What Severance Pay Rules Must Employers Follow in Oman?

Which Employees Qualify for Severance Pay?

• Private-sector employees working under an indefinite or fixed-term contract who are not enrolled in the Omani social insurance pension scheme generally qualify for end-of-service gratuity.
• Expatriate employees typically qualify for statutory gratuity, as they are usually outside the mandatory state pension system.
• Omani nationals may qualify only where they are not covered by the Social Protection Fund or another approved pension plan.
• Employees must usually complete at least one full year of continuous service with your company to earn statutory severance benefits.
• Employees dismissed for reasons other than gross misconduct, such as redundancy or business closure, remain entitled to accrued gratuity.
• Workers terminated for serious misconduct proven under the Labour Law may forfeit some or all of their severance rights, depending on the circumstances.

What Are the Legal Timelines for Paying Severance?

In Oman, the Labour Law requires you to settle all final dues, including end-of-service gratuity, promptly upon termination. In practice, this means paying severance on or very shortly after the employee’s last working day, once notice and leave balances are reconciled. Many employers target payment within 7 to 14 days to demonstrate good faith and avoid disputes. You should document the calculation, obtain written acknowledgment from the employee, and keep payroll records in case of inspection or a labour complaint. Delays or partial payments can trigger claims before the Ministry of Labour and expose your company to penalties and back-pay orders.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Oman, you risk both financial and regulatory consequences. The Ministry of Labour can investigate complaints, order back payment of any shortfall, and impose fines for non-compliance with the Labour Law. Persistent or intentional breaches can also damage your ability to sponsor visas and win government work, and may escalate into court proceedings.

• Authorities can order you to pay all outstanding gratuity plus any underpaid amounts.
• Administrative fines may be imposed for each violation or affected employee.
• Non-compliance can lead to labour court cases, legal costs, and enforcement orders.
• Reputational damage can affect recruitment, retention, and government relationships.
• Repeat violations may trigger closer monitoring or restrictions on your operations.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (https://www.playroll.com/employer-of-record) in Oman does not remove the underlying obligation to respect Omani Labour Law severance rules. Legally, the EOR is usually the formal employer on paper, responsible for calculating and paying end-of-service gratuity. However, your company, as the client, typically bears the commercial and contractual cost of those payments and any penalties. If the EOR mishandles severance, authorities may still look at the real working relationship and hold both parties accountable. You should ensure your EOR contract clearly allocates liability, requires strict legal compliance, and gives you visibility into how severance is calculated and funded.

Be 100 Percent Compliant in Offering Severance with Playroll

With Playroll, your company can manage Omani severance obligations with confidence, even when you are hiring your first employee in the country. Our team tracks changes to Omani Labour Law, including end-of-service gratuity rules, and builds those requirements directly into employment contracts and payroll workflows. You get clear visibility into accrued liabilities, termination cost estimates, and the exact calculations used for each employee.

Playroll’s global platform lets your HR and finance teams standardize offboarding processes while still respecting local rules in Oman. We coordinate with in-country experts to ensure final settlements, including gratuity, unused leave, and notice pay, are processed on time and documented correctly. That means fewer disputes, smoother exits for your team members, and a much lower risk of fines or legal challenges for your company.