Is a payroll benefits program for employees permissible? The Darul Iftaa conducted a Shariah Compliant Business Campaign program in Cape Town on the 9th of November 2013 at Al – Furqan Masjid. The program commenced with a welcome to the Darul Iftaa from Moulana Abdul Kader Ali Saheb on behalf of MJC (Muslim Judicial Council). The first part of the program was on the importance of earning Halal income and conducting ones dealings according to Shariah. This talk was conducted by Moulana Taha Karan Saheb. The talks will be uploaded on the website soon. This program was coordinated and arranged by Moulana Ilyas Ismail Saheb and his father – Basheer bhai, one of our elders in the work of Dawah and Tableegh. In the next few days we will be posting questions received from the program in Cape Town. Admin – Darul Iftaa Question: My company recently announced a new end of term benefits for us expatriate employees, and I am trying to determine if this is permissible or not. As per the new benefits, we now have 2 options to opt into. Option 1: is to continue as before with no monthly contribution from my end. The end of service benefit remains the same, which is depending on total number of years service multiplied by my final salary. For example, if an employee separates after 8 years of service with a base salary of 6,000, the payout from the program would be 36,000 (6 x 6,000). 6 times is determined from the following defined table: Completed Service Payout Less than 3 years Zero 3 years to less than 6 years 3 x salary 6 years and less than 9 years 6 x salary 9 years and less than 12 years 9 x salary more than 12 years 12 x salary Option 2: the employee will contribute 8% monthly plus 5% from his yearly bonus - the company then contributes the same as well as a bigger payout at time of resignation. There is no interest involved from any investments. The company has confirmed that the money will not be invested in any fund, but will be invested back into the company. Using the same example above for option2 will be: For example, if an employee separates after 8 years of service with a base salary of 6,000, the payout from the program would be 144,000 (24 x 6,000). 24 times is determined from the following defined table: Completed Service Payout: Less than 3 years 1 x service years x salary 3 years to less than 6 years 2 x service years x salary 6 years and less than 12 years 3 x service years x salary 12 years to 20 years 3.5 x service years x salary minus (6 x salary) Is option 2 permissible? Answer: In the Name of Allah, the Most Gracious, the Most Merciful. As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh. It is important to understand that Islam has laid down a few guiding principles for investments in regards to the distribution of profit and loss that every Muslim must adhere to who contributes (or invests) capital as a partner in any sort of business venture: (1) He must assume the risk of loss[1] (2) He is entitled to a share in the profit[2] (3) There cannot be a fixed rate of return[3]; therefore, no lump sum may be allocated for him[4] In regards to the benefits program offered by your employer, the company will be acting on your behalf by investing part of your income into the company itself.[5] Therefore, under Islamic law, you qualify as being an investor and partner in this company. Option 2 of the Global Payroll Benefits Program offered by your company violates all three rules of investment mentioned above. As such, it will not be permissible for you to participate in such a program. And Allah Ta’āla Knows Best Bilal Mohammad Student Darul Iftaa USA Checked and Approved by, Mufti Ebrahim Desai. daruliftaa.net [1] An Introduction to Islamic Finance by Mufti Muhammad Taqi Uthmani, pg. 22 [2] Ibid. [3] Ibid., pg. 27 [4] Ibid., pg. 50 [5] Fatawa Haqqaniyyah, vol. 6, pg. 212, Jamiah Darul Uloom Haqqaniyyah; Islam Aur Jadeed Maashi Masaail, vol 4, pg. 86-88, Idara-e-Islamiat
Posted on: Sat, 23 Nov 2013 06:39:28 +0000
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