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Kuwait indemnity rules in 2026: how it is calculated

Kuwait end of service indemnity explained: the two Article 51 rates by pay basis, the Article 53 resignation scale, why the wage includes allowances and which day divisor to use.

Kuwait's end of service indemnity is set by Law No. 6 of 2010 on labour in the private sector, and nothing in the calculation changed for 2026. What catches people out is not the rate but the three questions sitting around it: which of Article 51's two rates applies to this worker, whether Article 53 cuts the award because they resigned, and what counts as the "wage" the rate is applied to. Get those three right and the arithmetic is simple. Get any one wrong and the figure is wrong by a wide margin.

Article 51 has two rates, not one

Most Kuwait indemnity guides quote a single rate. The statute sets two, and which one applies depends on how the worker is paid, not on what they do.

Monthly paid workers, Article 51(b): fifteen days' wage for each of the first five years of service, then one month's salary for each year after that, with the total capped at one and a half years' wage.

Workers paid by the day, week, piece or hour, Article 51(a): ten days' wage for each of the first five years, then fifteen days' wage for each year after that, with the total capped at one year's wage.

A worker on a daily rate accrues at two thirds of the monthly rate in the first band and half of it afterwards, against a cap a third lower. Applying the monthly rate to a day-paid worker overpays them substantially, and the error grows with every year of service.

Both rates accrue from the first day. Article 51 gives the worker the indemnity "for any part of the year in proportion to the period of service he spent in the work", so there is no qualifying year to clear before anything is owed. That is a real difference from Qatar, where Article 54 requires a completed year before any gratuity arises.

The wage is not the basic salary

This is the most expensive misunderstanding in Kuwait payroll, because it runs the opposite way to the rule next door.

Article 55 defines the wage as the basic salary plus every element stipulated in the contract or the employer's rules, and it expressly brings in allowances, remuneration, commissions, grants, donations and cash privileges received periodically. Article 62 then makes the last salary paid the basis for calculating what the worker is owed.

So a Kuwait indemnity is calculated on total periodic remuneration, not basic pay. In Oman and the UAE the gratuity base is the basic wage alone and allowances sit outside it. Carrying the Omani habit across the border understates a Kuwaiti settlement by however much of the package sits in allowances, which in practice is often a third or more of it.

Article 53: resignation cuts the award on a scale

Article 52 pays the full Article 51 indemnity when the employer terminates the contract, when a limited term contract expires without being renewed, when the contract ends under Articles 48, 49 or 50, and when a female worker resigns because of her marriage within one year of that marriage.

Article 53 covers the worker who ends an unlimited period contract themselves. The award is then scaled by how long they served:

• Under three years: nothing is due.
• Three years to under five: half the Article 51 indemnity.
• Five years to under ten: two thirds.
• Ten years or more: the full amount.

Two consequences are worth holding onto. A worker dismissed by the employer after eighteen months is owed a pro rata indemnity, while a worker who resigns after thirty months is owed nothing at all, on identical service. And the Article 53 fraction applies to the capped Article 51 figure, not to an uncapped one, because Article 53 gives a fraction of "the terminal service indemnity, as stipulated in Article (51)".

The day divisor changes the answer by about 15%

Article 51's first band is written in days while its second band is written in months, so converting a monthly wage into a daily wage decides part of the result. The law does not give a divisor for this purpose. Article 67 does say that a worker's dues are worked out by dividing the salary by the number of actual working days without counting weekly off days, which is where the 26 day month used by Kuwaiti practitioners comes from. A 30 day month is the other common choice.

Take a monthly paid worker on KWD 600 who leaves after exactly five years. They have accrued 75 days of wage.

• At a 26 day month, the daily wage is KWD 23.08 and the indemnity is KWD 1,730.77.
• At a 30 day month, the daily wage is KWD 20.00 and the indemnity is KWD 1,500.00.

That is a difference of KWD 230.77, about 15%, on the same service and the same salary. The smaller divisor produces the larger figure, because a day is worth more of the month. Whichever convention a business adopts, it needs to be the same one in the employment contract, the accrual ledger and the final settlement, and it needs to be written down. The Kuwait indemnity calculator shows the working at both divisors side by side for exactly this reason.

A worked example at ten years

Same worker, KWD 600 a month, monthly paid, ten years of service, 26 day month.

• First five years: 15 days a year x 5 years = 75 days.
• Years six to ten: one month's salary a year x 5 years = 130 days at this divisor.
• Total: 205 days x KWD 23.08 = KWD 4,730.77, which is 7.88 months of wage.
• Cap check: the Article 51(b) ceiling is 18 months, KWD 10,800. Not reached.

If the same worker resigned at seven years instead, the Article 51 figure would be 75 days plus 52 days, KWD 2,930.77, and the Article 53 two thirds band would bring the settlement to KWD 1,953.85.

On the monthly rate the 18 month cap does not begin to bite until roughly twenty years of service, so for most leavers it never applies. It is still worth modelling for long tenured staff, because once it binds, further service adds nothing to the liability.

What employers should do now

• Record each worker's pay basis, monthly or day, week, piece and hour, as a payroll field, because it selects which Article 51 rate applies and no amount of care elsewhere recovers that choice.
• Accrue on total periodic remuneration under Article 55, not basic pay, and keep the list of which allowances are included on file. A package restructure that moves money between basic and allowances does not reduce the liability.
• Capture the reason employment ended, not just the date, since Article 52 and Article 53 pay different amounts on identical service, and a resignation under three years pays nothing.
• Fix one day divisor, record it in the contract, and use it everywhere. Twenty six is the practitioner default and thirty is defensible; switching between them is not.
• Apply the Article 51 cap before the Article 53 fraction, never after.
• Remember Article 51's last paragraph: the Social Security Law applies, and the employer owes the net difference between what it has paid toward the worker's social security subscription and the indemnity due. For Kuwaiti nationals in PIFSS that materially changes the cash figure.

Sources

• Law No. 6 of 2010 on Labour in the Private Sector, English text published by the Public Authority for Manpower, Kuwait. Articles 51, 52, 53, 55, 62 and 67 are the ones quoted above. Read from the archived copy on 19 October 2026 because manpower.gov.kw did not respond.
• The same law as published by ILO NATLEX, a second independent copy of the English text, for anyone who wants to check the wording against a different source.
• Article 51 for the two accrual rates, the pro rata part year, the deduction of debts and the social security offset.
• Article 52 for the four cases that pay the full indemnity, including the marriage case.
• Article 53 for the resignation scale and its year bands.
• Article 55 for the definition of wage, and Article 62 for the last salary paid as the basis.
• Article 67 for dividing salary by actual working days, which is the origin of the 26 day month.

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Running payroll across Kuwait and its neighbours means carrying a different accrual rate, wage base, resignation rule and cap for each country, and applying the right one to every employee without re-deriving it when someone leaves. The Axion People box accrues end of service to each GCC country's own rules, including Kuwait's split by pay basis and its Article 53 scale, alongside payroll, leave and statutory contributions, in Arabic and English.