By Kuwait’s Public Authority for Manpower (PAM) has issued an awareness notice reminding employers and workers of the legal provisions governing wages and financial deductions. Under Article 59 (A) of the Labour Law, deductions from a worker’s salary to settle debts or loans owed to the employer are capped at 10 percent, and employers are prohibited from charging interest on such loans or debts.
The notice, reported by Times Kuwait on 31 October 2026, also clarifies that total salary deductions are capped at 25 percent under Article 59 (B). Where competing claims arise, alimony obligations take priority. PAM further reminded employers that Article 28 of the Labour Law prevents the wage agreed in an employment contract from being reduced throughout the contract period.
What the two caps actually mean
The 10 percent and 25 percent figures are separate limits that work together. The 10 percent ceiling applies specifically to repayments of loans or debts owed to the employer. The 25 percent ceiling applies to the total amount that may be seized, assigned or deducted from a worker’s salary to settle debts of any kind.
In practice, an employer deducting 10 percent for a staff loan could still face other deductions, such as court-ordered payments or alimony, up to the 25 percent total cap. The notice does not state whether the 10 percent is calculated on gross or net salary, and PAM has not published a worked example. Payroll teams should treat the cap as applying to the worker’s contractual wage before any other deductions unless PAM issues further guidance.
The notice also does not state whether the cap applies per loan or across all employer loans combined. A conservative reading is that the total deduction for all employer loans cannot exceed 10 percent of salary, but employers with multiple loan arrangements should seek clarification from PAM.
How this differs from bank loan deductions
The PAM notice concerns employer loans only. It does not govern deductions made by banks from salaries or end-of-service indemnity. That distinction matters because much of the existing commentary on Kuwait salary deductions focuses on bank lending.
According to kuwaitlocal.com, standard loan agreements in Kuwait, as guided by the Central Bank of Kuwait and the Kuwait Banking Association, may include a clause allowing the bank to deduct outstanding loan amounts from indemnity. A sample clause quoted on that site requires the borrower to arrange with their employer to have monthly salary and indemnity transferred to the bank throughout the loan period.
That is a contractual arrangement between borrower, bank and employer. The PAM 10 percent ceiling does not override it. An employer could be deducting 10 percent for an internal loan while a bank separately receives salary transfers under a loan agreement. Payroll teams should keep the two streams distinct in their records.
What HR and payroll teams should check now
The PAM notice is a reminder of existing law, not a new regulation. The relevant articles were already in force. The practical task for HR and payroll teams is to audit current deduction practices against the stated limits.
First, review every active employer loan or salary advance. Confirm the monthly deduction does not exceed 10 percent of the worker’s salary. Where it does, reduce the deduction and extend the repayment period accordingly.
Second, check whether any interest is being charged on employer loans. The notice states plainly that interest is prohibited. Any interest already charged should be corrected, and the worker’s balance adjusted.
Third, review total deductions per worker. Even where the employer loan deduction is within 10 percent, other deductions could push the total past 25 percent. Alimony obligations take priority, so payroll should sequence those first.
Fourth, do not reduce the contractual wage. Article 28 prevents the agreed wage from being reduced during the contract period. A loan repayment deducted from salary is not a wage reduction, but changing the salary figure itself to offset a loan would breach the law.
What workers should do if deductions exceed the cap
The notice does not specify enforcement steps or penalties for employers who exceed the 10 percent ceiling. Workers who believe their employer is deducting more than the law allows should first request a written breakdown of all deductions from payroll or HR. If the employer does not correct the issue, the worker can raise a complaint with the Public Authority for Manpower, which oversees labour relations in Kuwait.
The notice does not state whether the cap applies retroactively to loans signed before the reminder was issued. Since PAM describes the provisions as existing law, the safer view is that the limits have always applied. Workers with older loans should still be able to challenge deductions above 10 percent.
The employer’s practical position
The cap does not prevent employers from granting loans or salary advances. It limits how quickly those loans can be recovered through salary deductions. A worker earning KD 400 per month with a KD 1,000 employer loan would need at least 25 months to repay under a 10 percent cap, assuming no other deductions.
Employers may respond by making smaller loans, requiring longer repayment terms, or declining to lend altogether. The notice does not require employers to offer loans, only to comply with the deduction limits when they do.
| Deduction type | Legal cap | Source |
|---|---|---|
| Employer loan or debt repayment | 10% of salary | Article 59 (A) |
| Total deductions from salary | 25% of salary | Article 59 (B) |
| Alimony obligations | Priority over other claims | Article 59 (B) |
| Contractual wage reduction | Prohibited | Article 28 |
Sources: timeskuwait
Photo: Elektrostal. Worker's payroll book. Plant EZTM. img 02 by Scanning Dmitry Makeev, scan date - 2020 year., Public domain
