Kuwait Labour Law Indemnity Calculator 2025

Under Kuwait's Labor Law, it's essential to understand how to calculate the indemnity or performance bonuses when an employee departs from their job. Many expatriates in Kuwait don't realize they are entitled to this compensation upon leaving.

We're exploring the Kuwait Indemnity Calculator today to help you determine your potential indemnity when exiting a job.

About Kuwait’s Labor Law: Kuwait's Act No. 6 of 2010 governs labor practices, specifically for the private sector. It states workers shouldn't exceed 48 hours a week or 8 hours a day, except in some cases. Different sectors have different rules, but a one-hour break is typical during workdays.

The Private Sector Labor Law (Law no.38/1964), overseen by the Ministry of Social Development and Labor, outlines employment conditions. This law has undergone various modifications since its declaration in 1964.

 

In Kuwait, indemnity—or end-of-service benefits (EOSB)—is a fundamental entitlement provided to employees upon the conclusion of their employment. Governed by Kuwait's Labour Law, this benefit ensures financial recognition for employees' service and loyalty. Whether you’re an employee or employer, understanding how indemnity is calculated is crucial. Here's a detailed guide on the Kuwait Labour Law indemnity calculation process.

What Is Indemnity in Kuwait?

Indemnity is a monetary compensation paid to employees who resign, retire, or have their contracts terminated. The purpose of this benefit is to safeguard the financial interests of employees and honor their contributions during their service period.

Eligibility for Indemnity

Under Kuwait Labour Law, employees qualify for indemnity based on the following conditions:

1. Employment Duration: The employee must have completed at least 3 years of continuous service to receive full benefits. However, partial indemnity may apply in certain cases.
2. Contract Type: Both indefinite and fixed-term contracts are eligible for indemnity calculations, though terms may vary slightly.
3. Resignation: Employees who resign may receive reduced indemnity, depending on the length of their service.

How Is Indemnity Calculated in Kuwait?

The indemnity calculation depends on the employee’s final basic salary (excluding allowances) and the duration of their service. The calculation differs based on whether the employee has an indefinite or fixed-term contract and the reason for termination.

General Formula for Indemnity Calculation:

• For the first 5 years of service: 15 days' pay for each year worked.
• After 5 years: 30 days' pay for each additional year worked.

The total indemnity cannot exceed 1.5 times the employee's annual salary.

Key Components:

• Daily Salary: Monthly basic salary ÷ 26 (working days in a month).
• Years of Service: Total number of years worked by the employee.

Examples of Indemnity Calculation

Example 1: Employee with 3 Years of Service

• Basic monthly salary: KWD 600
• Service duration: 3 years

Calculation:

1. Daily salary = 600 ÷ 26 = KWD 23.08
2. Annual indemnity = 15 days × 3 years = 45 days
3. Indemnity amount = 23.08 × 45 = KWD 1,038.60

Example 2: Employee with 7 Years of Service

• Basic monthly salary: KWD 1,000
• Service duration: 7 years

Calculation:

1. Daily salary = 1,000 ÷ 26 = KWD 38.46
2. For the first 5 years: 15 days × 5 = 75 days
3. For the next 2 years: 30 days × 2 = 60 days
4. Total indemnity days = 75 + 60 = 135 days
5. Indemnity amount = 38.46 × 135 = KWD 5,192.10

Indemnity for Resigned Employees

Employees who resign are entitled to reduced indemnity based on the following:

• Less than 5 years: 50% of full entitlement.
• Between 5–10 years: 66.67% of full entitlement.
• More than 10 years: 100% of full entitlement.

Using an Indemnity Calculator

An online Kuwait Labour Law indemnity calculator simplifies the process by allowing employees to:

1. Input their basic salary.
2. Specify their years of service.
3. Select the reason for leaving the job (e.g., resignation, termination).

The calculator instantly provides an estimated indemnity amount, helping employees plan their finances better.

Important Considerations

1. Deductions: Any loans, advances, or unpaid dues may be deducted from the indemnity amount.
2. Employer Obligations: Employers are required to adhere to the Labour Law when calculating and disbursing indemnity.
3. Legal Disputes: Employees can file a complaint with the Ministry of Social Affairs and Labour if they believe their indemnity was unfairly calculated.

 

Kuwait's indemnity system reflects the country’s commitment to protecting employees' rights and ensuring fair treatment at the end of employment. By understanding the calculation rules and utilizing tools like indemnity calculators, employees and employers can ensure compliance and financial clarity. Whether you are planning your career transition or managing your workforce, staying informed about Kuwait Labour Law indemnity is indispensable.