Introduction to payroll in Kuwait

Attracting and retaining top talent in Kuwait requires careful compliance with the country’s local employment legislation. This is especially crucial for financial processes such as payroll. Furthermore, ensuring payroll in Kuwait is compliant with local labor laws is not only a legal responsibility, but also a guarantee to your employees that you’re dedicated to paying them accurately and on time. The hard part is building the compliance team to handle the problem. Many companies large or small won’t have the capacity to build in-house compliance teams to support payroll in Kuwait and many other international markets where they want to build remote teams.

Employee compensation, benefits, and taxes in Kuwait

Let Skuad take that worry off your shoulders. Skuad handles Kuwait’s statutory guidelines for you so that you stay compliant every step of the way, from the details of salary requirements to the specifics of income taxes, from social contributions to benefits administration:

• Income, regional, or corporate taxes
• Social security, health insurance, unemployment benefits, and pension
• Different types of leaves and holiday compensation
• Other taxes and employee deductions

Payroll process in Kuwait

The payroll process consists of three phases and only changes from country to country based on the local labor laws dictating the details within each stage.

Pre-payroll phase

A stage reserved for due diligence, the pre-payroll phase requires a lot of standardization as well as input collection and validation.

Setting up the organization

Each business will approach process building and policy standardization differently. The pre-payroll phase is where important aspects of business that relate to payroll are prepared, including:

Business profile

The profile of your business consists of IDs and registered numbers that you need to maintain. For payroll purposes, these are used for the submission of supporting documentation such as invoices and tax forms, among others.

Work location

In terms of work location, it’s best to customize internal policies based on where the work is performed, especially if there are multiple locations in the same market.

Leave policy

Be clear on the structure and implementation of leave policy as the different types of leaves and their rates will naturally impact wage computation.

Attendance policy

Attendance policy is the foundation of salary calculation, so policy regarding increases and decreases of wages based on attendance needs to be standardized, transparent, and compliant with mandated guidelines. Attendance policy ought to integrate tools used to track hours rendered as well as a process for the collection of documents to support adjustments, such as sick slips, performance memos, and others.

Statutory components

The local labor laws of Kuwait indicate statutory components that you need to incorporate into your payroll process. Always work with your in-house compliance team or solutions provider to stay compliant.

Salary components

Policy relating to salary components typically addresses the fundamentals (such as base rate and mandatory deductions and benefits) and additional considerations. A complete compensation package generally exceeds locally mandated minimums to be appealing to job seekers.

Pay schedule

Employees in Kuwait generally expect to be paid monthly, unless they are day laborers who are paid hourly or are contracted on a weekly wage or project-based basis.

Employee information

The input collection and validation work that occurs during the pre-payroll phase involves a lot of employee information — think reimbursement documentation, sick slips, and more. Policies and standards related to the collection and maintenance of employee information are crucial for due diligence.

Payroll calculation phase

This stage is concerned with no other task other than the actual calculation of wages. Naturally, software automation and other tools can help speed up this phase, as long as they’ve already been set up to function with the prep work performed during the pre-payroll phase.

Post-payroll phase

Salary payments

The primary purpose of the post-payroll phase is salary disbursement, which occurs after you send an invoice to your payment processor.

Payroll accounting

Accounting is an internal process that is highly important for payroll due to how significant a business expense employee wages usually are.

Payroll reporting and compliance

Reporting, on the other hand, is an external process meant primarily for compliance — think tax or social contribution reporting to appropriate government bodies.

Book a demo and our experts at Skuad can show you how to run payroll in Kuwait, from pre-payroll to post-payroll.

Payroll processing in Kuwait

With local labor laws making the established phases of payroll processing even more detailed, companies who want to pay remote workers in Kuwait oftentimes don't have the in-house capability to guarantee compliance. If they do decide to invest the time and effort, that typically draws them away from other strategic business concerns like hiring and distributing pay.

This is why partnering with a payroll processing company is often a good alternative for any business.

Payroll processing company in Kuwait

Running payroll in Kuwait while keeping in step with local labor laws can only be guaranteed with genuine in-country expertise. Skuad offers that legal expertise not only in Kuwait, but also in many other international markets. Let us do the heavy lifting for you.

Payroll management in Kuwait

In addition, Skuad also bundles its services with payroll management. Often required by local labor laws, payroll management involves the maintenance and management of documentation relevant to payroll purposes, from tax forms to invoices and more.

Payroll compliance in Kuwait

Employment regulation in Kuwait is mostly governed by Law No. 6 of 2010, otherwise known as Kuwait’s Private Sector Labor Law. It’s fundamentally a compilation of parts of previous laws, acts, and amendments relevant to labor law codified into one collection.

Kuwait’s Labor Law includes sections relevant to payroll, including guidelines on compensation, working hours, leaves, and more.

Payroll components in Kuwait

Outlined below are some of the most important parts of Kuwait’s local labor laws that pertain to payroll processing. While not exhaustive, this list of payroll components illustrates how much detailed work goes into compliance. Learning about these payroll components will help you better deal with compliance concerns in the future.

Compensation

The minimum wage in Kuwait is currently set at 60 Kuwaiti Dinars or KWD ($195.72) per month. Note that this is only the minimum wage — it's notably lower than the average salary in the country, which is KWD 1,260 ($4,110.15) per month.

Working hours

A work week in Kuwait lasts 48 hours, and a work day is eight hours long. Employees are entitled to an hour-long break after five consecutive hours of work, which is not included in the eight hours mandated.

Overtime laws

As per local labor laws, overtime in Kuwait is capped at two hours a day, six hours per week, or 180 hours annually. Additionally, overtime should not exceed 90 days a year. Overtime hours are paid at 1.25x the base rate for regular hours and 1.5x the base rate for work rendered during public holidays.

Social security

Under the country’s Social Security Law, contributions must be paid monthly by employer and employee, respectively, at 11.5% and 8% of the employee’s monthly salary.

Sick leave

If employees provide a medical report, they are entitled to paid sick leave in the following structure annually:

• Full pay for the first six days
• 75% pay for the next six days
• 50% pay for the next six days
• 25% pay on the next six days
• 0% on the next six days without pay

Parental leave

New mothers are entitled to 30 days of paid maternity leave before their due date and 40 days after. They can also take a total of 100 days of unpaid maternity leave. Kuwait does not have provisions for paternity leave.

Public holidays

As per Kuwait’s local labor laws, employees are entitled to a total of eight paid public holidays:

• Hijri New Year’s Day
• Ascension Day
• Eid Al-fitr (two days)
• Eid Al-adha (two days)
• Birth of the prophet Mohammed
• National Day

Payroll taxes

There are no personal income taxes levied for individuals in Kuwait.

Other laws

Other important laws that may influence payroll processing include probationary periods and termination. In Kuwait, employees may undergo a probationary period capped at 100 days. Contracts under probation are liable to be terminated without notice. Generally, if an employer terminates an indefinite-term contract, notice must be given at least 15 days before termination.

Want to learn more? Request a demo and Skuad’s experts can discuss all the details you need.

Outsourcing Kuwait payroll processing

Navigating local labor laws can be challenging for even the largest companies, and even small businesses that hire remote workers in Kuwait need to adhere to the country’s employment legislation. For payroll processing, which involves financial matters as well as contributions to government bodies, this is even more of a priority.

Fortunately, you have a trusted global HR and payroll processing partner in Skuad. Outsource your payroll in Kuwait to Skuad to ensure complete compliance with local labor laws while also taking advantage of a cutting-edge platform for payroll processing. Better yet, Skuad’s full suite of HR management capabilities can help you build more globally distributed teams when it’s time to scale your business.

Find out how Skuad can help you grow your business internationally now.

Kuwait’s exchange rate currently stands at $1 for every KWD 0.31.