Thursday, April 2, 2009

Doing Business in Oman: End of Service Benefits

Companies and employees both should be aware of their rights and obligations when an employee leaves the company. For example, depending on the individual circumstances, the company will probably be required to pay an “end of service benefit” to the employee. Article 39 of the Labor Law (Royal Decree 35 of 2003) states that expatriate employees are generally entitled to an end-of-service gratuity payment on the termination of their employment contract and provides the calculation for the gratuity. The gratuity is calculated as follows:

Length of Employment


1 to 3 years

15 days basic salary
for each year of service

3 years or more

1 month basic salary
for each year of service

The gratuities are calculated based on the final basic salary, and any fraction of a full year is paid on a pro rata basis. No end of service benefit applies to employees who have been employed for less than a year.

If the employer establishes and operates a separate fund scheme approved by the government, then the expatriate employee may be entitled to receive the higher of the amounts payable under Article 39 or the separate fund payments, but not both.

Foreign companies operating in Oman or seconding employees to Oman should take steps to avoid possible “double dipping” by employees. This could happen to if an employee attempted to take advantage of a pension scheme operated by the employer outside of Oman, as well as the benefits payable under Article 39.