1. Administering Payroll for Kuwait
  2. Gratuity Calculation for Kuwait

Gratuity Calculation for Kuwait

Employees working in Kuwait are entitled to an additional payment upon termination which is called Gratuity. The entitlement to this payment is accrued during the work relationship.

The gratuity amount to be paid is driven by Kuwaiti labor laws. If you're not following the Kuwait labor laws, you can define your own formula for gratuity processing. Here are the available options:

  • You can define your own formula and create a setup according to the values to be returned to your formula run results. In this scenario, you may not need to use the localization solution for gratuity processing.

  • You can define your own reference formula gratuity processing, which substitutes the gratuity formula defined at the legislative level. If a user-defined formula exists, then the seeded formula runs it.

Let's take a look at the rules that the localization solution uses for gratuity processing:

  • Company type: The gratuity entitlement is based on company type and is captured in Kuwaiti Legal Employer Details.

    Note: For information on Kuwaiti Legal Employer Details, see the section Legal Entity HCM Information for Legal Employers and Payroll Statutory Units in the document Oracle Fusion HRMS (Kuwait): HR Implementation and Functional Considerations on My Oracle Support (MOS).

  • The duration of service and the contract type (fixed or unlimited) determines the number of days of gratuity payment to which the payee is entitled per year of service. These days are retrieved from the calculation information repository setup. Keep in mind that the duration of service can be reduced by unpaid or unauthorized absences. You can get this by creating elements for Unpaid Leave classification and attaching this element to the absence type. If an absence with this newly created absence type is recorded, the Unpaid Leave element's days input value will feed the Leave Without Pay balance. In the Gratuity formula, you can use the Leave Without Pay balance to get the unpaid absences.

  • The base salary for gratuity payment is calculated through the salary formula you selected at the legal employer level.

  • If the person is terminated, company type, contract type and termination initiator are checked before the amount is paid:

    • If the termination initiator is employer, then the complete gratuity accrued is paid to the employee.

    • If the termination initiator is the employee, the application fetches the payment factor using the contract type and period of service. Payment factor is available in the calculation information repository.