Payroll in Kuwait

Mercans stands ready as your premier partner for superior payroll services, both Managed and SaaS, in Kuwait. Our steadfast commitment to delivering exceptional payroll solutions in Kuwait is unparalleled. Drawing on years of expertise in the payroll sector, Mercans guarantees precise and compliant payroll services, solidifying our status as the preferred option for businesses of every scale. Rely on Mercans for punctual and accurate payroll processing, coupled with the convenience of conducting multi-currency transactions within the Kuwaiti market. Serving as your dedicated local payroll provider in Kuwait, we boast a team of in-country payroll specialists equipped with extensive knowledge of local regulations, providing comprehensive assistance for a seamless payroll experience tailored precisely to your business requirements.

Everything you need to know before running payroll in Kuwait

Payroll Requirements

In Kuwait, payroll regulations are dictated by the Kuwait Labor Law. While there is no specific guidance regarding payslips, it is customary for companies to provide employees with monthly payslips. Additionally, having a local employment contract and arranging for salary transfers are mandatory in Kuwait.

Wages can be determined based on various factors such as hourly, daily, weekly, monthly, or project-based rates. According to the law, wages must be paid on official work days and at the workplace, using the legally circulated currency. The regulations Astipulate:

• Monthly-paid employees must receive their wages at least once a month.
• Employees paid hourly, daily, weekly, or on a project basis must be paid at least once every two weeks.
• Employers are prohibited from transferring monthly-paid employees to hourly or weekly wage categories without terminating the existing contract, signing a new one, and updating the records with the Ministry of Social Affairs and Labor (MOSAL).

Working Hours

Working time in Kuwait average 40 to 48 hours per week and average five-day working week. Normal working hours are from 9am to 5pm on weekdays. Employees can take a 30 minute break, if they are working more than 5 hours a day.

Overtime Calculation in Kuwait

First, determine your hourly rate by following this calculation:

Salary ÷ 26 Days per month = Rate per day ÷ 8 hrs per day = Your hourly rate

Let’s Calculate your overtime!

• Normal Day: Total overtime × 1.25 × rate per hour = Your overtime pay
• Canceled Shift: As this shift is cancelled, your total duty hours will be counted as overtime. Total hours of duty × 1.5 × rate per hour = Your overtime pay
• Public Holidays: Double pay

Minimum Wages

Kuwait’s minimum wage is 75 Kuwaiti dinars per month

13th Month Salary

In Kuwaiti law, there are no regulations stipulating the provision of a 13th salary.

Starters

• Copy of nationality certificate.
• Copy of birth certificate or age assessment certificate.
• Copy of employment certificate for government authorities.
• Copy of Civil Identity Card.
• Copy of the document confirming the validity of the license or authorization related to the intended activity, completion status, or any pending charges that could impact the registration of insured individuals at the institution.
• Certificate from the Public Authority of Manpower confirming the registration of the insured individual.

Departures

Documents Needed for the Deregistration of Departing Employees:

• Submission of the end of service notice on the specifically designated form to the Public Institution for Social Security within ten days following the end of service.
• Copy of the service termination certificate for governmental authorities.

How many days after the Last Day of Employment Should the Final Settlement be Paid?

The final settlement should be paid after the employee signs the residency cancellation.

Company Formation in Kuwait

This service facilitates the establishment of a new company in Kuwait.

Eligibility or Criteria

• The company must consist of at least two individuals or more.
• Partners must possess clear criminal records and must not have any convictions.
• The share of non-Kuwaiti partners must not exceed 49%.
• Foreign partners must hold a valid residency visa.
• The managing partner must not be a government employee.
• Each partner must provide proof of payment for their share in the capital.
• A limited liability company cannot be established solely between a husband and a wife, unless a third partner is involved.
• The manager must be either Kuwaiti or from GCC countries.

Required Documents

• Copies of civil IDs of the partners and the manager.
• Capital certificate for joint ventures and limited partnerships; for limited liability companies, the capital is reserved during the establishment period.
• Certificate from the Public Institution for Social Security for the manager.
• Lease contract and receipt.
• Certificate of the address automatic number from the Public Authority of Civil Information.
• Certificate of sponsor’s approval for the foreigner to enter into partnership with others approved by the Kuwait Chamber of Commerce and Industry, along with signature authorization of the sponsor, work permit for the foreign partner, and transferring the manager’s residence to the company.

Procedures

• Visit the Department of Partnerships at the Ministry of Commerce and Industry, block 2, ground floor, and submit the required documents.
• Submit the application to the Department at the Ministries Complex along with the necessary documents.
• Choose the trade name of the company.
• Relevant entities, including the Kuwait Municipality and the Ministry of Interior, will be contacted to verify the location and obtain a certificate of police record for the partners.
• Obtain any additional approvals required before issuing the license (refer to the activity guide list).
• Reserve the capital of the limited liability company through the bank.
• Register the company with the Ministry of Justice.
• After registering the contract and submitting it to the Ministry, the license will be issued, and a fee of 30 dinars must be paid.

Fees

• 0 KD (Variable Fees)
• 30 KD (Fixed Fees)

Payroll Compliance in Kuwait

In Kuwait, employers are obligated to submit the following statutory filings. Mercans assists you in completing the necessary filings as per the Kuwait local laws.

Statutory Filings

Report 55

• Ensure all insured employees salary information is reflected in the report.
• Prepare and amend all new changes for Kuwaiti employees and residents.
• Log on to the PIFSS site and submit the report

Report 103

• Populate all data related to hiring new Kuwait employee or
• Populate all data related to terminating Kuwait employee on the report
• Log on to the PIFSS site and submit the report to register or deregister the employees

Report 166

• Ensure all insured employees salary information is reflected in the report
• Calculate due amounts to be paid by cheque or online.
• Log on to the PIFSS site and submit the report as well as make payment.

Report 168

• Once there is a salary change, populate the report with the affected employee details.
• Log on to the PIFSS site and submit the report
• Once employee has an accident or injuries, the employer must complete the form specified by a doctor and send them along with doctor’s report to insurance company

Disabled Workers Report

• Once employee has an accident or injuries, the employer must complete the form specified by a doctor and send them along with doctor’s report to insurance company

Payroll Taxes in Kuwait

Social Security in Kuwait

Kuwaiti employees contribute monthly to the Social Security Law, with the employer paying 11.5% and the employee 8% of their salary, capped at 2,750 Kuwaiti dinars (KWD) per month. Benefits include pensions and allowances for disability, sickness, and death.

Effective January 1, 2015, the employee’s contribution will increase by 2.5% of their monthly salary, capped at KWD 1,500 per month.

Expatriate workers in Kuwait currently have no social security obligations. However, the Kuwait Labour Law mandates terminal indemnity payments for those who complete three years of service, calculated at 15 days’ pay per year for the first three years and 2/3 month’s pay per year thereafter.

Personal Income Taxes in Kuwait

Kuwaiti employees make monthly contributions to the Social Security Law, with the employer covering 11.5% and the employee 8% of their salary, subject to a maximum of 2,750 Kuwaiti dinars (KWD) per month. These contributions provide benefits such as pensions and allowances for disability, sickness, and death.

Starting from January 1, 2015, the employee’s contribution will rise by 2.5% of their monthly salary, capped at KWD 1,500 per month.

Expatriate workers in Kuwait are currently exempt from social security obligations. Nevertheless, according to the Kuwait Labour Law, those who complete three years of service are entitled to terminal indemnity payments. These payments are calculated at 15 days’ pay per year for the initial three years and 2/3 month’s pay per year thereafter.

End-of-Service Calculation Rules

• Resignation: An employee who resigns before completing three years with the employer is not entitled to any indemnity. However, if the employee completes three to five years and then resigns, they are eligible for half of the indemnity. For those who complete five to ten years, two-thirds of the indemnity is granted. If an employee completes ten years of service before resigning, they are entitled to full indemnity, which equals one-month salary for each year worked, as stipulated in Article 51 of the Labor Law in the private sector, capped at 18 months.
• Termination: Upon termination, the worker is entitled to 15 days of remuneration for each of the first five years of service, and one month of remuneration for every year thereafter. The total end-of-service benefit should not exceed one-and-a-half years of remuneration for monthly-paid employees.
• Standard Pro-rata Calculation Formula for Partial Periods: Contributions are calculated for the full month in which insurance commenced and are not prorated for partial months except when the insured person’s service terminates on the last day of the month, in which case contributions are due for the full month.
• Daily Rate Calculation Formula for Leave Balance Payout: The leave balance payout is calculated based on the daily rate, derived from the sum of basic salary and fixed allowances, divided by 26 days, multiplied by the number of leave balance days. This calculation excludes the transportation allowance from the leave salary.
• Payslips: It is not mandatory to issue payslips according to the law.

Statutory Leaves in Kuwait

Annual Leave: Employees are entitled to 30 calendar days of annual leave per year.

Sick Leave: Employees can take up to 75 days of sick leave per year, with the following payment structure:

• Next 10 Days: Three-quarters of the pay
• Next 10 Days: Half pay
• Next 10 Days: Quarter pay
• Next 30 Days: Without Pay

Maternity Leave: Maternity leave spans 70 days.

Hajj Leave: Employees are granted 21 days of Hajj leave.

Compassionate Leave: Employees can take up to 3 days of compassionate leave.

Iddah Leave: Iddah leave extends to 130 days.

Benefits of Payroll Outsourcing in Kuwait

For our Payroll services in Kuwait, we’ve strategically implemented a robust tool that seamlessly operates across diverse countries, ensuring regional uniformity and meeting our clients’ specific requirements. This tool is aligned with our commitment to delivering:

• Stringent Safety Standards: Incorporating industry-leading security measures to protect sensitive data. Our ISO 27001 and ISAE3402 certifications ensure strict adherence to information security protocols.
• Consistent and Sustainable Performance: Ensuring reliable and sustainable performance to meet the dynamic demands of payroll services.
• Flexibility and Scalability: Offering flexibility and scalability to accommodate evolving client needs and adapt to changing business environments.
• Collaborative Cloud Platform: Utilizing a Cloud-based platform that fosters collaborative work, promoting efficiency and accessibility across teams.

The incorporation of ISO 27001 and ISAE3402 certifications signifies our dedication to the highest standards of information security and operational integrity.

Key Features of Electronic Payroll Support:

• Complete Traceability: Enabling a traceable process from generation to transmission and validation. Each step is meticulously validated by our expert human team, ensuring consistency between stored information and that accepted by regulatory authorities.
• Enhanced Human Resources Efficiency: Streamlining the payroll settlement process to enhance the efficiency of the human resources area. Significant time savings are achieved through the optimized use of our electronic payroll support.
• Certified Suppliers: Partnering with certified suppliers who uphold the highest standards of information security with ISO 27001 certification.

Secure data transmission processes are facilitated through these certified suppliers, bolstering the integrity of our services.

Mercans, with its adherence to ISO 27001 and ISAE3402 certifications, ensures that our clients not only benefit from a state-of-the-art payroll tool but also enjoy the peace of mind that comes with top-tier information security standards.

Payroll Solutions in Kuwait

Unlock the potential of seamless payroll processing in Kuwait with Mercans’ Global Payroll Solutions. Our adaptable models guarantee local compliance, facilitate multi-currency transactions, and integrate with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems. Ensuring accurate payments has never been easier.

Discover Our Versatile Models:

• SaaS (Software as a Service): Customized for enterprise businesses managing payroll across multiple countries, addressing intricate complexities arising from diverse data points, locations, currencies, and languages. Our SaaS model streamlines operations for optimal efficiency.
• Managed Services: Tailored for mid-sized and large enterprise businesses, our Managed Services model serves those handling multi-country payroll. It offers on-demand HR expertise, ensuring security, reliability, and compliance across the board.
• HRMS (Human Resource Management System): Ideal for mid to large businesses in expansion mode, our HRMS model provides a comprehensive suite of functionalities, including payroll and benefits management. Businesses can select specific features to suit their needs, ensuring a tailored and efficient solution.

Streamline Payroll with Mercans’ Technology and Integrations

• Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowess here
• Integrations: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integration here.
• Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here.