Indemnity Kuwait
Category: Legal
indemnity-kuwait_kuwait

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).

     
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.

 

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

 

13. 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.

 

14.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.

 

15.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.

 

16. 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.

 

17.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.

 

18.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.

 

19. 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

 

20. 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.

 

21.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.

 

22. 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.

 

23.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.

 

24.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.

 

25.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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02 Jul, 2016 5 30215
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