Kuwait Payroll and Benefits Guide

What global businesses need to know about payroll in Kuwait

Did you know that the Kuwaiti dinar (KWD) is the highest-valued currency in the world, with one dinar being worth approximately £2.55, $3.25 or €3.00? Or that it’s the fifth-richest country in the world by GDP per capita?

Kuwait hasn’t grabbed the business headlines in recent years as other Middle Eastern countries like the United Arab Emirates have. But it has long been a place where global enterprises (especially those involved in energy and finance) have come to trade and take advantage of a relaxed tax system. Kuwait’s population of around 4.8 million is friendly, and it’s an excellent place from which to start or advance an expansion into the region.

Compared to many other countries in the Middle East, Kuwait isn’t quite as welcoming to foreign investment, although attitudes have softened in recent decades. Nonetheless, this is a country where particular care must be taken to respect religious and cultural norms. This guide tells you what you need to know from payroll and employment standpoints.

Getting Started 

Generally speaking, foreign investors and enterprises cannot own more than 49% of any company operating in Kuwait, although there are some limited industries where this rule has been relaxed. Additionally, husbands and wives cannot open limited-liability companies, unless there is at least one more partner involved, and the company manager must be Kuwaiti or from a Gulf Cooperation Council country.

Owners are required to select a physical commercial location before obtaining the proper permits. Once paperwork is submitted to the Ministry of Commerce, authorities including Health, Fire, and other services will come to approve the safety of the facility. 

Companies will also need a local bank account to conduct business. Paperwork and documentation can take time to process in Kuwait, meaning anything from obtaining a license to opening a business account may take longer than expected. Those who are familiar with the ins and outs of the culture may be able to secure a bank account within four weeks.

Employment Considerations

Written contracts for employees are required in Kuwait but may prove difficult to draft if you’re not from the country. Boilerplate clauses are common in contracts and are not allowed to be negotiated, but there are other clauses that must be agreed upon and made clear by both employee and employer. Collective bargaining is technically allowed in Kuwait but almost never invoked in the private sector.

The normal working week in Kuwait (Sunday to Thursday) is between 40 and 48 hours a week. During Ramadan, staff should not work more than six hours a day, although many companies stipulate that non-Muslim staff must continue working full hours during this period. Overtime is capped at two hours a day, and should not be worked on more than three days per week or 90 days per year. Overtime is paid at 125% of the normal rate, rising to 150% plus a day off in lieu at weekends, or 200% plus a day off in lieu on public holidays.

Probation periods can run for anything up to a maximum of 100 days. Notice periods should be three months.

Compensation, Bonuses and Severance

Kuwait’s minimum wage currently stands at KWD 75 per month (approx. £190; $245; €225); in practice, only a few low-paying roles would pay around this level and most people earn substantially more than this. 

The bonus structure in Kuwait is typically based on performance, with most private companies required to give their employees some type of compensation for a satisfactory work history. However, this requirement is not always enforced. 

Severance pay is 15 days of salary for each of the first five years of service, and one month’s salary per year after that. The maximum cap is 18 months of salary.

Tax and Social Security

There is no income tax to pay in Kuwait. Businesses from outside Kuwait or other Gulf Cooperation Council countries are subject to a flat corporation tax rate of 15%. 

Recent plans to introduce VAT into Kuwait have been shelved, and it is not expected to be introduced until at least 2028. In the meantime, there may be some excise taxes introduced on a limited range of products such as tobacco, soft drinks, and some luxury goods.

There are three types of social security contributions in Kuwait. The main social security is paid by employees at 2.5%, while pension contributions are 11.5% by employers and 8% by employees. Both parties pay 0.5% into the unemployment fund.

While the country may have a relaxed tax system, there are several rules for foreign companies that must be followed. For example, they may need to withhold 5% of contractor payments in order to account for any financial liability at the end of the year. Working with a global payroll solution can make it easier to know which funds to reserve so all obligations can be met.

Holidays and Leave

Employees in Kuwait receive a relatively generous 30 working days of paid leave per year, once they have completed one year of service. Muslim employees with at least two years’ service are also entitled to 21 days of leave to perform the Hajj pilgrimage, which all Muslims are required to do once in their lifetime.

There are up to 14 days of official holidays in Kuwait each year, and the exact dates are confirmed by the authorities closer to the time. Holidays on Fridays are normally carried over to the next working day.

Paid maternity leave entitlement is ten weeks, starting 30 days before the due date, and should be paid by employers. Mothers can also take up to four months of additional unpaid maternity leave if they so wish. There is no statutory entitlement for paternity leave, or any further parental leave.

Sick pay is at full salary (paid by employers) for the first 15 days, then reduces to 75%. It continues to taper off to 50% after 25 days, and to 25% after 35 days. Any sick leave beyond 45 days is unpaid.

Bereavement leave is three days for a family member, four months and ten days for a Muslim woman whose husband has died, and 21 days for a non-Muslim woman whose husband has died.

In Summary

Many of Kuwait’s payroll and employment laws are clear and simple to understand. But it’s important to remember that this is a Muslim country and, in a number of areas, non-Muslims will be treated differently. This is just one of the cultural considerations that makes local expertise so valuable, such as a global payroll partner that can help you establish and maintain your compliance.

This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.

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