A primary challenge to Kuwait’s economic diversification is the scarcity of nationals working in the private sector. More than 90 per cent of the local, working population is employed by the government, meaning the private sector is staffed predominantly by expatriates. In recent years, Kuwait has encouraged its citizens to join the private sector by offering incentives such as salary support benefits, and has passed Kuwaitisation laws requiring the hiring of stipulated percentages of Kuwaiti nationals across various job categories, with financial penalties for non-compliant employers.

An employee of a foreign employer who works in Kuwait typically signs two contracts

Kashif Syed, SNR Denton

In February 2010, Kuwait’s National Assembly enacted the Private Sector Labour Law, No. 6 of 2010, popularly known as ‘the new labour law’. The Labour Law is the main source of law governing employer-employee relations. The government body responsible for implementing and enforcing the Labour Law is the Ministry of Social Affairs and Labour (MSAL), which monitors compliance and carries out regular random checks on the premises of private sector employers. It also receives employment-related complaints through its labour officers located in each of the six provinces of Kuwait. The offices are there to assist employees and encourage settlement of disputes before passing them on to the Kuwait courts.

The provisions of the Labour Law apply to all employees – regardless of nationality or country of origin – who work in Kuwait for private sector employers, even where employers contract with the public sector. The oil sector is an exception up to a point, where more favourable employment benefits are legislated for certain kinds of employees by a separate labour law. The key features of the Labour Law are summarised below.

Employment contract

The Labour Law provides for a written employment contract in Arabic and in a second language upon the request of an employee. In the case of a dispute, however, the Arabic version prevails over an employment contract in any other language.

An employment contract can be for either a definite or an indefinite term. A definite-term employment contract should not exceed five years and should not be for less than one year. A definite-term employment contract may be renewed after the end of the initial fixed period by agreement of both parties. But if both the parties continue performance following the expiry date, the contract is considered to be renewed automatically on the same terms, except that the period is indefinite.

The minimum wage for private-sector employees is KD60 a month

An employee of a foreign employer who physically works in Kuwait typically signs two contracts: an employment contract with the foreign (or primary) employer; and an employment contract with the agent (or secondary) employer. The second, or local, contract is an essential part of the work permit application that is signed by the employee and the agent or sponsor of the foreign employer, acting as the local employer on record. For the purposes of Kuwait law, the local employment contract is the official contract that is registered by the agent with the MSAL. It sets out basic details such as name, position, salary and payment category and whether it is a definite or indefinite-term contract. Although the first employment contract outlined here is optional, it is widely used by foreign employers to provide the full foreign employment structure and benefits to employees, while at the same time complying with the Labour Law.

Employment visas

Generally speaking, foreign nationals are not permitted to reside or work in Kuwait without an employment visa (except for dependants whose residency is sponsored by a spouse or parent) and a labour card, which is generally referred to as a Civil ID or Iqama. Employment visas can only be obtained by a Kuwaiti employer. There is no system in Kuwait that allows an individual to obtain an employment visa from a foreign employer by him or herself.

Employees are entitled to an end-of-service payment upon termination or expiration of the contract

An employer (or the Kuwaiti sponsor in the case of the foreign employer) is not permitted to hire expatriate staff without registration at, and authorisation from, MSAL. In addition, an employer in Kuwait may not hire a foreigner who is not under that employer’s sponsorship. These requirements that tie an expatriate’s residency status to his or her employment status are fundamental to the control of the labour force in Kuwait.

Minimum wages

The minimum wage offered to employees in the private sector is KD60 ($215) a month. The Labour Law requires salaries to be paid in Kuwaiti dinars by direct deposit into the Kuwait-based bank account of the employee. Employers must submit the transfer receipts at the MSAL monthly as evidence of compliance with the Labour Law, failing which they risk financial penalties and blacklisting by the MSAL. There is also an electronic network in place between the local banks and the MSAL to ensure salary deposits are made correctly and on time.

Working hours and overtime

The maximum number of working hours in a week is 48, or eight hours a day, unless the Labour Law allows otherwise. During the holy month of Ramadan, working hours are reduced to 36 hours a week. An employee must not work more than five continuous hours a day without a rest period, which need not be more than one hour. Employees are entitled to a weekly paid holiday of not less than 24 hours.

Overtime

An employee may be required to work overtime if there is some urgent necessity or emergency, or by agreement in other cases. Overtime hours are restricted to a maximum of two hours a day and not more than three days a week. Total overtime hours should not exceed more than 180 hours annually, or more than 90 days each year.

An employee working a 48-hour week, with eight hours worked each day, is entitled to additional pay for authorised overtime. He or she is entitled to 125 per cent of basic pay for overtime hours worked on a regular work day, 150 per cent of basic pay for work on a rest day (along with a day off), and 200 per cent of basic pay, along with a day off, for work on a public holiday.

Vacation and sick leave

An employee receives 30 working days of paid annual leave, prorated annually. Employees are ineligible to apply for leave until they have completed at least nine months of service. Public holidays and sick leave are not counted as part of annual leave.

Kuwait’s public holidays are as follows:

• One day for Islamic New Year
• One day for Al-Isra wal Meiraj (Ascension of the Prophet Mohamed)
• Three days for Eid al-Fitr (End of Ramadan Feast)
• One day for Yaum al-Arafat (Standing Day)
• One day for Eid al-Adha (Feast of the Sacrifice)
• One day for Prophet Mohamed’s Birthday
• One day for National Day
• One day for Liberation Day
• One day for New Year’s Day

Employees are entitled to sick leave with pay under the Labour Law, subject to submission of a doctor’s certificate. The employee is entitled to full payment for sick leave for up to 15 days. If he extends his leave for another 10 days, then he is entitled to two-thirds of his salary. If the employee extends for a further 10 days, then he is entitled to half of his salary. If he extends for another 10 days, then he is only entitled to one quarter of his salary. Any further sick leave would be without pay. This entitlement is for the period of one year and not for each time the employee gets sick.

Termination

There are slightly different rules for the termination of definite-term employment contracts and indefinite-term employment contracts.

A definite-term employment contract terminates upon expiration of the definite term. Either the employer or the employee may terminate a definite-term employment contract for cause, but if such termination is found to be without legal justification, the party who terminated the contract must compensate the other party for damage suffered. The amount of compensation cannot exceed the salary of the employee for the remaining period of the contract.

It is extremely hard to form a union due to the difficulty in obtaining approval from the MSAL

An indefinite-term employment contract may be terminated by either party with a prior written notice provided to the other party. Such notice shall be provided at least three months prior to the effective date of termination in the case of employees paid on a monthly basis, and at least one month prior to the effective date of termination for all other employees.

The employer may excuse the employee from work during the period of notice, but must count such period as work service. The employee remains entitled to salary and benefits during this period.

End-of-service payments

Employees are entitled to an end-of-service payment upon termination or expiration of the employment contract. An employee who is paid on a daily, weekly or per-project basis is entitled to an end-of-service payment equal to 10 days’ wages (salary plus cash value of all benefits) for each of the first five years of service, prorated for any partial year, and 15 days’ wages for any following years, also prorated, but in any case not exceeding one year’s wages.

For an employee paid on a monthly basis, the end-of-service payment is 15 days’ wages for each of the first five years of service, prorated for any partial year, and one month’s wages for any following years, also prorated. The total payment is limited to 1.5 years’ wages.

A Kuwaiti employee’s entitlement to his end-of-service payment will be subject to the employer’s right to deduct the amount it has contributed towards its employee’s pension entitlement as prescribed under the Social Insurance Law.

An employee on an indefinite-term contract who terminates his contract by giving the required notice is entitled to half of his end-of-service payment if employed for more than three years but less than five years. If employed for more than five years but less than 10 years, he is entitled to two thirds of the end-of-service payment, and for more than 10 years’ service, he is entitled to the full payment.

Pension

There are no statutorily-required pension schemes in Kuwait for foreign employees. For Kuwaiti citizens, however, there is a compulsory pension scheme prescribed under the Social Insurance Law that is equivalent to 15 per cent of the Kuwaiti employee’s wage. The employer must contribute 10 per cent from the employee’s salary, while the Kuwaiti employee pays the remaining 5 per cent. However, for calculating the contributions to be made, the salary amount against which the contributions are calculated is currently capped at KD2,250 ($8,100) a month.

Compensation

The Labour Law obliges an employer to bear the costs of medical treatment of an employee who sustains injury or becomes sick due to his work. The employee has the right to full salary while undergoing treatment for a work-related injury or an occupational disease. If the period exceeds six months, the employee is entitled to half pay for the period exceeding six months until he is cured with or without disability or dies consequently. The heirs of such injured or deceased employees are entitled to receive compensation that is determined by MSAL and varies according to the circumstances.

Trade Unions

Kuwait’s Constitution provides a general right to Kuwaiti employees to form trade unions. Under the Labour Law, only Kuwaiti national employees are entitled to form unions after fulfilment of several conditions. In practice, however, it is extremely hard to form a union because of the difficulty in obtaining approval from the MSAL.

Health and Safety

The Labour Law sets out several obligations on the Kuwaiti employer in relation to the health and safety of its employees. In addition to the employers’ obligations under the Social Insurance Law for Kuwaiti employees, an employer must ensure that it maintains sufficient insurance to cover its foreign employees against work injuries and occupational diseases.

Mobility of employment

In order to transfer to another employer/sponsor, an expatriate employee who has not worked for three years continuously for the same employer (or one year if locally hired) must obtain a letter of release from his old employer. He is entitled to obtain this after the fulfilment of certain statutory requirements. If the employer refuses to provide such a letter of release, then the employee will have to leave the country and return on a new work permit obtained by the new employer. There is no minimum period that must elapse before an employee can return to Kuwait on a new employment visa.