Muscat: The Ministry of Labour (Mol) has provided clarification regarding the calculation of end-of-service gratuity in accordance with Article 61 of the Labour Law.
The Ministry has detailed the process for determining end-of-service gratuity under Article 61 of the Labour Law within the Sultanate of Oman. This provision applies to employees who are not covered by the Social Protection Law and whose employment contracts have concluded.
Article 61 of the Labour Law states, "Without prejudice to the provisions of Article 48 of this law, upon the termination of an employment contract by the employer, for workers not benefiting from the Social Protection Law, the employer is obligated to pay the employee a gratuity for the duration of their service, ensuring it does not fall below the basic wage for each year of service."
Furthermore, the law outlines that the employee is entitled to a gratuity for any fraction of the year, with the last basic salary received by the employee serving as the benchmark for the gratuity calculation. The period of service prior to the enactment of this law is to be considered as part of the service period for determining the gratuity period.
According to the law, the provisions of this article will remain in effect until the Social Protection Law's savings system is operational. During this period, the employer has the option to settle the employee's rights for their service before the commencement of the savings system. In such cases, the settlement must be calculated at the basic wage on the settlement date.
Should the entitlement for gratuity be established under the previous law and the employee continues to serve under the new law, the gratuity will be calculated at a rate of fifteen days' wages for each year of service for the initial three years, and one month's wages for each subsequent year. The calculation should reflect the provisions of the previous law for the years it was applicable and the provisions of the new law for the years following. If the entitlement arises solely under the new law, the provisions of the new law will take precedence, with the gratuity amounting to no less than the equivalent of one basic salary for each year of service, based on the employee's most recent basic salary.
Example Calculation:
The provided illustration illustrates the computation process for an employee whose tenure commenced prior to the introduction of the new legislation and persisted thereafter.
- The employee remained employed with the organization until the implementation date of the revised Labour Law, which was July 31, 2023.
- The employee was not entitled to benefits under the Social Protection Law.
- Employment Start Date: August 1, 2021
- Basic Salary: OMR 500
Previous Period: The gratuity for the duration under the previous legislation (August 1, 2021 to July 31, 2023) was determined at half the basic salary (OMR 250).
New Period: The gratuity for the duration under the revised legislation (beyond July 31, 2023) was established at the full basic salary (OMR 500).
Overall Calculation:
To ascertain the total gratuity, one must sum the gratuity amounts determined for both the previous and new periods.
Additional Considerations:
The specific clauses of the Social Protection Law may also influence the gratuity determination for certain employees.
It is imperative to seek guidance from a Human Resources professional or legal advisor for precise and tailored advice regarding gratuity computations in Oman.
