Kuwait

Employer of Record in Kuwait

Kuwait provides a more compelling business expansion alternative in the Middle East. The talented workforce and favorable business climate make it an attractive destination. 

However, following compliance requirements, you may find it challenging to hire employees in Kuwait. 

Here, an employer of record in Kuwait or Kuwait EOR can streamline your hiring from onboarding to termination, including the payroll process in Kuwait, and allow you to focus on growing your business in Kuwait. 

Skuad’s Kuwait EOR (Employer of Record) solution helps your business expand into Kuwait without needing to set up an entity. 

Our unified and automated global HR platform enables you to expedite the onboarding of your remote team, manage their payroll and benefits, and ensure compliance with local regulations. 

With the assistance of our international network, we help you streamline the global expansion process. Contact Skuad.

For a deeper perspective into the practicalities of hiring in Kuwait, we have discussed in detail Kuwait's labor law and its various provisions. 

Further, you can explore Skuad's Employee Cost Calculator to estimate the total cost of hiring, factoring in salary, benefits, taxes, and employer contributions.

Kuwait at a Glance

• Official Name: State of Kuwait
• Location: Southwest Asia
• Population: 4.3 million
• Currency: KWD Kuwaiti Dinar
• Capital city: Kuwait City
• Languages: Arabic (Official), English‍
• GDP:USD 162.65 billion

Hiring in Kuwait

Companies looking to hire employees in Kuwait must be familiar with Kuwait’s Labor Law. 

Kuwait's significant working population comprises expatriates, so there are various aspects of employment laws. 

Every citizen has a right to duty, and they should not be discriminated against on any ground. The two most critical elements are work residency for employees and employment contracts.

Companies looking to hire knowledge workers tend to hire contractors and often use Job Search portals like Bayt and Naukrigulf. 

These portals help find a pool of talent available in Kuwait, but they don’t help much in the overall hiring and onboarding process. In addition, if companies are not compliant, they may risk penalties and delays that can affect their business.

Engaging and paying foreign talent via a global EOR solution like Skuad is significantly cheaper than in-house HR. 

Skuad, as an Employer of Record in Kuwait, can help you hire in Kuwait without setting up a legal entity; this eliminates most of the legal and financial risks. Additionally, you will be flexible in adding more projects to expand your business.

Incorporation: Setting Up a Subsidiary in Kuwait

Many factors impact setting up a Subsidiary in Kuwait. For example, different regions and cities in Kuwait can have their subsidiary laws, which will affect how you incorporate them.

Another important aspect is the type of subsidiary you intend to set up. 

You can incorporate several different entities, including a shareholding company, limited liability company (LLC), branch, or partnership. 

Each option will have other Kuwait subsidiary laws and restrict your activity level in the country. 

Most companies choose to incorporate LLCs because it gives them the most freedom to operate, while a branch is the most restrictive entity type.

Pros and cons of setting up a company in Kuwait

These unique advantages, combined with the general benefits mentioned previously, make Kuwait an attractive destination for businesses seeking to expand their operations in the Middle East.

Pros:

• There is no corporate tax in Kuwait levied on companies that are fully owned by Kuwaiti or GCC nationals.
• The Kuwaiti government has implemented various initiatives to attract foreign investment, including streamlined business processes and incentives for specific industries.
• Kuwait is a predominantly Muslim country, and its business environment is generally Sharia-compliant. This can attract businesses seeking to cater to the Islamic market or adhere to Islamic principles.
• Kuwait has a relatively well-educated and skilled workforce. Thus, improving employer branding can help retain skilled talent in the long term. 

While setting up a company in Kuwait can offer significant benefits, it is important to carefully consider the potential challenges and risks: 

Cons:

• Foreign companies may need to partner with a local sponsor to avoid company taxes in Kuwait. 
• Kuwait's labor laws differ from those in other countries. To avoid legal issues, you need to ensure compliance with these laws.
• While Kuwait offers opportunities for regional expansion, its domestic market is relatively small compared to other countries.
• Moreover, understanding and adapting to local cultural norms and business practices can be important for success in Kuwait.

Steps for company formation in Kuwait

• Register at the Department of Companies of the Ministry of Commerce and Industry (MOCI)
• Reserve a unique company name
• Obtain a letter addressed to the bank from the Department of Companies
• Deposit your capital at the bank
• Inspection of your company offices by the municipality
• Approval of a memorandum of association from the Department of Companies
• Commercial Registry or the Company
• Issuance of commercial license from the Department of Companies
• Registration with the Kuwait Chamber of Commerce and Industry
• Registration with the Public Authority for Civil Information (PACI)
• Complete Registration at the Ministry of Labor and Social Affairs

Setting up a Subsidiary in Kuwait can be a complex process for a foreign company. Skuad, as an Employer of Record, has a team of lawyers, accountants, and consultants who can help handle the process with ease.

Outsourcing employment and expansion through an Employer of Record in Kuwait

When you decide to expand into Kuwait as an organization, you also need to determine the path you want to take - whether you wish to build an in-house team or accept an EOR to manage payroll and employee lifecycle.

EOR Kuwait services

Skuad’s Kuwait Employer of Record (Kuwait EOR) solution makes it easier and faster for businesses to expand into Kuwait. 

Taking the EOR route ensures smooth and compliant payroll processing and other employment responsibilities without any entity establishment. 

Skuad can help you manage monthly payroll, contracts, work permits, taxation, etc., in Kuwait for your employees.

General EOR service terms

Kuwait Employment Agreements  & Onboarding Process

Onboarding is the process through which new employees are introduced into a company. It involves providing them with essential information about the company, its culture, and their specific roles. 

The goal of effective onboarding is to ensure that new hires feel welcomed, informed, and prepared to contribute to the organization.

How to successfully onboard employees in Kuwait

Onboarding is crucial for integrating new employees into your company culture and ensuring their success. In Kuwait, there are specific cultural and legal factors to consider when developing an effective onboarding strategy:

1. Be mindful of Islamic customs and values, especially when dealing with female employees or during religious holidays.
2. Consider providing Arabic language training or resources to help new employees communicate effectively with Kuwaiti colleagues and clients.
3. Ensure that all necessary work permits and visas are obtained for foreign employees.
4. Moreover, familiarize yourself with Kuwait's labor laws, including working hours, overtime, and minimum wage regulations.
5. Further, ensure that the HR department is available to support and assist new employees.

Types of employment agreements in Kuwait

Here is a standard two-party recruitment/employment contracts in Kuwait:

• Permanent (Indefinite) Contracts: These are open-ended agreements for long-term employment. They have no fixed duration and can be terminated only under specific circumstances outlined in the Kuwait Labor Law or the employment contract.
• Temporary (Fixed-term) Contracts: These are contracts for a specific duration, typically up to five years for expatriates. They automatically terminate at the end of the agreed-upon period unless renewed.

To draft a suitable employment agreement for hiring in Kuwait, refer to this sample letter of agreement between employer and employee. 

Onboarding checklist

• Prepare the workspace and ensure all necessary equipment is ready.
• Send a welcome email with the start date and required forms.
• Conduct a welcome meeting to introduce the new hire to the team.
• Provide an office tour, highlighting key areas and facilities.
• Organize role-specific training sessions and hold regular check-ins.
• Assess the onboarding experience and explore opportunities for career growth.

Tax Rate in Kuwait

Kuwait VAT Tax

• Kuwait has not started using a Value Added Tax (VAT) system, even though it agreed with other Gulf Cooperation Council (GCC) countries to implement VAT. 
• Kuwait signed the GCC VAT agreement in 2017, but introducing VAT has been delayed several times. It is now one of the last two GCC countries, along with Qatar, that hasn’t introduced VAT yet. 
• The planned VAT rate is 5%, but it has faced delays due to legal issues and public opposition.

Purpose of Kuwait tax clearance certificate 

The Tax Clearance Certificate (TCC) and Tax Retention Release Letter (TRRL) are essential documents in Kuwait for verifying tax compliance and facilitating business and financial transactions. They serve the following purposes:

Tax Clearance Certificate (TCC):

• A TCC verifies that a company or individual has paid all their outstanding taxes to the Kuwaiti government.
• Many business activities in Kuwait require a TCC, such as obtaining a business license, registering a property, or bidding on government contracts.
• Banks and other financial institutions often require a TCC before approving loans, opening bank accounts, or processing financial transfers.

Tax Retention Release Letter (TRRL):

• A TRRL is issued by the Kuwaiti tax authorities to authorize the release of taxes that have been withheld from a company's income or payments.
• TRRLs are necessary for companies to settle their financial obligations, such as paying suppliers or contractors.
• By requiring a TRRL, the Kuwaiti government helps ensure that companies comply with their tax obligations.

Legal Compliance for Hiring in Kuwait

Hiring employees in Kuwait requires adherence to specific legal regulations. Here are some key aspects to consider:

Kuwait employment law

Kuwait employment laws apply to both foreign nationals and citizens. However, there are some differences in their entitlements.

To set up a local entity in Kuwait, a company must be aware of all aspects of Kuwait’s employment regulations. Although they may look somewhat complex and confusing, they are not much different from the employment regulations of many other countries. Nevertheless, to minimize or mitigate challenges that may arise for companies looking to set up a local office, it is advisable to partner with a local payroll provider who is well aware of Kuwait’s labor laws for both local and international employees.

Contractors vs. full-time employees

The decision to keep contractors versus hiring full-time employees is of great importance while expanding globally. Contractors should be hired for short-term projects and work where high supervision is not needed. However, if you have a role that is part of the company’s core business and requires a long-term association, you should hire a full-time employee. 

For example, industries dealing in knowledge workers, such as IT Solutions, Services, Business Intelligence, and Software Development, may be best suited to hire contractual employees to utilize the best talent available at a much lesser cost.

Fines/penalties for Kuwait labor law non-compliance

You can face fines, imprisonment, or both for non-compliance with labor laws in Kuwait. The severity of the penalty depends on the nature of the violation: 

• Fines for labor law violations typically range from 100 to 1,000 Kuwaiti Dinars (KWD) per violation. Repeated violations can lead to penalties of up to 5,000 KWD per violation. This includes misclassifying employees as contractors. 
• For certain violations, you can face imprisonment for up to three years. Repeated offenses can result in the closure of the business. 
• Moreover, if you bring in expatriate employees and then fail to provide them with employment, you may be fined and must bear the cost of the employee's repatriation.
• You will be fined for not maintaining safe working conditions in Kuwait. The Ministry of Labor in Kuwait can suspend the use of specific machines until the violation is remedied. 

IP protection in Kuwait

The Kuwait Ministry of Commerce and Industry oversees the patent, industrial design, trademark, and copyright systems.

You can be liable for civil or criminal prosecution if you infringe upon any IP rights. You can also try to resolve the issue directly with the infringer through mediation, a cease and desist letter, or a licensing arrangement.

Types of Kuwait Work Visas

It is common to employ foreign workers in Kuwait, but it requires adherence to Kuwait work visa regulations and procedures. Here are some key points to consider:

Work Permit in Kuwait

To live and work in Kuwait, foreigners shall obtain a residency visa, which is issued based on valid employment. The employer needs to apply for a Kuwait work permit on behalf of the expatriate employee. The Private Sector Kuwait Labor Law has specific requirements for employers. You must keep a file for each foreign employee that includes copies of their:

• Work Permit
• Kuwaiti Civil ID
• Documents related to sick and annual leave in Kuwait
• Overtime hours
• Work injuries or diseases, if applicable
• Penalties
• End of service date and reasons for leaving the job
• Employment contract
• Copies of receipts that an employee returns all documents, tools, and certificates after employment.

Payroll in Kuwait

Let’s learn about how you can pay employees in Kuwait easily:

How to pay employees in Kuwait

To set up Kuwait payroll and manage corporate tax in Kuwait, you need to be aware of the rules, which vary from one category to another. 

The first and foremost thing you must consider is whether you want to employ foreign professionals or locals. 

As a foreign company, you must be aware of and adhere to local tax laws like income tax, business tax, Kuwait withholding tax, employee compensation insurance, and social security costs.

Best way to pay employees in Kuwait

There are two ways of doing it

• Set up an in-house team to manage the payroll in Kuwait.
• Hire a local payroll specialist, who will simplify management and ensure complete compliance with Kuwaiti laws.

Companies can’t set up their payroll in Kuwait unless they have a registered subsidiary, which means it could take a long time before hiring your first employee. 

However, as the Kuwait Employer of Record, Skuad offers excellent payroll services in Kuwait in addition to compliance with Kuwait employment law to make hiring easier & quicker.

Benefits & Compensation Per Labor Law in Kuwait

Here are some key aspects of statutory Kuwait employee benefits and compensation:

Worker Rights Per Kuwait Labor Law 2024

The Kuwait Labor Law of 2024 outlines various rights for workers. Here are some key provisions:

Remote & Hybrid Work in Kuwait

The labor laws in Kuwait have legalized remote work in the private sector. 

You can set up an HR policy for hiring remote employees based on our remote work readiness checklist for maximum compliance. 

Here are some key considerations: 

1. Determine which positions are suitable for remote work based on job functions and requirements.
2. Establish criteria for employees who can work remotely, such as experience, performance, and reliability.
3. Determine whether the company will reimburse employees for home office expenses like internet, utilities, or office supplies.
4. Implement a system for tracking employee hours, such as time-tracking software or timesheets.
5. Determine the frequency of team meetings and how they will be conducted (e.g., in-person, virtual).
6. Determine the frequency and method of performance reviews for remote employees.
7. Implement robust data security measures to protect sensitive information.
8. Outline a procedure for resolving disputes or conflicts that may arise between the company and remote employees.
9. Ensure that remote workers are treated fairly and equitably compared to on-site employees.

Check our full remote work readiness checklist here.

Kuwait Employee Salary

The Ministry of Labor in Kuwait enforces minimum wage regulations, and you must pay your employees above and beyond the Kuwaiti minimum wage standards. 

In 2024, the minimum wage in Kuwait is 75 Kuwaiti Dinars (KWD) per month for private sector employees. Considering a 48-hour week, Kuwait wages per hour amount to 0.39 Kuwaiti Dinars (KWD). 

You can benchmark your employees' salaries against Kuwait's average salary for better retention. Our salary insights tool can help you estimate the normal salary in Kuwait.

Leave Policy in Kuwait

You must align your company HR leave policy with the following statutory employee leave in Kuwait: 

You must observe the following Kuwait national holidays-

• New Year’s Day
• National Day
• Liberation Day
• Ascension Day/Isra wa Miraj
• Eid Al Fitr
• Eid Al Adha
• Islamic New Year/Hijri New Year
• Prophet Mohammed’s Birthday
• Waqfat Arafat

Background Checks in Kuwait

Background checks are becoming increasingly common in Kuwait, particularly for employment and business purposes.

Common types of background checks in Kuwait:

• Identity Verification: This typically involves confirming an individual's name, date of birth, nationality, and passport details.
• Employment History: Verifying previous employment, job titles, and dates of employment.
• Education Verification: Confirming educational qualifications, such as degrees and certifications.
• Criminal background check in Kuwait: Checking for any criminal convictions or pending legal cases.
• Credit Check: In some cases, a credit check may be conducted, particularly for financial roles.

Considerations for background checks in Kuwait:

• The Ministry of Interior directs access to extensive databases that can be used for verification purposes, especially police background checks in Kuwait. 
• Kuwaiti cultural factors may influence the scope and depth of checks conducted. It's important to be mindful of cultural sensitivities and avoid excessive inquiries that could be perceived as invasive.
• Kuwait has data protection laws in place, and businesses must comply with these regulations when collecting and processing personal information.

Termination & Offboarding Under Kuwait Employment Agreement

The Kuwaiti labor law governs termination of employment on resignation and individual employment contracts. The process typically involves the following steps: 

Probation period

As per Kuwait’s Labor law, a worker's probation period is 100 working days. If the employer terminates the employee within the Kuwait labor law probation period, the employee becomes eligible for an end-of-service benefit proportionate to his work period. Once the probation period ends, the employee becomes eligible for benefits and entitlements as defined in the employment contract.

Termination of service

As per Kuwait Employment Law, Both the Employer and employee may terminate an employment contract after giving a termination notice.

Notice period

The notice period in Kuwait is three months for monthly salaried employees and one month for all other types of employees. If an employer terminates the employee without any notice period, they must pay the total amount of salaries covering the notice period. The same rules apply to an employee who is not able to complete the notice period.

Severance pay

Offboarding per Kuwait employment agreement

You can set up a formal offboarding process to improve your employer branding and also to keep the Kuwait labor law termination and notice period nuances in check: 

• Schedule an exit interview to gather feedback from the departing employee.
• Set up a process for the return of company property, including equipment, documents, and access cards.
• Duly settle any outstanding financial matters, such as salary payments or reimbursements.

Kuwaiti Culture Considerations for Business

Traditional Arab and Islamic values influence business practices in Kuwait. However, with globalization, Kuwait's cultural office practices are modernizing to attract foreign investments. 

Moreover, understanding these cultural nuances can significantly impact your success in the Kuwaiti market: 

• The Kuwaiti government plays a significant role in the economy. You may consider building healthy relationships with government officials.
• Understanding tribal affiliations can be beneficial as they influence business relationships and decision-making. 

PEO

A PEO (professional employer organization) is an organization that enters into a joint-employment relationship with an employer - by providing employees on lease to the employer. 

This arrangement allows the PEO to share and manage liabilities and employee-related responsibilities. 

The organization must be registered in every Kuwaiti state as a legal entity to hire PEO services. 

The best alternative for a PEO is having an Employer of Record. EOR can be used as a partial workforce. It also allows companies to work in Kuwait without setting up a legal entity.

Skuad enables companies looking to expand in Kuwait without the hassle of setting up a Legal Entity. Skuad helps manage workers’ compensation, payroll, and unemployment claims and handles local laws and taxation.

Conclusion

We understand that expanding business across geographies is not an easy task. 

For example, while Kuwait has well-defined labor laws and fewer taxation. Understanding the local provisions and getting approvals from state agencies is a complex task. 

Skuad can help by providing a well-established global HR platform to hire, pay, and manage employees without setting up a legal entity in Kuwait.

‍Talk To Skuad Experts now.

FAQs

1) What is an employer of record in Kuwait?

An Employer of Record in Kuwait is a service that legally hires and manages staff on behalf of another company, handling payroll, benefits, tax compliance, and local labor law compliance. This allows companies to employ staff in Kuwait without establishing a local entity, simplifying business operations and market entry.

2) How much does an EOR cost?

The cost of using an EOR in Kuwait typically ranges from 10% to 20% of the employee's salary, depending on the level of services provided. This fee covers comprehensive management of employment-related tasks, making it a cost-effective solution for managing overseas employees. For more insights, try Skuad’s cost calculator now.

3) What is the difference between an EOR and a PEO?

Both EOR and PEO are outsourcing solutions to manage your global teams in foreign jurisdictions. However, the actual difference lies in handling workers. At the same time, an EOR acts as the legal employer for your international employees, and a PEO shares joint legal employment responsibilities. The choice between an EOR and a PEO depends on your specific needs and the level of control you want to maintain over your international workforce.

4) What are the benefits of an EOR?

Key advantages of using an EOR include compliance with local employment laws, streamlined HR management, operational flexibility, and reduced legal and financial risks. This service is particularly valuable for companies looking to expand quickly without the complexities of setting up a subsidiary.