Payroll Process in Kuwait: A brief overview

Ranjith Menon

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    Payroll process is not a cakewalk; it is quite complicated that requires abundant time and resources. One needs to monitor tax updates and other statutory changes constantly and must also ensure that employees are paid the correct salary amount on time.

    The payroll process will not be the same for all countries; each country has its own tax laws, minimum salary requirements, pension plans, gratuity schemes, leave policies, and many more. Here we have covered in detail about the payroll process in Kuwait, via a set of FAQs.

    1. What is the frequency of Salary Payment in Kuwait?

      Article 56 of the Kuwait labour law states that employees shall be paid as follows;

      • Employees hired on monthly pay should be paid the wages at least once in a month.
      • Other types of workers shall be paid at least once every two weeks.
    2. What are the statutory pay components included in employee salary?

      The Kuwait labor law does not define the components that should make up an employee’s salary; there are no defined statutory components.

    3. What are the common pay components that are normally payable to employees?

      Fixed component may include Basic salary, Housing Allowance, Transport Allowance and Living Contribution. The variable components may include Overtime, Sales commission, Bonus, Incentives, Relocation allowances, Leave passage, Housing Allowance, Transport Allowance and Living Contribution.

    4. What are the standard working hours in Kuwait?

      The standard working hours are set at a maximum 8 hours a day or 48 hours a week. The standard working hours during Ramadhan is 6 hours a day.

    5. What is the official salary payment currency in Kuwait?

      Article 56 states that remuneration is to be made in the country’s currency, in this case, the Kuwait Dinar.

    6. How is overtime calculation determined in Kuwait?

      Overtime is any extra hours worked by an employee beyond the normal working hours.  A worker on overtime hours is entitled to a 25% pay over his original remuneration. A worker working on his weekend rest day is entitled to a 50% pay over his original remuneration. Workers working over a national holiday are entitled to a 100% pay over their original remuneration.

    7. How is gratuity accrued?

      Employees are entitled to 15 days wages for each year of the first five years of service and one-month wage for each year of service thereafter.  Calculation shall be made based on the last remuneration received by the worker. The total end of service benefit should not exceed one-and-a-half-year remuneration for employees.

      To know more about Kuwait Gratuity Click here

    8. When is gratuity paid to an employee?

      Employees are eligible for gratuity pay at the end of their service period, at termination, death, or while resigning.

    9. What are the statutory deductions that are made to employees in Kuwait?

      There is no statutory deduction in the form of income tax in Kuwait. However Kuwaiti nationals are enrolled in Social security and hence they deduct a certain amount of their salary towards social insurance.

    10. How is Kuwait Social contribution calculated?

      For Kuwaiti Nationals employees, contributions are payable monthly by both the employer and employee. The employer’s contribution is 11% and the employee’s contribution is 10.5% of monthly salary up to a ceiling of 2750 Kuwait Dinars per month.

    11.  What is WPS in Kuwait?

      Wage Protection System (WPS) was implemented to protect the employee’s salary payment. It is an electronic salary transfer system that allows institutions to pay workers’ wages via banks, approved and authorized to provide the service.

    12. Are Employees eligible for Air Ticket Benefits in Kuwait?

      There is no statutory requirement for employers to provide employees with air tickets. However, as a general practice, many employers provide their employees with annual or bi-annual air tickets to travel back to their home countries for vacation.

    13. What is the leave policy defined under the labor law?
      • Annual Leave
        As per Article 70, workers in Kuwait are entitled to a 30-day paid annual leave. However, the entitlement to a leave for the first year of work begins after at least 9 months of service for the employer. Official holidays and sick leaves during the year are not counted as annual leave.
      • Sick leave
        As per Article 69,Employees are entitled to seventy-five-day sick leaves during the year broken down as follows:

        • first 15 days – at full pay
        • following 10 days – at three-quarters of the pay
        • following 10 days – at half pay
        • following 10 days – at quarter pay
        • following 30 days- without pay.
      • Maternity leave
        According to Article 24, a pregnant working woman shall be entitled to a paid maternity leave of 70 days, not included in her other leaves, if she gives birth within this period. After the end of the maternity leave, the employer may give the working woman, at her request, an unpaid leave for a period not exceeding four months to nurse her baby.
      • Hajj Leave
        As per Article 76, An employee who has spent two continuous years working for the same employer shall be entitled to 21 days leave with pay to perform Al-Hajj if employee had not performed hajj before.
      • Paternity Leave
        In the Labour law of Kuwait, there is no Statutory Paternity Leave.
      • Marriage Leave
        Marriage leave is not provided in Kuwait; employees can avail their Annual leave for marriage.
      • Compassionate Leave
        According to Article 77, the employer may grant an employee a special leave of three days in the event of a first- and second-degree relative’s death.
      • Iddah Leave
        The Muslim working woman, whose husband has died, shall be entitled to a fully paid iddah leave for four months and ten days from the date of death. During this leave, the working woman cannot work for another employer.The non-Muslim working woman, whose husband has died, shall be entitled to a paid leave of 21 days.
      • Academic Leave
        The employer may grant an employee a paid academic leave provided the worker shall return and work for the employer for a similar length of time. Academic leave should not exceed five years.

      Please read our article on Kuwait leave policy here for a comprehensive understanding.

    14. Is bonus or incentive payment mandatory in Kuwait?

      No, Incentive and Bonus is totally based on Companies decision.

    15. What are the items included in the End of Service Benefits calculation in Kuwait?

      The employee is entitled to the following end of service benefits.

      1. End of service Gratuity
      2. Repatriation ticket if applicable
      3. Notice periods pay if applicable
      4. Any unutilized leave (Vacation) pay
      5. Any other outstanding payment or deduction

    Holidays in Kuwait

    The following National holidays are given in Kuwait.

    1. Arabic New Year: 1 day
    2. Isra’ and Mi’raj day: 1 day
    3. Eid Al-Fitr: 3 days
    4. Arafat day: 1 day
    5. Eid Al-Adha: 3 days
    6. Prophet’s Birthday (Al-Mawlid Al-Nabawi): 1 day
    7. National Day: 1 day
    8. Gregorian New Year: 1 day

    Employee Benefits in summary:

    1. Salary
    2. Gratuity
    3. Annual Leave
    4. Sick leave
    5. Maternity Leave
    6. Iddah Leave
    7. Compassionate Leave
    8. Medical Insurance
    9. Overtime pay if applicable.
    10. Hajj Leave

    Payroll Process

    The process of payroll is a little complicated and time-consuming; hence it is always recommended to outsource your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business.

    One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.

    As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our clients’ entire payroll cycle that includes preparation of payroll reports, processing salary payment with WPS compliance, accrual management including Gratuity, pension funds, an online portal for accessing payslips, and many more. Our leadership team spends the necessary hours on every project, ensuring our clients get refined consulting services to take your business forward.

    Business owners may not have the time for payroll calculation as they have numerous other things to take care of. Outsourcing payroll functions will not only free up the time of the owner but will also promise professional service.

    To know more about our payroll process, Click here

    Disclaimer:

    Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subjected to change and not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.
     

     
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