanctioned without the permission of the current sponsor — to any other company which is willing to sponsor you. So, don’t worry about anything and file a complaint with the Labor Office if your sponsor doesn’t budge from his stand.

Here is the calculation of your benefits:

Indemnity Salary:
KD 300 Service: 21 years 5 months

For the first five years = 15 days pay for each year = 75 days pay

But these 75 days have first to be divided by 26 (working days in a month = 2.88 months pay)

For the remaining 16 years 5 months you get one month for each year = 16.42 months salary

Total = 19.3 months pay

But according to the Kuwait Labor you are entitled to a maximum of 18 months pay as indemnity unless the sponsor himself wishes to pay you more, so you will get 18 x KD 300 = KD 5,400 as indemnity

You will get KD 5,400 (the full amount) and nothing can be deducted from this amount even if you have resigned because you have over 10 years service.

Leave balance payment
You last availed leave in June, 2013 which means you have balance of annual leave for two years 11 months.

You are entitled to full leave for the last 11 months because you are entitled to 30 days every year, which means 11 months of work and 30 days paid leave every year.

Therefore, you have 90 days leave balance But these 90 days have also to be divided first by 26 (working days in a month) and then multiplied by your salary = 3.46 x KD 300 = KD 1,038

Please remember that the annual leave balance payment has to be calculated separately from the indemnity

So, your total dues = KD 5,400 + KD 1,038 = KD 6,438

Please remember one important fact. Your sponsor might say that you can accumulate only a maximum of two years leave and might try to cheat you out of one year’s leave payment.

If the sponsor attempts to not pay the full amount, please draw his attention to the last para of Article 72 and Article 73 of the Kuwait Labor Law enacted on Feb 20, 2010.

The last para of Article 72 says “The annual leave can be accumulated for more than two years with the consent of both the parties”.

Article 73 says “Without prejudice to the provisions of Articles 70 & 71 (which talk about the entitlement and payment for annual leave), the worker shall be entitled to a cash consideration of “all his accumulated leaves” upon the expiry of his contract.

This clearly means that if a worker has accumulated annual leave for any number of years e.g. 4, 10 or even 20 years, he must be paid for all the accumulated leave with all the calculations based on the last remuneration (according to Article 62 of the Kuwait Labor Law).

Indemnity Kuwait Indemnity Calculation In Kuwait, Question and Answers

4. Indemnity

Question :I joined my current employer on June 6, 2011. I got a termination notice from the company on 4th April 2016 with the notice period of 3 months (Last date of service as July 3, 2016) due to the contract expiry. Now the company is ready to release me at any time due to the client requirement of transferring me to another contract. Based on my joining date, I will complete 5 years of service with the company by 5th June 2016. Request you to please provide clarification to the following queries: Does it make any difference to my indemnity if I get released earlier than 5th June 2016 (5 years service) or after 5th June 2016. How much will be my end of service benefits in the two cases i.e. if I get released by May 31, 2016 and June 15, 2016 (Monthly is salary – KD 1,200 while my leave balance as of April end is 13 days)

Ans :  we need to have a close look at Article 44 (d) of the Kuwait Labor Law enacted on Feb 20, 2010.

Before we go on, we need to have a close look at Article 44 (d) of the Kuwait Labor Law enacted on Feb 20, 2010. Article 44(d) says that “The employer may exempt the employee from work during the period of notification but shall count such period within the worker’s period of service. The employer shall pay the worker all his entitlements and remuneration for the period of notification”. So, it really doesn’t matter whether you are released before 5th June, immediately or after the last day of your notification i.e. July 3, 2016, your indemnity must be calculated until July 3, 2016. Please also remember that you are entitled to the full indemnity because your services are being terminated by the company.

Please keep in mind that when an employee is terminated he is always entitled to the full indemnity regardless of the period of service. It’s only when you resign you get half the indemnity if your service is between three to five years and two-thirds if your service is five to 10 years. And once you have put in 10 years service you get the full indemnity even if you resign. So as your service will be only a few days over the 5 year-period we will take the same as 5 years for the calculation of your indemnity which will be as follows.

15 days for each year of service = 75 days But these 75 days have to be divided by 26 (working days in a month) = 2.88 months pay = 2.88 x KD 1,200 = KD 3,456 So KD 3,456 is the amount you should get as your indemnity whenever you are given the release, just because of Article 44(d). We would like to draw your attention to another very important aspect of the Kuwait Labor Law i.e. when your service is considered until the end of the notification period, your balance of leave must also be calculated until that date.

This means your leave balance will be 16 days and not 13 days and these 16 days must first be divided by 26 (working days in a month) = 16 / 26 = 0.6154 x KD 1,200 = KD 738.480 So, KD 738.480 will be the payment for your annual leave balance which means your total dues = KD 738.480 + KD 3,456 = KD 4,194.480

 

5. Indemnity, Leave balance payment & Time period taken to transfer visa to another company

Question :I have been working in a company for the last 8 years 9 months (joined Aug 9, 2007) as an engineer but my services were terminated on April 3, 2016.

My salary on my work permit is KD 1,200 and I have 99 days annual leave balance.

My questions are as below :

1. What are my end of service benefits if I am released on April 30, 2016?

2. I have got a job in another company… how many days will it take for me to get a local transfer from the Ministry of Social Affairs and Labor?

Ans : The worker’s service will be counted until the last day of the notice period

First of all, we do not understand why you have mentioned the date April 3, 2016 because the company has to give you a three month notice and even if both the parties agree to part ways early, the worker’s service will be counted until the last day of the notice period, which in your case would be July 2, 2016 and as such we will calculate your indemnity until that date.

As such, your service will be 8 years and 11 months and not 8 years and 9 months … so you have to also get the indemnity for these additional two months.

So, here is the calculation for your indemnity: Total service: 8 years 11 months

Salary: KD 1,200

So, you should get 15 days pay for each of the first five years = 75 days pay but these 75 days have to be divided by 26 (working days in a month) = 2.88 months salary

For the remaining period you get one months salary for each year = 3.92 months salary

Total indemnity = 2.88 + 3.92 = 6.8 months salary = 6.8 x KD 1,200 = KD 8,160

As your services were terminated, you are entitled to the full indemnity i.e KD 8,160 regardless of the fact that you have not completed 10 years service.

Second on the issue of annual leave, you say that you have a balance of 99 days but we feel that you should be getting 5 days more in view of the extra two months of the notice that you had not included in your service.

This means your annual leave balance should be 104 days and the amount you should get should be calculated as follows;

Annual leave balance: 104 days

Salary: KD 1,200 The 104 days should first be divided by 26 = 4 months salary = KD 1,200 x 4 = KD 4,800 So, you should be paid KD 4800 in lieu of your balance of leave

Your total dues = KD 8,160 + KD 4,800 = KD 12,960

On the issue of the time that the Ministry of Social Affairs and Labor will take to transfer your residence, we would like to state that this all depends on efficiency of your new company’s mandoub (company representative).

If the mandoub is good, he will only need just over a week (or a maximum of two weeks) to complete the formalities but if he is slow he will take a minimum of one month.

6. Company trying to cheat on Indemnity

Question – I joined my current company on April 4, 2000. At that time the company had several projects so company got my residence done on one of their projects. After five years — in June 2005 — my company transferred my residence to the sponsorship of the company.

When I asked company about my indemnity, the company said that they will calculate my indemnity from June 2005, since that was the date my residence was transferred to the company. I have argued with them, that I had been working for them since April 4, 2000, and because of their own convenience they had got my residence for a sister company… so my indemnity must be calculated from 2000.

Actually I had been working with them since April 4, 2000. The company also said that in the calculation of indemnity they will calculate only working days… Fridays and public holidays will be not counted.

Kindly advise me how much is my indemnity as my current salary is KD 300 and my last working day is Aug 31, 2016.

Ans : There is no doubt about the fact that your company is trying to cheat you out of a portion of your indemnity because it must be calculated from the day you started working for them and not from the day the company started to sponsor you.

As the salaries of all workers are sent to the bank, you have enough proof of the length of your service with this company and you can take your case to the Labor Office and even the court if the company refuses to give you your full dues.

On the same note we would like to mention that all holidays, weekends and official holidays, are to be counted in the service.

Even your annual leave is part of the service. The only days that can be deducted from your service is the unpaid leave if you have taken any.

If the company does not back down over the above two issues file a complaint against your firm with the Labor Office in your area …and if the Labor Office, for any reason, does not decide the issue in your favor take the company to court.

Your indemnity will be calculated as follows:

Service start date – April 4, 2000

Last working day – August 31, 2016

Total service – 16 years, 4 months (approximately)

So, you will get 15 days for each of the first 5 years = 75 days

But these 75 days have to be divided by 26 (working days in a month) = 2.88 months salary

You will also get one months salary for each year of service after the first five years = 11.33 months salary

Total = 14.21 months

salary = 14.21 x KD 300 = KD 4,263

And as you have served over 10 years with the company you are entitled to your full indemnity.

7. Indemnity Date

Question – I joined a company on June 1, 2004 and after three years they transferred to one of its own division and they also transferred my visa to that division but the owner remained the same. They paid 3 years indemnity at that point. There was no separate contract paper on the transfer. Until now I am working in the division to which I was transferred. If I resign now, will my starting date with the company — for calculation of indemnity — be June 1, 2004 or June 1, 2007. I am working still on my contract which I received on June 1, 2004 as both the divisions belong to the same owner

Ans : It all depends on how you were paid (as regards your indemnity)

It all depends on how you were paid (as regards your indemnity) and what your contract says on the issue. As we do not have this information we may not be able to give you a very accurate answer but we will try to be as “close as possible”.

This is your contract says you will get your indemnity “according to the Kuwait Labor Law”. If your services have been continued under the same contract and the same sponsor then your indemnity should be calculated from the day you joined the firm, i.e. June 1, 2004 but the company after calculating the indemnity for the 11 years should minus the amount it paid to you.

The company can’t get away by calculating the indemnity from June1, 2007 if your service is continuous.On the other hand, if the division you were transferred to, is a total different and independent entity —regardless of the fact it has the same sponsor then you will be deemed to have worked for two different companies and your indemnity should be calculated only for the period that you have been with your current firm, i.e. from June 1, 2007. Now we have detailed two separate situations for you. Use the one which is applicable to you.

Please also remember that your firm can’t give you less than what is mentioned in the Labor Law even if a lesser calculation is mentioned in your contract. In such a case the calculation must be made according to the Labor Law.

 

8. Indemnity – Working for International company

Question :  I am working for an international company in Kuwait for the last 5 years and before that I worked for 5 years for the same company in Saudi Arabia with no interruption of my employment contract except the geographical relocation. I did not receive the termination benefits when I left Saudi Arabia.

Now upon my termination, the company is offering me gratuity based only upon my 5 years in Kuwait whereas I have been employed for 10 years by the same company.

The company says it will also pay me a termination gratuity for my time in Saudi Arabia, but each case is based on a 5-year term whereas I would get a higher gratuity if they considered the 10 years as a single term as per the Kuwait Labor Law.

Which is correct, please?

Ans: You have to read the contract carefully again to understand what all benefits are due to you.

This all depends on your contract plus the laws of the countries where you have served. You have to read the contract carefully again to understand what all benefits are due to you. You must also see whether the service according to the contract has to be counted as continuous or separately as you jump from country to country.

Because if nothing is mentioned about the service being continuous then things will be as we elaborate below. Having said that we must mention that the problem here lies in the application of the law because the Kuwait government is only responsible for the service you put in for that firm while in this country, and not for any service that you put in before you arrived at Kuwaiti shores.

You also need to understand that yours is a case of “multiple jurisdictions”, in your case of Saudi Arabia over the first five years of your service and then Kuwait for the remaining period. You must also understand that to work in Kuwait, if you are already working somewhere else in the GCC or to work in any other GCC state if you are already working in Kuwait, you are first required to cancel the contract, work permit and residence of the country where you are currently working.

This means that you must get all your benefits, in full, when you cancel your contract in another GCC country like Saudi Arabia in your case – before you get a work permit and start working in Kuwait.

So, in the practical application of the GCC laws, your company is right in the calculation of your benefits. In spite of the above, we would advise you to have a close look at you contract – or should we say contracts if you signed one in Saudi Arabia and another one on arrival in Kuwait.

 

Full indemnity in Kuwait for private sector employees, iiQ8

 

9. Indemnity calculation for 6 yrs service ( Salary + Allowance + Food )

Question :  I am working as a secretary in a Kuwaiti company for the past 6 years (Joining date: 23-01-2010). My salary on the last work permit was KD 260, and all the transactions in this regard have been made by the company through the bank. But my problem is that the total salary has three components (Basic KD 210 + food KD 25 + allowance 25 = 260 KD).

Right now I am planning to finish my job with the company with a view to get a final exit with a notice period of 3 months now (My last day with the company may be 02-05-2016) Can you advise me on the calculation criteria for my indemnity for a working period of 6 years 3 months with the salary of KD 260.

Ans : Before we directly answer your question, we need to have a close look at the word “remuneration”, which is what should be used according to the Kuwait Labor Law, enacted on Feb 20, 2010 for all calculations linked to overtime pay, annual leave pay and even indemnity.

The reason for going back to the Labor Law is that most of the companies in the country — even the so-called reputed ones — are interpreting the law wrongly, for their own benefit. Article 55 of the Kuwait Labor Law states that “Remuneration means the basic payment the worker receives or should receive in consideration of his work in addition to all the elements stipulated in the contract or the employer by-laws. “Without prejudice to the social allowance and the children’s allowance granted by the virtue of Law 19 of the year 2000, the remuneration shall include the payments made to the worker on periodic basis such as bonuses, benefits, allowances, grants, endowments or cash benefits”.

Now, we need to have a look at Article 62 of the Kuwait Labor Law which says “The calculation of the worker’s entitlements shall be made on the basis of the last remuneration received by the worker”. Unfortunately, as we said earlier, most of the companies are interpreting the law according to their own liking and calculating the indemnity of their employees only on the basic pay, which is totally wrong. After having said all the above we come specifically to your case and your indemnity, if done correctly, should be calculated as follows:

Total pay =KD 260 Service = 6 years 3 months For first five years indemnity will be calculated on the basis of 15 days pay for each year = 75 days but these days must be divided by 26 (working days in a month) = 2.88 months salary

For the remaining service the calculation must be made on the basis of one months pay for each year = 1.25 months pay

Total indemnity = 4.13 months pay = 4.13 x KD 260 = KD 1,073.800

But according to the Kuwait Labor Law, if your service is over 5 years but less than 10 years you get only two-thirds of the indemnity if you resign.

So, you will get only KD 715.860 as your total indemnity if the company calculates the same correctly.

10. Indemnity & Transfer

Question : I got a job offer on 15-2-2006 and joined the company as an engineer on March 11, 2006 and was gradually elevated to the position of Company Executive and also served as a Project Manager for the company’s various projects. To meet my own level of satisfaction I thought to quit and join another company, so I resigned with effect from Jan 2, 2016 by giving a 3-month notice, expecting the benefits of 10 years as per Kuwait Labor Law with end date of March 10, 2016.

The project to which I was assigned is in the completion stage and nearing commissioning. My notice period of 3 months and project completion is quite matching.

Morally, I am not bound by anything and I refused to take any more assignments since I had verbally informed the company in September 2015 that I would quit after the current project completion. My 10 calendar years of service will be completed on 11th March 2016. My basic salary is KD 1,125 and with other allowance I get KD 1,550 per month. In the last 10 years of service I have taken a total leave of approximately 14 months.

Q1: How will my indemnity be calculated and how much should I get ?

Q2 : I am willing to get a local transfer visa to join the other company without cancelling my own residence and that of my family so as to avoid going back to my own country, redo the medical check up and come again since I am already 51 years old.

 

Q3: I want to pay back to my company and get an early release after 11th of March 2016 since the other company is pressurizing me to join the firm quickly. I will be highly obliged if the Legal Clinic offers me advice to all my above queries. I am in dilemma and badly need some suggestions to solve my problems.

Ans : We answered your earlier question very recently and we will answer the “changed” question again plus the other question although we will amend our answer a little so that your Question 1 on calculation of indemnity is re-answered. We will, however, use most of our previous answer for the purpose of answering

Question 1. Although you have “completed” 10 years service, things could become complicated for you if your company takes a close look at your annual leave record. We say this because many companies take the annual leave availed over the service period into account while calculating the indemnity.

A close look at your record reveals that you have taken four months over and above your entitlement of 10 months annual leave for 10 years service. Some companies ignore this fact, but most don’t … If your company takes these “extra 4 months” into account, you will not be able to complete your 10 years service.

These four months will be deducted from your service …so, your service at the end of the three-month notice period with be 9 years 8 months.

This will drastically affect your service because if you don’t complete the 10 years service, you will only get two-thirds of your total indemnity. But we will work on the scenarios of both the situations (full indemnity and two thirds indemnity) so that you know how much you will get regardless of the method adopted by your company.

Please note that the Situation 1 from the previous answer will remain unchanged although we will reprint it below. But before we go on and work on the calculation of your indemnity, please understand that your indemnity, according to the Kuwait Labor Law, must be calculated according to your remuneration and not on your basic pay.

Article 55 of the Kuwait Labor Law states that “Remuneration means the basic payment the worker receives or should receive in consideration of his work in addition to all the elements stipulated in the contract or the employer by-laws. “Without prejudice to the social allowance and the children’s allowance granted by the virtue of Law 19 of the year 2000, the remuneration shall include the payments made to the worker on periodic basis such as bonuses, benefits, allowances, grants, endowments or cash benefits”.

Now, we need to have a look at Article 62 of the Kuwait Labor Law which says “The calculation of the worker’s entitlements shall be made on the basis of the last remuneration received by the worker”. Unfortunately, as we said earlier, most of the companies are interpreting the law according to their own liking and calculating the indemnity of their employees only on the basic pay, which is totally wrong.

After having said all the above we come specifically to your case and your indemnity, if done correctly with the use of remuneration ( basic pay plus allowances), should be calculated as follows: Situation 1 Service = 10 years Pay = KD 1,550 (basic pay plus all allowances)

So, for the first 5 years you must get 15 days pay for each year of service = 75 days But these 75 days must be divided by 26 (working days in a month) = 2.88 months pay

For the next 5 years you must get one month’s pay for each year of service = 5 months pay Total indemnity = 7.88 months pay = 7.88 x KD 1,550 = KD 12,214

So, you should get this full indemnity (KD 12,214) if the company accepts your service of 10 years, not considering the extra leave you took.

Situation 2 Service = 9.67 years (after deducting the extra 4 months you took as annual leave ) Pay = KD 1,550 (basic pay plus all allowances) So, for the first 5 years you must get 15 days pay for each year of service = 75 days

But these 75 days must be divided by 26 (working days in a month) = 2.88 months pay For the next 4.67 years you must get one month’s pay or percentage for each year of service = 4.67 months pay

Total indemnity = 7.55 months pay = 7.55 x KD 1,550 = KD 11,702.500 But as your service is less than 10 years you will get two-thirds of the above indemnity = KD 11,702.500 x 2/3 = KD 7,801.670

In reply to your second question, we would like to state that as you have worked such a long time for a private sector company you will not have any difficulty in transferring locally to another. In other words you won’t have to leave the country and will be able to complete all the transactions easily. As a result, the residence of your family will not be affected and they will also not have to leave the country. If their residencies expire you can get these renewed for the same duration as yours. As far as your third question is concerned, it all depends on your negotiations with the company. You should get the release papers finalized before your notice period is over so that there is no delay in joining the new company. The company, if it wishes, can also allow you to leave before the completion of the three-month notice period.

11.Indemnity Calculation

Question : I am currently working in a reputed coffee-shop in Kuwait and have already resigned. I am now serving the notice period of 90 days. I worked in the company for (7) seven years and 4 months. My current gross salary is KD 300. I wanted to know how much would I get as indemnity after all the clearance is done. I don’t have any debts or credits from any company or individual.

Ans: As you have resigned after seven years and four months (including the service period) you are entitled of two-thirds of your indemnity because such is the case for expatriates who have put in over 5 years but less than 10 years service.

Your indemnity would, however, be calculated as follows:

Salary = KD 300

Service = 7 years 4 months

You get 15 days pay for each of the first 5 years service = 75 days but these have to be divided by 26 (working days in a month) = 75 / 26 = 2. 88 months salary

After that you get one month’s salary for each year of service = 2. 33 months salary

Total = 2. 88 + 2. 33 months salary = 5. 21 months salary = 5. 21 x 300 =KD 1,563

But as you have worked over 5 years but less than 10 years you are entitled to two-thirds of this amount = KD 1,042.

 

12. Indemnity calculation :

Question : I need to understand the process of indemnity calculation. I want to know the indemnity in my case. I will be completing 10 calendar years service by March 2016. I am currently serving the notice period of 3 months, from January 2016. My salary is KD 1,125 but with the allowances I get KD 1,550 per month. Over the 10 years that I have been in service I have taken a total leave of 13 months. Please advise my indemnity calculation.

Ans : Although you have “completed” 10 years service, things could become complicated for you if your company takes a close look at your annual leave record. We say this because many companies take the annual leave availed over the service period into account while calculating the indemnity. A close look at your record reveals that you have taken three months over and above your entitlement of 10 months annual leave for 10 years service. Some companies ignore this fact, but most don’t … If your company takes these “extra 3 months” into account, you will not be able to complete your 10 years service.

These three months will be deducted from your service …so, your service at the end of the three-month notice period with be 9 years 9 months. This will drastically affect your service because if you don’t complete the 10 years service, you will only get two-thirds of your total indemnity. But we will work on the scenarios of both the situations (full indemnity and two thirds indemnity) so that you know how much you will get regardless of the method adopted by your company. But before we go on and work on the calculation of your indemnity, please understand that your indemnity, according to the Kuwait Labor Law, must be calculated according to your remuneration and not on your basic pay.

Article 55 of the Kuwait Labor Law states that “Remuneration means the basic payment the worker receives or should receive in consideration of his work in addition to all the elements stipulated in the contract or the employer by-laws. “Without prejudice to the social allowance and the children’s allowance granted by the virtue of Law 19 of the year 2000, the remuneration shall include the payments made to the worker on periodic basis such as bonuses, benefits, allowances, grants, endowments or cash benefits”.

Now, we need to have a look at Article 62 of the Kuwait Labor Law which says “The calculation of the worker’s entitlements shall be made on the basis of the last remuneration received by the worker”. Unfortunately, as we said earlier, most of the companies are interpreting the law according to their own liking and calculating the indemnity of their employees only on the basic pay, which is totally wrong. After having said all the above we come specifically to your case and your indemnity, if done correctly with the use of remuneration ( basic pay plus allowances), should be calculated as follows:

Situation 1

Service = 10 years Pay = KD 1,550 (basic pay plus all allowances) So, for the first 5 years you must get 15 days pay for each year of service = 75 days But these 75 days must be divided by 26 (working days in a month) = 2.88 months pay For the next 5 years you must get one month’s pay for each year of service = 5 months pay Total indemnity = 7.88 months pay = 7.88 x KD 1,550 = KD 12,214 So, you should get this full indemnity (KD 12,214) if the company accepts your service of 10 years, not considering the extra leave you took.

Situation 2

Service = 9.75 years Pay = KD 1,550 ( basic pay plus all allowances) So, for the first 5 years you must get 15 days pay for each year of service = 75 days But these 75 days must be divided by 26 (working days in a month) = 2.88 months pay For the next 4.75 years you must get one month’s pay or percentage for each year of service = 4.75 months pay

Total indemnity = 7.63 months pay = 7.63 x KD 1,550 = KD 11,826.500

But as your service is less than 10 years you will get two-thirds of the above indemnity = KD 11,826.500 x 2/3 = KD 7,884.300

 

Calculating Termination Indemnity or End of Service benefits in Kuwait

 

Source – Arab Times

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