What Are Cap Rules in Kuwait Labor Law? In Kuwait’s Private Sector Labor Law (Law No. 6 of 2010), Article 51 introduces a clear maximum, or “cap,” on end-of-service indemnity payouts.
Employees are eligible for 15 days’ pay per year for the first five years, and one month’s pay for each additional year. However, regardless of the total calculated entitlement, the law mandates that the final indemnity paid to any employee cannot exceed 18 months’ salary.
This legal limit is known as the “Cap Rule” and is designed to provide both employee security and employer cost certainty, making it a vital feature for expatriates and local workers in Kuwait searching for clear guidance on their end-of-service benefits.
What is “Before Cap” and How Is It Calculated?
“Before Cap” refers to the gross or raw indemnity amount based solely on an employee’s years, months, and days of service, multiplied by the appropriate salary rate as set by the law (15 or 30 days per year, depending on duration).
👉 For example, a long-term employee may accrue a much higher entitlement from this calculation, especially if their length of service is considerable.
However, this number is theoretical as it does not account for the legal limits of the cap.
What is “After Cap” and Why Is It Important?
“After Cap” represents the actual, legal indemnity that the employer is obligated to pay, factoring in Article 51’s 18-month salary limit. Even if the computed entitlement (“Before Cap”) is extremely high—say, KD 20,000 for an employee earning KD 300/month over 25 years—the employer, by law, must only pay KD 5,400 (KD 300 x 18 months) due to the cap.
This ensures fairness and legal compliance, and protects both parties from disputes at the close of employment contracts.
Legal Reference: Article 51 of Kuwait Labor Law
Kuwait Labor Law – Article 51 states:
“The worker shall be entitled to a lump sum indemnity for the period of his service at the rate of 15 days’ wages for each year of the first five years and one month’s wages for every year thereafter.
The indemnity shall not exceed one and a half year’s wages.” In simpler terms, “one and a half year’s wages” is the cap, equal to 18 months’ salary.
Why Is This Important For Your Indemnity Calculator?
To ensure transparency and user clarity, your calculator should display both:
📌 Total After Cap Rules: The final, legal amount due, respecting the 18-month salary cap and including adjustments for unpaid leave or resignation percentages.
Tags: Kuwait Labor Law, indemnity cap, Article 51, end-of-service benefits, indemnity calculator, 18 months’ salary, before cap, after cap, expatriate rights.