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Severance and Termination Rules in Oman’s Labor Law: A Complete Guide for Employers and Employees
Table of Contents
Introduction: Why Severance Rules Matter in Oman
Overview of Oman’s Labor Law 2025
Employer and Employee Rights During Termination
Grounds for Termination in Oman
Termination by Employer
Termination by Employee
Mutual Termination Agreements
Notice Period Requirements in Oman
Severance Pay (End-of-Service Benefits) Explained
Calculation of Gratuity Payments
Probation Period Termination Rules
Termination for Misconduct vs. Redundancy
Retirement and End-of-Service Settlement Rules
Special Provisions for Expatriate Workers
Treatment of Unused Annual Leave at Termination
Termination in Fixed-Term vs. Unlimited Contracts
Redundancy and Collective Layoff Rules
Compensation for Unlawful Termination
Documentation Employers Must Maintain
Dispute Resolution and Labor Court Procedures
Case Study: Handling Termination Disputes in Oman
Checklist for Employers: Lawful Termination Process
Future Outlook: Expected Changes in Oman’s Labor Market
Conclusion
FAQs
Quick Introduction: Why Severance Rules Matter in Oman
In Oman, severance and termination rules are critical for ensuring fair treatment of employees and protecting employers from legal disputes. With a growing workforce—both local and expatriate—understanding the legal framework of terminations, gratuity payments, and compliance requirements is essential.
For employees, these rules guarantee financial stability when employment ends. For employers, they provide a structured way to manage workforce changes without facing penalties or disputes.
Overview of Oman’s Labor Law 2025
Oman’s Labor Law sets out clear guidelines on:
Employment contracts (fixed-term and unlimited).
Termination grounds (with cause, without cause, mutual agreement).
Notice periods based on employment terms.
Gratuity (end-of-service benefits) as mandatory severance.
Compensation in cases of unlawful dismissal.
The Ministry of Labor oversees compliance and provides mechanisms for resolving disputes.
Employer and Employee Rights During Termination
Employer Rights:
Dismiss for misconduct or redundancy.
Require notice periods (except in gross misconduct).
Defend termination decisions before labor courts.
Employee Rights:
Receive gratuity payments.
Be compensated for unused leave.
Claim compensation if unlawfully terminated.
Grounds for Termination in Oman
Termination by Employer
Redundancy due to restructuring.
Misconduct (fraud, violence, breach of duty).
Underperformance (with documented warnings).
Termination by Employee
Resignation with notice.
Immediate resignation if employer breaches contract (e.g., unpaid wages).
Mutual Termination Agreements
Employers and employees may agree to terminate under mutually agreed severance terms.
Notice Period Requirements in Oman
One Month Notice: For monthly-paid employees.
15 Days Notice: For employees paid weekly or daily.
Probation: Termination requires 7-day notice.
If notice is not given, payment in lieu of notice is required.
Severance Pay (End-of-Service Benefits)
Every employee completing one year or more of continuous service is entitled to gratuity, unless dismissed for gross misconduct.
Acts as financial compensation for years of service.
Mandatory even for expatriates.
Paid in addition to notice and leave settlement.
Calculation of Gratuity Payments
Formula:
First 3 Years: 15 days’ basic salary per year.
After 3 Years: 30 days’ basic salary per year.
Cap: Not to exceed two years’ salary.
Example Table: Gratuity Calculation
| Years of Service | Gratuity Entitlement |
|---|---|
| 1 Year | 15 days’ salary |
| 3 Years | 45 days’ salary |
| 5 Years | 120 days’ salary |
| 10 Years | 285 days’ salary |
Probation Period Termination Rules
Probation can last up to 6 months.
Either party can terminate with 7-day notice.
No gratuity is payable during probation termination.
Termination for Misconduct vs. Redundancy
Misconduct
Theft, fraud, breach of confidentiality, absenteeism.
No gratuity if dismissed for gross misconduct.
Redundancy
Business closure, restructuring, automation.
Employee still entitled to gratuity and notice.
Retirement and End-of-Service Settlement Rules
Retirement age in Oman: 60 years (extendable).
Retiring employees entitled to full gratuity, unused leave, and pensions (if applicable).
Special Provisions for Expatriate Workers
Entitled to same severance pay as Omanis.
Employers must ensure exit visa processing.
Final settlement must be cleared before departure.
Treatment of Unused Annual Leave at Termination
Employers must compensate for unused annual leave days in cash, based on last drawn basic salary.
Termination in Fixed-Term vs. Unlimited Contracts
Fixed-Term: Compensation equal to wages for the remainder of the contract, unless terminated for cause.
Unlimited: Standard notice and gratuity rules apply.
Redundancy and Collective Layoff Rules
Requires prior approval from the Ministry of Labor.
Employers must justify redundancy with economic grounds.
Employees entitled to full benefits.
Compensation for Unlawful Termination
If termination is deemed unlawful:
Court may order reinstatement or compensation.
Compensation = up to 3 months’ wages in addition to gratuity.
Documentation Employers Must Maintain
Employment contract.
Salary slips.
Performance warnings.
Termination notice letters.
Failure to maintain records increases risk of disputes.
Dispute Resolution and Labor Court Procedures
Disputes first go to the Ministry of Labor Mediation Unit.
If unresolved within 2 weeks, case moves to Labor Court.
Courts prioritize employee rights, but employers can defend with documentation.
Case Study: Handling Termination Disputes in Oman
A mid-sized construction company terminated 50 employees due to a project cancellation. By maintaining documentation of project loss and securing prior approval from the Ministry, it avoided wrongful termination claims. Employees were paid gratuity and leave settlements smoothly.
Checklist for Employers: Lawful Termination Process
✅ Review employment contract.
✅ Identify valid grounds for termination.
✅ Provide required notice or payment in lieu.
✅ Calculate gratuity and leave settlement.
✅ Issue final clearance certificate.
✅ Submit termination to Ministry of Labor (if redundancy).
Future Outlook: Expected Changes in Oman’s Labor Market
Digitization of severance settlements.
Possible increase in notice periods.
Stronger protection for expatriate workers.
Alignment with international labor standards.
Conclusion
Severance and termination rules in Oman strike a balance between protecting employees’ rights and giving employers flexibility. For businesses, following lawful termination procedures is essential to avoid disputes, while employees gain financial security and fairness at the end of service.
FAQs
Q1. What is the standard notice period in Oman?
One month for monthly-paid employees, 15 days for others.
Q2. Who is eligible for gratuity in Oman?
Employees completing at least one year of service, except those dismissed for gross misconduct.
Q3. Are expatriates entitled to severance pay?
Yes, expatriates have the same rights as Omani employees.
Q4. Is gratuity payable if an employee resigns?
Yes, provided they complete one year of service.
Q5. Can employers dismiss without notice?
Yes, only in cases of gross misconduct.
Q6. What happens if an employee is terminated during probation?
Only 7-day notice is required; gratuity is not payable.
Q7. How is gratuity calculated?
15 days’ basic salary per year for first 3 years; 30 days thereafter.
Q8. What is the maximum gratuity cap?
Two years’ salary.
Q9. Do employees get compensation for unused leave?
Yes, based on last drawn salary.
Q10. What if termination is unlawful?
Employee may be reinstated or awarded compensation (up to 3 months’ wages).
Q11. Can employers terminate due to redundancy?
Yes, with Ministry approval and full settlement of dues.
Q12. Is severance required in mutual terminations?
Yes, unless otherwise agreed in writing.
Q13. Do retirement settlements include gratuity?
Yes, plus pensions if applicable.
Q14. Are part-time workers entitled to gratuity?
Yes, proportionally.
Q15. What is payment in lieu of notice?
Compensation equal to salary for the notice period not served.
Q16. Can probation be extended beyond 6 months?
No, the law limits probation to 6 months.
Q17. Is a written termination letter required?
Yes, termination must be documented.
Q18. How are disputes resolved?
Through Ministry mediation first, then labor court if unresolved.
Q19. What documents should employees keep?
Contracts, pay slips, and termination letters.
Q20. Can gratuity be withheld for damages?
Only if proven in court or with employee’s written consent.
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