Banks in Kuwait, in conjunction with the Ministry of Justice, aim to establish a single process for salary deductions.
Standardizing Salary Garnishment Procedures in Kuwait
The Ministry of Justice (MoJ) and the banking sector in Kuwait are working together to streamline court-ordered salary garnishments through a proposed unified banking mechanism. This move aims to address procedural inconsistencies and operational challenges faced by banks when implementing garnishments [1][4].
Key aspects of the proposed unified mechanism include prioritizing bank loan installments before garnishments, making court-ordered alimony payments the top priority in the hierarchy of deductions, and ongoing discussions regarding additional salary components such as labor support, rent allowances, social assistance, and Kuwait Credit Bank repayments [1].
Currently, there are significant discrepancies between banks in how they handle garnishments, with some withholding entire salaries temporarily before releasing exempted portions, causing confusion and delays [1]. The new unified mechanism aims to simplify and accelerate the execution of garnishments, reducing administrative complications for employers and lending institutions [1][4].
The reform could have a positive impact on businesses, particularly Small and Medium Enterprises (SMEs). The lack of a uniform process has increased operational burdens, potentially distracting from core business activities. The resolution of inconsistencies and streamlining of procedures may ease financial management burdens and enhance creditor rights protection through reliable debt recovery [1][4].
Ministry of Justice officials have assured banks of full legal cooperation in resolving operational and legal challenges. One proposal under consideration is adopting the Bahraini model, which withholds a fixed value rather than a percentage of wages. The total garnishment should not exceed 50% of an employee's permanent salary [1].
Furthermore, discussions are ongoing about excluding rent allowances, student aid, and social assistance from amounts eligible for seizure [1]. Major banks in Kuwait handle up to 800 garnishment orders daily, with an estimated 35,000 permanent garnishment orders [2]. Companies, particularly SMEs, face difficulties due to garnishments that include full salary transfers before distribution to staff, potentially violating wage payment rules [3].
This move towards a standardized, legally clear approach for court-ordered salary garnishments could improve business certainty around payroll deductions, benefiting financial operations of companies, including SMEs [1][4]. For updates on this development, follow us on our website, Instagram, and Facebook.
[1] Al-Rai Daily Newspaper, "Standardizing salary garnishment procedures," 2021. [2] Al-Qabas Daily Newspaper, "The number of permanent garnishment orders in Kuwait is estimated at 35,000," 2021. [3] Arab Times, "Companies face difficulties due to garnishments," 2021. [4] Kuwait Times, "Government and banks collaborate to standardize salary garnishment procedures," 2021.
The proposed unified banking mechanism will address operational challenges in the business sector by reducing inconsistencies in salary garnishments, leading to enhanced financial management for companies, particularly Small and Medium Enterprises (SMEs). The standardization of salary garnishment procedures could improve business certainty around payroll deductions, benefiting the financial operations of companies, including SMEs.
