Indemnity Is Calculated On Basic Salary Plus All Allowances As Per Kuwait Labor Law
Category: Legal

Due to downsizing of our department, some of us have been issued termination letters with a 3 months’ notice period which ends in the 1st week of November 2016.

I had joined the company in September 2012 and was made to sign a contract with the following term stating “Indemnity will be one month salary based on basic salary and HRA only for each completed year of service, however in case of resignation from employment, provisions of the Kuwait Labor Law will apply”.

My current salary is KD 400 which is breakdown as follows:

Basic: KD 200
HRA: KD 115
Transport allowance: KD 85

My questions are:

1. How will my indemnity be calculated and how much will I receive.

2. According to the Kuwait Labor Law, is the indemnity calculated on basic salary and HRA as stated by the company or on the final salary you receive for the month.

3. Is the company right in stating the above terms on the contract?

4. Is the company right to breakdown my salary in the above format, where else in reality I don’t get any amount as allowance?

5. I have not availed my annual leave of 30 days and air ticket for this year. Am I entitled to the 30 days leave pay and the ticket amount.

Name withheld

Answer: The company is not right in its calculations because the Kuwait Labor Law clearly says that indemnity must be calculated on the last remuneration, which has been defined as the basic salary plus ALL the allowances received regularly.

Unfortunately, most of the companies calculate the end of service benefit on the basic salary which is totally wrong but even the Ministry of Social Affairs and Labor – the custodians of the Kuwait Labor Law — turns a deaf year to the problem.

So, your indemnity according to the law should be calculated on KD 400 (the final salary) plus the cost (divided by 12) of the air ticket. This is a very important part of your salary because you receive it every year. We have to divide it by 12 (number of months in a year) to get the amount to add to your monthly salary.

In view of the fact we don’t have the cost of the air ticket we can’t accurately calculate your indemnity. The company is wrong in including the above wording in the contract. Please remember that anything against the Kuwait Labor Law will not be accepted by a court of law even if you have signed a contract.

The court will set aside the contract. In the end we would like to stress that you are also entitled to payment for all the days of annual leave you have in balance plus the cost of the air ticket if you fulfil the terms of the contract on this issue.



22 Sep, 2016 2 6689
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