Employer not required to contribute worker’s insurance for amounts paid as bonuses

In a landmark judicial ruling, the Civil Court of Cassation, chaired by Counselor Fouad Al-Zuwaid, ruled that the General Organization for Social Insurance is not entitled to oblige the employer to pay a share for the worker according to Chapter Three on the allowances granted by the State to the worker, and that the share paid for the worker is the one related to the wage.

A significant landmark ruling indicated as the court referred to Article 55 of the new Private Sector Labor Law No. 6 of 2010, which defines “wage” as the basic wage or any amount the worker is entitled to receive for their work, in addition to any components outlined in the contract or work regulations. The court clarified that this does not include social allowances or children’s allowances as specified by Law No. 19 of 2000.

The ruling emphasized that the wage calculation includes periodic allowances, bonuses, grants, gifts, or cash benefits provided by the employer on a regular and continuous basis, and is relied upon by the worker to organize their livelihood.

The court clarified further that allowances granted to the worker by entities other than the employer, such as the social allowance and children’s allowance provided by the state to Kuwaitis working in the private sector under Article 3 of Law No. 19 of 2000, which supports national labor and encourages employment in non-governmental entities, are not considered part of the worker’s wages for the purpose of calculating entitlements.

Furthermore, the court stated that since the social allowance and children’s allowance granted by the State, to Kuwaiti workers in the private sector under Article 3 of Law No. 19 of 2000, which supports national labor and encourages employment in non-governmental entities, are provided by the State, as they do not constitute elements of wages.

The reason being, wages, as defined by the court, refer to payments made by the employer on a regular and continuous basis, which the worker relies on to organize their livelihood. These State-provided allowances are not part of the worker’s wage for the purpose of calculating entitlements.

The Court of Cassation decided to refer the case to the Experts Department to calculate the share of subscriptions paid by the appellant, the employer. This includes determining the subscription percentages for amounts granted by the Manpower Restructuring Program, such as the social allowance, children’s allowance, and other labor support elements, which were charged to the employer, despite the court ruling that this practice was illegal.

The court ruling ended with obligating the Social Insurance to return the financial amounts to the employer, which was paid to the Social Insurance without right.