In a region where Dubai often steals the limelight for international business, Kuwait—the United Arab Emirates’ much smaller Gulf Cooperation Council (GCC) neighbor—is the second-richest GCC nation per capita after Qatar. Moreover, the oil-rich nation’s economy has experienced continued growth over the past few years, expanding by an estimated 3% in 2016, and is expected to continue growing at 1.9% in 2018. This growth is largely due to increased oil production and enacting the state’s Development Plan, which aims to improve Kuwaitis’ quality of life, further develop the state’s petrochemical industry, and attract/increase foreign investment.
While oil is far and away Kuwait’s main economic driver, the nation’s robust banking sector also attracts generous foreign attraction and is experiencing a resurgence in credit issuance; the country’s banking system received favorable marks from Moody’s, with the investor service noting that Kuwait’s banking system is stable, poised to continue its economic growth.With projected growth, a diversifying economy, and one of the world’s highest GDPs per capita, Kuwait continues to be no stranger to expats from all over the world, with expatriates making up over two-thirds of Kuwait’s population. Are you considering sending an employee to Kuwait to work among the nation’s two million expats?
Becoming an Expatriate in Kuwait
For anyone who is not a GCC national and wishes to enter Kuwait, they will need either a visa or entry permit to do so. For those who are relocating to Kuwait to work, their employer must present a formal offer of employment before the employee can receive a work permit and residency visa to reside in the country. Male visa recipients can then sponsor their spouse and dependents, allowing them to live in Kuwait. Wives and daughters may be sponsored indefinitely, while male children may only be sponsored until age 21. Should a dependent wish to begin working in Kuwait, they will need to apply for a separate work visa with a Kuwaiti sponsor. Female expats cannot sponsor their husbands.
Social Security Contributions in Kuwait
Kuwait’s oil and financial sectors may be attractive, but its lack of personal income taxes for expatriates is particularly alluring for many. For some expats, this can be a welcomed respite from tax rates as high as 25% of their income. For employers, this spells a sizable cut on cost per employee—though foreign businesses must pay income tax (and may find setting up an entity in Kuwait to be expensive). But because expats do not pay income taxes, Kuwait’s public social security system is not accessible to them. While some employers offer corporate pension schemes to expats, many expats find that paying into their home country’s state or private pension plan works best. International PEO (professional employer organization) can help companies save both time and costs when both sending an employee to Kuwait and establishing a larger footprint.
Kuwaiti Healthcare Availability
Expats currently have access to Kuwait’s public medical facilities. Medical care is available at a nominal fee, making it affordable for virtually all expats. Recently, however, Kuwaiti nationals have begun to complain of long wait times due to the large number of expats seeking medical attention, spurring a debate on whether or not a separate healthcare system should be developed to cater only to expats. In response, Kuwait is unrolling its new healthcare system for expats, signaling higher costs to cover the expansion. Private plans are widely available, but often expensive. This is an important cost consideration for employers who are planning to send an employee to Kuwait in 2018 and beyond.
Severance in Kuwait
For employers who are sending expats into Kuwait, they can expect to cover severance pay should the employee be terminated while abroad. For employees who have been with their organization for under five years, they are entitled to 15 days compensation for each year completed. For employees who have over five years with their employer, they are entitled to 30 days compensation for each year worked. However, this is capped at one-and-a-half year’s remigration.
If you are considering sending an employee to or establishing your business presence in Kuwait, reach out to Velocity Global today to learn more about how International PEO can help you expand with a light footprint to begin operating quickly and compliantly.