Terminating an employee in Oman requires careful compliance with the Labour Law (Royal Decree 35/2003) and its amendments. Oman’s framework gives employers clear grounds for dismissal but sets firm procedural requirements and financial obligations that apply in almost every exit scenario. Getting this wrong can expose your company to compensation claims of up to 12 months’ wages, so understanding the rules before you act is essential.
Oman’s termination framework: what employers need to know
Oman’s Labour Law distinguishes between termination for cause, termination without cause, fixed-term contract expiry, mutual agreement, and employee resignation. Each route carries different notice requirements, gratuity obligations, and legal risks. The law is broadly protective of workers, which means the burden falls on employers to document their decisions thoroughly and follow the correct process for each termination type.
One overriding risk is arbitrary termination. If an employer dismisses an employee without a valid, documented reason, the law treats the termination as arbitrary and triggers a compensation obligation of between three and 12 months’ wages. This applies even if full notice and gratuity are paid.
Termination for cause
Oman’s Labour Law allows summary dismissal under Article 40 in specific, well-defined circumstances. A termination for cause carries no notice period and no entitlement to end-of-service gratuity, but it must be handled with precision.
Grounds for summary dismissal
The following grounds justify termination for cause under Article 40:
- The employee provided false identity or submitted forged qualifications
- The employee caused serious financial loss to the employer (the employer must report this within 30 working days of becoming aware)
- The employee repeatedly violated safety rules after receiving a written warning
- The employee was absent without a reasonable cause for seven consecutive days or 10 separate days in a single year
- The employee disclosed confidential information belonging to the employer
- The employee received a final criminal conviction involving honor or trust
- The employee was found to be intoxicated during working hours
- The employee committed assault that caused harm in the workplace
Process and documentation
When grounds for summary dismissal arise, the employer must issue a written termination decision that specifies the cause within 48 hours of obtaining evidence. This 48-hour window is a legal requirement, not a guideline.
Before issuing the termination decision, the employer may conduct an administrative investigation. During this investigation, the employer can suspend the employee in writing for up to 30 days without pay, but the salary for that period must be retained and held in reserve. If the investigation finds the employee innocent, the employer must reinstate them and release the retained salary in full.
Even where termination for cause is valid, the employer still owes the employee their earned wages up to the termination date and any accrued entitlements not explicitly excluded by law. The employee loses the right to gratuity and notice, but wages for work already performed are always payable.
Termination without cause
An employer can end an employment relationship without the employee having done anything wrong, provided there is a valid business reason behind the decision. Valid reasons include operational restructuring, Omanisation requirements, retirement, or documented performance issues where the employee has gone through a performance improvement plan of at least six months without improvement.
Arbitrary termination risk
If the employer can’t point to a documented, legitimate business reason, the termination is treated as arbitrary. Arbitrary termination entitles the employee to compensation of between three and 12 months’ wages, assessed based on the duration of service, the circumstances of the dismissal, and the damage suffered. This compensation is payable on top of any notice pay and gratuity already owed.
Notice requirements
For monthly-paid employees, the required notice period is 30 calendar days. For employees paid on a non-monthly basis, the notice period is 15 days. Notice must be given in writing and must state the reasons for termination. If the employer wants to end the employment immediately rather than requiring the employee to work through their notice period, payment in lieu of notice is permitted.
Gratuity on termination without cause
End-of-service gratuity is fully payable when the employer terminates without cause. The gratuity calculation is covered in detail in the section below.
End-of-service gratuity
End-of-service gratuity is a statutory entitlement for employees who have completed at least one year of continuous service. It’s calculated on the employee’s last basic salary, excluding allowances, bonuses, and other variable elements.
Post-july 2023 formula (rd 53/2023)
For service accumulated from July 2023 onward, the formula is one full month’s basic salary for each completed year of service. Partial years are calculated on a pro rata basis.
Worked example: An employee on a basic monthly salary of OMR 800 who has worked for four years and six months under the post-2023 formula would be entitled to: 4.5 years x OMR 800 = OMR 3,600.
Transitional calculation for pre-july 2023 service
If the employee has continuous service that predates July 2023, the pre-2023 portion of their gratuity is calculated under the old formula: 15 days’ basic salary per year for the first three years of service, then one month’s basic salary per year from year four onward.
Worked example: An employee who has worked since January 2020 and is terminated in January 2026 has six years of total service. For January 2020 to July 2023 (3.5 years under the old formula): 3 years at 15 days = 45 days, plus 0.5 years at 1 month = 0.5 months. For July 2023 to January 2026 (2.5 years under the new formula): 2.5 months. The total gratuity would combine both portions using the employee’s last basic salary.
2027 Savings scheme for expats
From 2027, the end-of-service gratuity entitlement for expatriate employees will be replaced by a mandatory employer savings scheme. Under this scheme, employers will contribute 9% of the employee’s salary to a savings fund on a monthly basis. Employers with expat staff should begin planning for this transition now, as it will change how termination costs are structured and accounted for.
Fixed-term contracts
Fixed-term contracts in Oman are common and come with specific rules depending on how they end.
Natural expiry
When a fixed-term contract reaches its agreed end date, no notice is required from either party. The contract simply concludes. Despite there being no termination as such, end-of-service gratuity is still payable provided the employee has completed at least one year of service.
Early termination by the employer
If an employer ends a fixed-term contract before its expiry date, the statutory notice periods apply (30 days for monthly-paid employees). Gratuity is payable on the service completed to date, and the employer must also compensate the employee for the unexpired portion of the contract term. All accrued annual leave and wages earned to the termination date must also be settled.
Mutual termination agreement
A mutual termination agreement (MTA) allows both parties to end the employment relationship on terms they negotiate together. This can be a useful option when a clean exit is needed without the risk of dispute.
Requirements
An MTA must be in writing and signed by both the employer and the employee. The document must clearly state that both parties consent to the termination, the effective date of the agreement, and the terms that have been agreed. Without these elements, the agreement may not hold up if challenged.
Notice and compensation
There’s no statutory notice period required in an MTA beyond what the parties agree. The notice period can be waived entirely if both sides consent. Gratuity is payable on an MTA if the employee is legally entitled to it based on their length of service. Any additional compensation beyond the statutory minimum is a matter for negotiation between the parties.
Employee resignation
When an employee resigns, they’re required to give 30 calendar days’ written notice if they’re paid on a monthly basis. If the employee leaves without serving their notice period, they’re obligated to compensate the employer with wages equivalent to the notice period they didn’t work. End-of-service gratuity is payable on resignation provided the employee gave proper notice and has completed at least one year of service.
Final payment
All outstanding amounts must be paid to the employee immediately on the date of termination. The final payment must include all earned wages, accrued but untaken annual leave, any notice pay due, and the end-of-service gratuity. If an employee abandons their work without formal resignation, the employer has seven days to settle the final payment.
Unpaid wages carry priority status under Omani law, meaning they take precedence over most other employer debts in the event of any financial dispute. Employers should treat final settlement as a time-sensitive obligation, not an administrative formality.
Immigration obligations on termination
When a foreign national’s employment ends in Oman, the employer has a set of immigration obligations that must be completed before the exit is treated as fully concluded.
The employer must cancel the employee’s work permit and labour card through the Ministry of Manpower. Immigration authorities must be notified of the termination. The employee’s residency permit must either be cancelled or adjusted depending on whether they’re leaving Oman or transitioning to a new sponsor. Critically, all financial obligations to the employee must be settled before the visa cancellation can be finalised. Attempting to cancel immigration documents before clearing final pay can create legal complications.
Redundancy and EOR arrangements
Redundancy as a standalone termination ground isn’t available under an Employer of Record (EOR) arrangement in Oman. If a business needs to end a role due to restructuring or workforce reduction, the process must be handled through the valid termination without cause framework, with proper documentation of the business reason and full payment of notice and gratuity. Employers using an EOR should discuss exit strategy with their provider before communicating anything to the employee.
How an EOR handles compliant termination in oman
Terminating an employee in Oman involves a series of interconnected legal, financial, and administrative steps that need to be executed in the right order. An EOR takes on the employer’s legal obligations in Oman, which means it’s responsible for ensuring that notice is correctly served, investigations are properly documented, gratuity is calculated accurately under the applicable formula, final payments are made on time, and immigration notifications are filed correctly.
For businesses without a legal entity in Oman, this matters a lot. A misstep in any part of the process can trigger arbitrary termination claims or immigration penalties. EOR services remove that exposure by handling the full termination process through a team that knows Omani labour law in detail.
Manage terminations in oman with RemotePass
Whether you’re navigating a termination for cause, planning a workforce restructuring, or simply need to exit a fixed-term contract cleanly, RemotePass gives you the infrastructure to do it compliantly. Our team manages the full termination process in Oman, from notice and investigation documentation through to final payment and visa cancellation, so you’re not carrying legal risk in a market you may not know well. To find out how RemotePass can support your operations in Oman, visit https://remotepass.com/demo.
