Payroll Process in Oman

Jahid Tapadar

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    A brief overview

    For a non-specialized, payroll is about getting your wages/salary paid on a specific date of every month. For a professional, many factors need to be considered such as payroll policy, labor law and they must also ensure that every employee gets paid the actual amount after any deductions/ additional earnings.

    Every country has different processes and policies with regard to payroll and also laws and regulations for the safety of Human resources. Here we have covered some important points about the Payroll Process in Oman.

    1. What is the frequency of salary payment in Oman?

      Article 51 of Oman Labour Law states as follows,

      • Employees working on a monthly wage should receive their salaries at least once a month,
      • If the employee works by piecemeal, or if the work period exceeds at least two weeks the employee should be paid for the work done in the first week, and the balance should be settled one week after completion of the job.
      • In other cases, the employee should be paid once every week or fortnightly. If the employee agrees in writing with his employer, he can receive his salary once every month.
    2. Are there any statutory pay components in Oman?

      Oman labor law does not specify any fixed pay components that should make up an employee’s salary.

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

      Fixed components may include Basic salary, House rent allowance and Conveyance Allowance. The variable components may include Overtime, Sales commission, Bonus, Incentives, Relocation allowances, Leave passage etc.

    4. What is the minimum Salary in Oman?

      Oman’s minimum wage is 325 Omani riyals per month for Omani nationals. There is no specified minimum wage for expatriate workers.

      Please refer to the following article on the ministerial decree 

    5. What are the maximum working hours in Oman?

      The maximum number of working hours in Oman is nine hours per day which includes at least half an hour of rest. During the holy month of Ramadhan, the maximum number of working hours for Muslim employees is six a day.

    6. How is Overtime Calculated?

      As per Article 70, the employee must get paid extra for the additional hours worked, and the employee is entitled for overtime work plus at least 25% against their basic salary. 50% overtime is provided when an employee works on his day of rest and 100% overtime is provided when an employee works during a national holiday.

    7. How is gratuity accrued?

      As per Article 39 of Oman Labor Law, Gratuity calculation is accrued against the last drawn basic salary on the following basis.

      • A service period below 3 years at 15 Days per year.
      • Three Years and above at one month (30 Days) salary per year.

      Please refer to our detailed article on Oman gratuity policy 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 at resignation. According to Article 39, the worker shall be entitled to a fraction of the year worked provided he has completed more than one year of continuous service

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

      In Oman, payroll is not subject to income tax, and hence there are no mandated tax deductions. Whereas Omani nationals are subject to mandatory national pensions plans contributions.

    10. Which employees qualify for Oman pension contribution?

      Pension contribution in Oman is provided for Omani nationals only.

    11. How is Oman pension calculated?

      The contribution is fixed at 18.5% of the employee’s Gross Salary, of which 11.5% (includes 1% for occupational injuries and disease) is payable by the employer and 7% is payable by the employee.

      The maximum deduction base amount is OMR 3000. The employee Pension contribution is deducted from the monthly wages and the employer needs to pay this amount along with the employer contribution to the Pension Authority.

    12. What is WPS in Oman?

      The Wage Protection System (WPS) is mandatory in Oman. Companies in Oman need to adopt the Ministry of Manpower’s wages protection system to ensure that the employees are paid on time

      Under the WPS, companies are required to submit wage information to the Ministry of Labor via the e-service program. The WPS ensures that employee rights are protected and that salaries are paid according to agreed terms of employment contracts.

    13. Are Employees eligible for Air Ticket Benefits in Oman?

      There is no specific statute in the labour Law to provide return air tickets to the worker’s home country. However, many companies provide air tickets to employees annually and some of the companies extend this payout to employees’ dependents as well.

    14. What is the leave policy defined under the labor law?

      Annual Leave

      According to Article 61 of the Oman Labour Law, upon completion of six months of service with the employer, an employee is entitled to a paid annual leave for a period of thirty days for every calendar year.

      Sick leave

      As per Article 66, an employee whose sickness is proved shall have the right to a sick leave not exceeding in total ten weeks in one year whether such weeks are continuous or separate and the sick leave shall be granted as follows:

      • The first fourteen days, with full gross salary. (1st and 2nd week)
      • Day 15 to Day 28, with three quarters of the gross salary. (3rd and 4th week)
      • Day 29 to Day 42, with half the gross salary. (5th and 6th week)
      • Day 43 to Day 70, with a quarter of the gross salary. (7th to 10th week)

      A medical certificate must be provided as Proof of sickness. However, in case there is a dispute, the matter shall be referred to the Medical Committee, provided for in Article (43) of this Law.

      Maternity leave

      According to Article 83, A female employee shall have the right to a special fifty-day maternity leave covering the periods before and after delivery with full salary for not more than three times during her service with the employer.

      Hajj Leave

      Muslim Employees get a special leave to perform Hajj once and only after one year of continuous employment. The leave may be up to 15 days which shall be once throughout the period of service. This is a paid leave.

      Paternity Leave

      The Labor law of Oman is silent about paternity leave.

      Marriage leave

      Employees are granted a three-day paid marriage leave with gross salary. This type of leave can only be grated once throughout the entire service period.

      Compassionate Leave

      Compassionate leave is granted for three days in the case of the death of a first-degree relative, and for two days in the case of a second-degree relative.

      Examinations leave

      Omani nationals’ employees who are studying in schools, colleges or universities in the country are granted fifteen days per year for the purposes of taking their examinations.

      Iddah Leave

      In the case of a married Muslim female employee is widowed, she is granted 130 days paid leave to mourn the death of her husband.

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

    15. Is employee Medical Insurance mandatory in Oman?

      It is mandatory that an employer provide medical insurance to the employee during the duration of employment.

    16. Is bonus or incentives payment mandatory in Oman?

      Bonus and incentives payments are not mandatory according to Oman compensation laws. Companies provide these benefits to employee to attract top talent.

    17. Is the employment of foreigners regulated in Oman?

      Yes, an employer is not allowed to bring in foreign workers into the Sultanate of Oman unless he obtains approval from the ministry. Grant of such approvals depends upon the following.

      • There must be insufficient qualified Omanis for the job.
      • The employer meets the required percentages for Omanisation.
      • The required fees are paid.
    18. What are the items included in End of Service Benefits calculation in Oman?

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

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

      Employee Benefits in summary:

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

      It is mandatory for businesses to process payroll in a timely and accurate manner, be it in Oman or anywhere across the world. The law and procedures related to payroll system might vary for different countries, but the mandatory requirement remains the same. An accurate and streamlined system for payroll processing will mitigate risk and improve business operations vastly.

    Payroll Process in Oman

    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 in Oman, 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.

    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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