Calculation of Employee Gratuity in Oman

The Ministry of Labour of Oman has clarified the method for calculating end-of-service gratuity for both Omani and expatriate employees, according to Article 61 of the Labour Law, until the implementation of the savings system under the Social Protection Law.

Gratuity for Omani Employees

For employees who are not beneficiaries of the Social Protection Law, the employer must pay an end-of-service gratuity for each year of service, not less than the basic wage. The gratuity for service periods before the enactment of this law will also be considered.

Gratuity Calculation Example

For instance, if an employee worked from August 1, 2021, to July 31, 2023, with a basic salary of 500 Omani Rial, the gratuity would be calculated as follows:

1. Period Before the New Law (August 1, 2021 – July 31, 2023): The gratuity will be calculated at half of the basic salary (250 Omani Rial for each year).
2. Period After the New Law (After July 31, 2023): The gratuity will be calculated at one full basic salary (500 Omani Rial for each year).

New Savings System

According to Article 135 of the Social Protection Law, details regarding the savings system will be clarified in the executive regulation. This system will be mandatory for expatriate employees, and employers are required to contribute 9% of the monthly basic wage to the savings.

Implementation Date for the Savings System

As per Article 52 of the Social Protection Law, the date for the implementation of the savings system must be fixed by the Board of Directors of the Social Protection Fund, and this date will not exceed July 2026.

Gratuity and Savings Payment

Employers must pay the end-of-service gratuity according to Article 61 of the 2023 Labour Law. Employees can request to receive their savings as a lump sum or in annual or monthly installments. In cases of death or permanent disability, the savings will be paid to the legal heirs.

Exiting the Savings System

Employees must notify the Social Protection Fund if they exit the savings system. Failure to do so within the specified period may lead to losing investment returns for one year.

This initiative by the Ministry of Labour of Oman aims to facilitate the calculation of end-of-service gratuity and improve the savings system for employees in the country.

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source: Calculation of Employee Gratuity in Oman – Oman Observer