Indemnity
I need to understand the process of indemnity calculation. I want to know the indemnity in my case.
I will be completing 10 calendar years service by March 2016. I am currently serving the notice period of 3 months, from January 2016. My salary is KD 1,125 but with the allowances I get KD 1,550 per month.
Over the 10 years that I have been in service I have taken a total leave of 13 months. Please advise my indemnity calculation.
Name withheld
Answer: Although you have “completed” 10 years service, things could become complicated for you if your company takes a close look at your annual leave record.
We say this because many companies take the annual leave availed over the service period into account while calculating the indemnity.
A close look at your record reveals that you have taken three months over and above your entitlement of 10 months annual leave for 10 years service. Some companies ignore this fact, but most don’t …
If your company takes these “extra 3 months” into account, you will not be able to complete your 10 years service. These three months will be deducted from your service …so, your service at the end of the three-month notice period with be 9 years 9 months.
This will drastically affect your service because if you don’t complete the 10 years service, you will only get two-thirds of your total indemnity.
But we will work on the scenarios of both the situations (full indemnity and two thirds indemnity) so that you know how much you will get regardless of the method adopted by your company.
But before we go on and work on the calculation of your indemnity, please understand that your indemnity, according to the Kuwait Labor Law, must be calculated according to your remuneration and not on your basic pay.
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 with the use of remuneration ( basic pay plus allowances), should be calculated as follows: Situation 1 Service = 10 years Pay = KD 1,550 (basic pay plus all allowances)
So, for the first 5 years you must get 15 days pay for each year of service = 75 days
But these 75 days must be divided by 26 (working days in a month) = 2.88 months pay For the next 5 years you must get one month’s pay for each year of service = 5 months pay Total indemnity = 7.88 months pay = 7.88 x KD 1,550 = KD 12,214 So, you should get this full indemnity (KD 12,214) if the company accepts your service of 10 years, not considering the extra leave you took. Situation 2 Service = 9.75 years Pay = KD 1,550 ( basic pay plus all allowances)
So, for the first 5 years you must get 15 days pay for each year of service = 75 days
But these 75 days must be divided by 26 (working days in a month) = 2.88 months pay For the next 4.75 years you must get one month’s pay or percentage for each year of service = 4.75 months pay Total indemnity = 7.63 months pay = 7.63 x KD 1,550 = KD 11,826.500 But as your service is less than 10 years you will get two-thirds of the above indemnity = KD 11,826.500 x 2/3 = KD 7,884.300
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