What Severance Pay Rules Must Employers Follow in Kuwait?

Which Employees Qualify for Severance Pay?

• Private-sector employees covered by Kuwait Labor Law No. 6 of 2010 whose contracts end without proven gross misconduct.
• Employees on indefinite contracts who are terminated by the employer for reasons other than those listed as serious misconduct in the law.
• Employees on fixed-term contracts that are not renewed or are ended early by the employer without a lawful cause.
• Kuwaiti and expatriate employees alike, provided they are not excluded categories such as domestic workers or those under special regimes.
• Employees who resign after at least three years of continuous service, who may be entitled to a reduced end-of-service benefit.
• Employees whose employment ends due to the employer’s closure, bankruptcy, or similar reasons not attributable to the employee.

What Are the Legal Timelines for Paying Severance?

In Kuwait, the Labor Law requires you to settle all end-of-service benefits, including severance, promptly upon termination. In practice, authorities expect payment on the employee’s final working day or within a very short period afterward, often interpreted as a few days. Delays can trigger complaints to the Public Authority for Manpower and may complicate work permit cancellations or transfers. Your company should therefore build internal processes to calculate and approve severance as soon as notice is given. Aim to have final pay, unused leave, and severance ready no later than the last day of employment and document the employee’s receipt in writing.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Kuwait, you risk financial penalties, administrative action, and potential court claims. The Ministry of Justice and the Public Authority for Manpower can investigate complaints, and courts may award unpaid benefits plus compensation and legal costs. Non-compliance can also affect your company’s ability to sponsor visas or obtain government approvals.

• Administrative fines may be imposed for breaching Labor Law obligations related to end-of-service benefits.
• Courts can order payment of all outstanding severance plus statutory entitlements and legal costs.
• You may face compensation awards for wrongful termination or delayed payment of benefits.
• Repeated violations can damage your company’s reputation with regulators and employees.
• Non-compliance can complicate work permit renewals, transfers, or future hiring approvals.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as a provider offering services via https://www.playroll.com/employer-of-record does not remove the need to follow Kuwait’s severance rules. Under Kuwaiti practice, the legal employer on record is generally responsible for calculating and paying end-of-service benefits in line with the Labor Law. However, your company can still face commercial, reputational, or contractual exposure if the EOR mishandles terminations. You should ensure your EOR contract clearly allocates liability for severance, sets service standards for timelines and calculations, and requires the EOR to maintain compliant payroll records. Regular audits and coordinated offboarding processes help ensure employees are paid correctly and disputes are minimized.

Be 100 Percent Compliant in Offering Severance with Playroll

Kuwait’s end-of-service rules can feel complex, especially when you are juggling different contract types, expatriate staff, and evolving regulatory guidance. Playroll helps your team operationalize these rules by standardizing how you capture start dates, salary components, and service periods so severance calculations are consistent and auditable. With clear workflows, you can trigger severance estimates as soon as a termination is contemplated, giving finance and HR time to budget and review.

By partnering with Playroll, your company can centralize documentation, automate reminders for payment deadlines, and maintain a clean audit trail for every termination. Our approach is designed to align with Kuwait Labor Law while giving you practical dashboards and reports your leadership can actually use. That means fewer surprises at exit, smoother interactions with authorities, and a better offboarding experience for employees leaving your organization.