Managing payroll in Oman requires a solid understanding of the country’s labour framework, social insurance obligations, and recent regulatory changes that directly affect how you pay and retain staff. Whether you’re hiring Omani nationals, expatriates, or a mix of both, the rules differ significantly for each group. This guide covers everything you need to know to run compliant, accurate payroll in the Sultanate.
Key authorities governing payroll in oman
Oman’s payroll landscape is overseen by several government bodies, each with a distinct role. The Ministry of Labour (MoL) enforces labour law compliance, including working hours, wage payment, and contract requirements. The Public Authority for Social Insurance (PASI) administers social insurance contributions for Omani nationals, covering old age, disability, death, and occupational injury. The Social Protection Fund (SPF) manages the newer contribution schemes that cover maternity, paternity, employment security, and expatriate benefits. You’ll interact with all three bodies at various points in your payroll cycle.
Pay cycle and payment deadlines
Oman operates on a monthly payroll cycle. There’s no single fixed statutory pay date, but salaries must be paid within 3 days of the end of each payroll period. Delays beyond this window can result in penalties, so building a reliable internal payroll calendar is essential for staying compliant.
Working hours and the ramadan reduction
The standard working week in Oman runs Sunday to Thursday, totalling 40 hours. During the holy month of Ramadan, working hours for all employees are reduced to 30 hours per week. You’ll need to account for this reduction in your payroll calculations for overtime, part-time arrangements, and any hours-based pay components.
Employment contracts
Oman only permits fixed-term employment contracts. All contracts must be bilingual, written in both Arabic and English. Both language versions carry equal legal weight, so you’ll want to ensure consistency across both versions before employees sign.
Probation periods
Probation can last up to 3 months and may be extended once for an additional 3 months, giving a maximum probationary period of 6 months. The probation clause must be stated in writing within the contract. During probation, either party can terminate with just 7 days’ notice.
Minimum wage: omani nationals only
Oman’s minimum wage applies exclusively to Omani nationals. It currently sits at OMR 325 per month, structured as OMR 225 basic salary plus OMR 100 in allowances. Expatriate workers are not entitled to this minimum, and there’s no statutory floor for their remuneration.
Mandatory performance-based increments from 2026
From January 1, 2026, Omani nationals who complete at least 6 months of service and receive a performance rating of “Acceptable” or above are entitled to a mandatory annual salary increment. The increment rates are:
| Performance rating | Annual increment |
|---|---|
| Excellent | 5% |
| Very Good | 4% |
| Good | 3% |
| Acceptable | 2% |
These increments are applied to the basic salary and take effect on January 1 each year, based on the prior year’s performance evaluation. You’ll need a functioning performance management process in place to support this obligation operationally.
Social insurance contributions
Contribution obligations differ significantly depending on whether you’re employing Omani nationals or expatriates.
Contributions for omani nationals
Omani nationals are covered under PASI and the SPF, with contributions split between employer and employee.
Employer contributions:
| Fund | Rate |
|---|---|
| Old Age, Disability & Death Insurance | 11% of gross salary |
| Occupational Injuries/Diseases | 1% of gross salary |
| Employment Security Insurance | 0.5% of gross salary |
| Maternity/Paternity SPF | 1% of gross salary |
| Total | ~13.5% of gross salary |
Employee deductions:
| Fund | Rate |
|---|---|
| Old Age, Disability & Death Insurance | 7.5% of gross salary |
| Employment Security Insurance | 0.5% of gross salary |
| Total | 8.5% of gross salary |
Contributions for expatriate employees
Expatriate employees have a more limited contributions profile, though this is changing.
Employer contributions:
| Fund | Rate | Notes |
|---|---|---|
| SPF sick/maternity/paternity | 1% of gross salary | Effective July 2024; salary capped at OMR 3,000 for contribution purposes |
| Occupational Injuries/Diseases | 1% of gross salary | |
| Total | ~2% of gross salary |
Employee deductions: Currently 0% for expatriates.
The 2027 expatriate savings scheme
From 2027, a new mandatory employer savings scheme will replace the traditional end-of-service gratuity for expatriate employees. Under this scheme, employers will contribute 9% of each expatriate’s basic wage into a savings fund. This is a significant structural change to how you budget for expatriate workforce costs, and you should begin modelling the impact now for employees who will still be with you when the scheme takes effect.
Personal income tax
Oman currently has no personal income tax. However, this changes on January 1, 2028, when a 5% tax on net income above OMR 42,000 per year will come into effect. For most expatriate workers earning below this threshold, there’ll be no immediate payroll impact. For higher-earning employees, you’ll want to ensure your payroll systems can accommodate withholding when the time comes.
End-of-service gratuity
End-of-service gratuity is a statutory obligation you need to plan for throughout the employment relationship, not just at the point of separation.
How gratuity is calculated
The calculation method depends on when the employee’s service began relative to July 2023.
Service from July 2023 onwards: Employees earn 1 full month’s basic salary for every complete year of service, from year one. The minimum qualifying period is 1 year.
Service before July 2023: The pre-July 2023 portion accrues at 15 days of basic salary for each of the first 3 years, then at 1 full month per year thereafter.
Gratuity is always based on the employee’s last basic salary, excluding any allowances or variable pay. If an employee has service straddling July 2023, you calculate the two portions separately and combine them.
The 2027 transition for expatriates
From 2027, the end-of-service gratuity system for expatriates will be replaced by the 9% employer savings scheme described above. Service accrued before the transition will need to be handled according to the transitional rules when they’re finalised. You should track accrued gratuity carefully for current expatriate employees so you can calculate final entitlements accurately at the point of transition.
Performance-based annual increment: operational considerations
Running the mandatory performance increment process smoothly requires attention to timing and documentation. Evaluations need to be completed and recorded before year-end so increments can be applied from January 1. You’ll want to ensure that HR and payroll systems are integrated, that line managers understand the rating categories, and that increment calculations are reflected in the first payroll run of the new year. Any dispute about a rating could delay the increment, so a clear internal appeals process is worth having in place.
Repatriation air tickets for non-omani employees
Non-Omani employees who take leave and return to work are entitled to one return air ticket to their home country per leave cycle. This is a statutory entitlement, not a discretionary benefit. You’ll need to budget for this as part of your total cost-of-employment calculation for expatriate hires, and your HR team should track when employees are eligible so the entitlement doesn’t fall through the cracks.
Payroll compliance deadlines and final payment obligations
Beyond the 3-day payment window for regular salaries, Oman sets specific deadlines for final payments on termination. If you terminate an employee’s contract, their final payment is due immediately. If an employee abandons work, you have up to 7 days to process the final payment. Missing these deadlines can expose you to penalties, so it’s worth building termination payment workflows into your payroll process.
Social insurance contributions are remitted monthly to PASI and the SPF. Keeping on top of these submissions is important because late or inaccurate filings can attract additional liability.
How an EOR simplifies payroll in oman
For companies that don’t have a legal entity in Oman, an Employer of Record (EOR) offers a practical path to hiring compliantly without setting up a local subsidiary. The EOR acts as the legal employer on your behalf, managing payroll, social insurance submissions, end-of-service gratuity accruals, contract administration, and regulatory filings. This is particularly valuable in Oman given the complexity of maintaining parallel compliance tracks for nationals and expatriates, tracking the July 2023 gratuity calculation split, and preparing for the 2027 savings scheme transition and the 2028 income tax introduction.
RemotePass offers EOR services across the GCC and beyond, so you can hire in Oman and other markets through a single platform. Rather than rebuilding payroll infrastructure each time you enter a new market, you can move fast with full local compliance handled for you.
If you’re ready to hire in Oman, book a demo with RemotePass to see how the platform handles payroll, benefits, and compliance for both nationals and expatriates.
