Kuwait Labor Law Private Sector Section 4

Termination Benefits

A lump sum payment also known as termination compensation is given to employees when the employment is terminated.

Calculation of Termination Indemnity

For those who work within 5 years, for each year completed by workers they are entitled to a termination indemnity equivalent to 15 days compensation, and a 30 days compensation for each year completed for workers that worked for more than 5 years, but it is limited to one and a half year’s remigration.

For employees who are paid based on piece-rate, hourly, daily or weekly basis, a termination indemnity of 10 days compensation for each completed years of service for the first 5 years and 15 days salary payment for each complete year more than 5 years. This is limited to one year’s salary in which both cases of part years, pro-rated amount is calculated

Restrictions for Termination Indemnity

An employee who was not able to complete his five years of service is not entitled to any indemnity once he decides to resign. Any employee who resigns after working for five years or more in the company is given 50% indemnity. For employees who have reached their retirement age, which were disabled at work or died are given full indemnity. A full indemnity is also given to women employees who married while she is an employee and women employees who renders resignation within 6 months of marriage.


Disciplinary Notices & penalties

All related regulations for employees should be issued in a form of circulars or bulletins. These regulations must also be written in Arabic. Employees who have committed offense may be penalized if the regulation specifies that the offensive act is punishable. All penalties should be progressive but are limited as follows:

– Each act of misbehavior is equivalent to one punishment

– If the act of misbehavior is committed after working hours, outside the workplace and is not related to work, no penalty will be imposed.

– If the penalty is salary deduction, it should not exceed 5 days per month. If the penalty exceeds the total amount of the employee’s 5 days salary then another 5 days deduction will be imposed on his next salary.

– If the penalty is suspension from duty, it should not exceed 10 days per month

– If the act of misbehavior was proven after 15 days, a penalty cannot be imposed



Employment contract will automatically expire at the end of the fixed period stated in the contract. If the employer renews the contract and the employee is willing to work for another period then same conditions will be applied.

If the employment does not state any conditions regarding termination of contract before the end of the fixed period, either party can terminate the contract. The party that terminates the contract must compensate the other. If the employer terminates the contract, the employee will receive compensation limited to his wage earned from the termination day until the end of the contract. If the employee resigns from his work before the end of his contract, employer’s compensation is limited to his actual loss.

If an employee has an employment contract with unlimited period, termination can be made by informing the other party in writing. The notification should be given 15 days before the termination. In lieu of notice, either party may pay the other an amount equivalent to 15 to 7 day salary.

If the employee commits any of the following:

– Doing any wrongful act that results to a serious damages or loss to the employer

– Continuously disobeys his employer’s instructions

– Disobeys safety instructions at work given by the employer on each location

– Has been absent of more than 7 consecutive days without any reason

– Has been convicted of a crime affecting honor, honesty and morality

– Commits an act against public ethics in the workplace

– Assaults a fellow employee, employer or his agent at work or an account of work

– Failure to perform his obligations under the terms of his contract or the labor law

– Commits fraudulent activities to obtain work

– Reveals secrets relating to his employment

An employer has the right to terminate an employee without prior notice and without paying the employee’s indemnity and compensation.


If an employer commits any of the following:

– Fails to abide by the provisions stated on the employee’s contract or the labor law

– Assaults his employee

– Continuously endangers his employee’s health

An employee has the right to end his contract before it expires and without prior notice, collect his indemnity and no payment for the compensation will be applied.


If an employee dies, fails to perform his work or used all his sick leave, his contract will automatically be terminated. Indemnity will be paid for all these cases.


An employee’s contract is also automatically terminated if his firm or company:

– Goes into liquidation

– Merges with another firm or company

– Experienced lockout

– Is sold or inherited

The new owner has the right to indemnity while the employees may continue to serve the new owner while reserving his rights to indemnity for his previous service.