Monday , October 23 2017

Calculation of annual Leave Salary

We seek your advice on the calculation of the annual leave salary. An employee gets a basic salary of KD 400 plus monthly allowances like housing and transportation i.e. KD 40 + 30 + 20 respectively. In this case the employee’s monthly remuneration works out to be KD 490. So, what would be his salary for 30 days. Furthermore, while the employee is on leave, is he entitled to receive the full allowances of KD 90 in advance or upon his return from his annual vacation ?. And lastly we would appreciate if you give any reference to the clause or the article in the new Labor Law or point out any justification to support such payments.

Name withheld
Answer: The law clearly says that all calculations of an individual’s benefits i. e. indemnity, annual leave and overtime must be based on an employee’s “remuneration”, which means the total of the basic salary and all the allowances regularly paid to the individual. Having said that, on checking with the Ministry of Social Affairs and Labor’s Legal Department – to get a clarification on the issue – it was found that while all the three allowances were to be considered in the remuneration in the calculation of both the indemnity and overtime pay, the same was not the case with the annual leave salary, in which only the housing and living allowances were to be used…and not the transportation allowance.

The reasoning offered by the ministry for this was that the transportation allowance is paid to the individual for travelling to the office and while on leave as there is no such case while he is on his annual leave. So, while calculation the indemnity and overtime – in specifically the case you mentioned, KD 490 would be used as the basis but for the calculation of annual leave salary the calculations would be based on KD 470 ( after leaving aside the KD 20 for the transportation allowance).

As leave is for 30 working days the annual leave salary would be worked out as follows: Salary for calculation KD 470 This salary must be divided by 26 ( working days in a month) = KD 470 / 26 = KD 18. 076 As the annual leave is for 30 working days this figure must be multiplied by 30 = KD 18. 076 x 30 =KD 542. 280 So, KD 542.280 would be this individual’s annual leave salary specifically for the above case. Answering your other query, the law clearly states that the leave salary ( including the allowances ) must be paid to the individual before he proceeds on his vacation. In this connection, please refer to Article 71 of the Kuwait Labor Law enacted on Feb 20, 2010 which has only the following one line : “The worker shall be paid for his annual leave before taking such a leave”.

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