Kuwait Indemnity – 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. Indemnity Calculation for above 5 years but less than 10 years of service inclusive of allowance

Question : I have  been 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 = KD 260).

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: 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 month’s 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 twothirds 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.

 

Indemnity Calculator as per Kuwait Law

 

2.Oil sector indemnity

Question : I’ve been trying to find examples of calculation for oil sector but have been unable to do so. Please help me calculate my indemnity on the following information: – Oil Sector – 12 years service – KD 800 salary

Answer: While you do eventually fall under the Kuwait Labor Law, all such issues for the oil sector employees are governed by the Labor Law for the Kuwait oil sector. Under that law, the calculation of the indemnity is not as direct as in the private as these calculations depend on individual contracts, focusing on the area where the concerned expatriates are employed. As we don’t have any details of your contract, we are not in a position to calculate your indemnity.

3.Indemnity Calculation if you resign

Question : First of all, I would like to thank you for your free legal advice to many expatriates here in Kuwait. My inquiry is as follows: I have been 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 = KD 260).

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.

Answer: 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 month’s 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 twothirds 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.

Calculating Termination Indemnity or End of Service benefits in Kuwait

4. Indemnity not paid

Question : I would like to inquire that if a company does not give indemnity to an employee, what should that employee do? And which supporting document needs to be presented to the Labor Office so that it can take any action against the company and ensure that the indemnity of employee is paid to him. In view of my current situation I need your valuable suggestion as soon as possible.

Ans: If a company does not pay an employee his indemnity, the employee should file a complaint with the Ministry of Social Affairs and Labor, through the Labor office in his area. All the employee will need is proof of the duration of his service with the company and a record of the last pay he received.

He can get this certificate about the service from the company as it is obligated under the Labor Law to provide the employee a service certificate while the pay record can be obtained from the bank where his pay was deposited every month. In case the company refuses to give the service certificate, the Ministry of Social Affairs and Labor can find out the same from its records.

 

5.Indemnity case won but company shut down

Question : I had filed a case against my employer which happens to be a private limited company for non-payment of indemnity, which was due to me when I resigned.

By Allah’s grace and thanks to my lawyer’s efforts, I got the judgement in my favor wherein the company had to pay me my 9 years of service indemnity and accrued leave balances.

However, by the time I received the court’s judgement, the company had shut down with all its assets sold. I gather that since this is a private limited company, the liability of this company is limited only to the company and not to the owners or shareholders.

Incidentally, the manager of this company also happens to be the owner as well and the company file is still active in the Chamber of Commerce.

I am led to believe that the company now does not hold any account with any bank for us to recover the indemnity. I have won the case but I still feel I have lost as I cannot recover my right. May I ask the Legal Clinic to provide me any solution, if any?

Ans : We must take a close look at Article 50 of the Kuwait Labor Law for the Private sector which was enacted on Feb 20, 2010.

The work contract shall expire in the following cases:

a) Issuance of a final court judgment that declares the bankruptcy of the employer.

b) The final closure of the firm.

However, if the firm is sold or merged in another firm or if it is transferred by the means of inheritance, donation or any other legal action, the work contract shall be effective on the successors under the same conditions mentioned therein.

The rights and obligations of the previous employer towards the laborers shall be transferred to the employer who replaces him.

So, you can see that the people or company which bought the assets of the firm inherit the liability of paying the dues or benefits of all the employees regardless of the fact your company was a private limited company or otherwise. So, file a case with the Labor Office in your area against both the current owners of the company’s assets and the previous owners of the company. There is only one solution to this case – you will get your dues.

 

Indemnity Calculator as per Kuwait Law

 

6.Indemnity Calculation for 11 years service

 Question : I request you to provide me the indemnity calculation ( as I have resigned) for the period of service mentioned below along with the other details. Date of joining: 08/10/2004 Date of resignation: 29/10/2015 Last working day: 29/01/2016 Total service: 11 years, 3 months, 3 weeks You are requested to provide a detailed reply according to the Kuwait Labor Law for the Private Sector.

Ans : To calculate your indemnity we need the full information and in your question you have provided us details about your service but left out the most important detail…your salary, without which we can’t proceed further. But we will still help you in a way that you won’t face any problems in working out the indemnity yourself.

First of all you are entitled to 15 days pay for each of the first five years = 75 days but these days have to be divided by 26 (working days in a month) = 2.88 months salary For the rest of your service you are entitled to one month’s salary for each year = 6.3 months salary So, total indemnity = 9.18 months salary To calculate your indemnity just multiply 9.18 by your salary and you will get the amount due to you.

Please remember that as you have completed 10 years service, you are entitled to the full indemnity regardless of the fact you resign from service or your services are terminated.

 

7. 18 years service maximum payment of Indemnity

 Question : Need your expert legal advice on how to proceed with the following matter. I have been in employment with my current company since 1982. The company, however, says that a total of only 18 years service will be calculated as far as indemnity is concerned. They have not taken into consideration the service from 1980 to 1990 (pre-invasion period) whereby an Amiri decree was made that full indemnity up to the invasion period should be given. Is there any law that the dues up to invasion period be settled separately and then after invasion?

 Answer: This is a question which is on the lips of a lot of people, especially those who have worked over 25 years with their current firms i.e. they were here before the invasion of the country.

Immediately after the liberation of Kuwait it was decided by the topmost authorities that the pre-invasion indemnities would be paid in full and calculated separately from the postinvasion indemnities. So, a majority of the firms immediately settled the indemnities of their employees and started anew with the calculation of indemnities for the post invasion period.

This went on for almost 18 years when the Ministry of Social Affairs and Labor – on representation from a lot of big firms — decided that the calculation of both the pre and postinvasion periods could be combined.

This action has never been challenged in any court of law. So, as the current situation stands the calculation of indemnities for both the periods is combined and an employee is entitled to a maximum of 18 months salaries. Please remember, however, that these 18 months salaries doesn’t include any other dues — like payment for any balance of annual leave

8. Indemnity issue

Question : I came to Kuwait through a company and am working as a Software Architect for one of the ministries in Kuwait. My company is paying me my indemnity every month as part of my salary so now if my salary is KD 600 they say KD 550 is the salary and KD 50 the indemnity. Is this how it’s supposed to be done? This is causing other issues like bank accounts getting blocked

Ans: First of all you need to know that the Kuwait Labor is for the private sector and does not affect the working of the government sector, especially the ministries. As such all the ministries are allowed to have their own special contracts and if your ministry says that a part of the salary is your indemnity then the law stands with the ministry … If this is mentioned in your contract. If this is not mentioned in your contract then you can take the ministry to court over the issue, provided your contract says that you are entitled to end of service benefits. Some ministries have special contracts these days which clearly mention that your lump-sum pay is all that you will receive. You have to be watchful while signing the contract because there is nothing you can do later.

 

9.Management says ‘shops and establishment category are not entitled for Indemnity’

Question : I worked in a company mainly dealing with imported foods from world over from June 2007 to April 2015 before I resigned from this firm. The company transferred a fixed amount as salary through the bank and paid the difference in the salary and allowances in cash during my tenure with them. I don’t have a work contract. But the company renewed the residence over all the years. I have now transferred my residence to another company. But still I have not received my settlement from the previous company. I came to know that the management will not give the indemnity because the company is under “shops and establishment category”. So there is no need to give the indemnity (management’s words). So please let me know whether I am eligible for any indemnity for the service as per the Kuwait labor law. Also let me know whether there is any law that if a company is under the “shops and establishment” category, there is no need to give the indemnity.

Ans : The company is lying and trying to get away from its obligations by not paying you any indemnity. All of the private sector, regardless of any category, is covered by the Kuwait Labor law which was enacted in February 2010 and as such must ensure that the indemnity mentioned for various stages of employment must be paid to the employees. If your previous company continues to insist on not paying you your indemnity, you must file a case with the Ministry of Social Affairs and Labor through the Labor Office in your area.

Indemnity Kuwait Indemnity Calculation In Kuwait, Question and Answers

10. 5 years service – Indemnity calculation ( 11 months leave taken in 5 years)

Question : I have been working in an engineering & construction company as a supervisor in Kuwait since July 15, 2011. My salary is 300+27 KD.

Now I want to resign from my service after 15 July, 2016,after completion of five years with the firm. Can I get 5 years benefit? During five years service I have been in vacation for 11 months.

How are the five years calculated by the existing Kuwait Labor Law.

Will the company shall deduct my vacation period which I availed during service from the period that I have served with the firm?

Kindly advise me in this regard.

Ans: No, you can’t get the benefit for five years because over these years you have been on unpaid leave for nearly six months.

Please remember that the company has the right to deduct the period you were on unpaid leave from your service, which means that you have to serve an additional six months to complete five years of service.

And after completing the five years service you will be entitled to 15 days pay for each of these years, which means you should get 75 days but these 75 days must be divided by 26 (working days in a month) = 2.88 months.

These 2.88 months must be multiplied by your total remuneration i.e. your basic salary plus all the allowances that you get regularly (2.88 x 327 = KD 942). But please remember that you will get only two thirds of this amount if you resign after completion of five years service.

 

11. Indemnity in ministry

Question : I am a regular reader of the Arab Times… could you please answer my queries on the following subject.

I have been working with a ministry, in an office job, for the last 7 years on a second contract.

If I resign by end of this year, how much will I get as indemnity? Is the indemnity based on the basic salary or the salary with all allowances as a total? Will it be half a month’s salary for first five years and 1 month salary for additional years? Will there be any difference in resignation and termination benefits? Last year, a friend of mine resigned and he did not get the full salary, they deducted the 50- dinar allowance the government declared for ministry staff twice (meaning KD 100 reduced from his salary) and calculated the benefits.

Is it legal to do so? Now it seems that the private sector law is better than the ministry sector. Civil Service Commission have different procedures for each ministry?

Ans: Please remember that the Kuwait Labor Law is for the private sector only and the benefits of the ministry employees depend on the individual contracts and rules and regulations set by the Civil Service Commission. So, it all depends on your contract plus the rules of your ministry.

You also have to check what sort of contract you have because sometimes ministries have special contracts which stipulate a lot of different things. In view of the above, we can’t comment on your query and we suggest you talk to your HR Department to get the exact details of the benefits you are entitled to receive.

 

12. Indemnity issue after rehiring back

Question : I have been working in a general trading company since June 2007. My superiors shifted me from one department to another in April 2010. I got information from my HR Department that I was terminated (on paper) in March 2010 and rehired in April 2010. They got my signature on the re-hired/contract paper but they didn’t say they had re-hired me. They only said it was a new policy and I had to sign the paper. Will this affect my indemnity?

Ans : Yes, it does affect the calculation of your indemnity because for the first five years the calculation is based on 15 days a year and after that you are entitled to one month for each year of service. So, if you are terminated and reemployed your indemnity will again be calculated on the basis of 15 days per year. And you have made things worse by accepting the termination and the new contract. You could go to the Ministry of Social Affairs and Labor with a complaint but you are in a “catch 22” situation as you could lose your job. So, it’s up to you to decide.

 

Q8 expatriates Indemnity Calculation, Indemnity Calculation in Kuwait, iiQ8

 

13. Calculation of Indemnity and leave salary

Question : Kindly calculate my indemnity and leave salary. Joining date 01-05-2006 Resign from 01-06-2015 Salary basic KD 225 per month Allowance KD 15 per month Every year the company gives me commission and incentive This time the company paid KD 500 for the fiscal year ending June 2014. Leave: 1 month paid leave per year.

 Answer: First of all, please remember that commissions don’t count in the calculation of the indemnity, only the basic salary and all the allowances that you get regularly. In your question you have not mentioned the amount of bonus that you receive per year or have received this year. Secondly, you have also not mentioned that type of allowance that you receive, because not all (although most of them) allowances are counted in the calculations of the indemnity and also the annual leave payment. So, in absence of the above information we can’t calculate your indemnity nor the annual leave payment.

 

Source – Arab Times

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Calculating Indemnity in Kuwait – FAQ