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Monday , January 27 2020

Indemnity Calculation if you resign

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.

Name withheld
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.

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