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Indemnity issue

Dear Sir, A controversial situation has arisen in our company with regard to the indemnity calculations. The company policy being followed is as follows: Upto 5 yrs — 30 days salary per annum; above 5 yrs till 10 yrs — 45 days salary per annum and above 10 yrs — 60 days salary per annum.

The entitlement is payable in either case of separation, resignation or termination (under normal circumstances). Due to an error in calculation, the indemnity provision was being calculated @ 30 days basis for the entire duration period of service for the existing employees till now.

However, this mistake was noticed at the year end and corrected as per the above policy as at 31-Dec-2016. But now the company intends to cancel this policy retrospectively and reverse the provision so far created against the existing employees and maintain it @ 30 days pa only for their entire period of service. This has a drastic negative effect on the indemnity entitlement for all its existing employees.

There are many existing employees whose service is more than 5 years with a few even above 10 years who are likely to suffer. Usually an entitlement as per company policy at the time of employment will be his final entitlement at the time of separation and this cannot be curtailed by changing a policy in-between. But this sudden change in stand by the company reduces his entitlement which is unjust. Is this legally valid? Please clarify?

Name withheld

Answer: From your narrative, it is clear that the company was using a policy which was at variance with the Kuwait Labour Law. But in so far as this policy is not to the disadvantage of the workers vis-a-vis the labour law, this is permissible.

Indeed, the workers under the company policy, were taking more during separation than the labour law envisaged. With the change in company policy, the question is whether this new policy must be applied retroactively or not.

We are of the view that if the old policy was part of your conditions of service and was communicated to you either orally or in writing at the time of recruitment, then the company cannot change the policy to your advantage now.

In this case the new company policy cannot be applied retrospectively and hence will only affect future recruits and not those of you who were recruited on the basis of the old policy.

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