Hiring in Bahrain
Bahrain, officially known as the Kingdom of Bahrain, is an island nation located in the Middle East. Arabic and English are the official languages. Petroleum production, aluminum production, finance and construction materials are some of its most exported products and services, whereby they make substantial contributions to the country’s GDP. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Bahrain’s legal and tax regulations. Employment regulations are stipulated in the labor code. The labor code states that the maximum term of probation in the Kingdom of Bahrain shall be three months and it must be clearly laid down in the employment contract too. There is no personal income tax (PIT) regime in Bahrain. As the Employer of Record (EOR), Global PEO’s facilitate companies by ensuring compliance with the aforementioned labor code and tax laws.
statutory labor requirements
- The maximum term of probation in the Kingdom of Bahrain shall be three months and it must be clearly laid down in the employment contract too.
- Employees are generally entitled to 30 days of annual paid leave after one year of service.
- During the first year of employment, the employee is entitled to take accrued vacation, which for all employees accrues at a rate of 2 1/2 days per month.
- Six days of the leave must be taken consecutively.
- Employers typically pay for expatriate employees’ air travel home during their vacation.
- Once during employment, Muslim employees are eligible for 14 days of paid leave for a pilgrimage to Mecca, providing they have worked for the employer for at least 5 years.
- New Year's Day (1st January)
- Labor Day (3rd May)
- Eid al-Fitr
- Day of Arafat
- Eid al-Adha
- Islamic New Year
- Prophet's Birthday
- National Day (16th December)
- Independence Day (16th to 17th December)
- Women are generally entitled to 75 days of maternity leave:
- 60 days of paid leave
- 15 days of unpaid leave
- There is no paternity leave
- Generally, employees are entitled to 55 days of sick leave per year:
- 15 days at full pay
- 20 days at half pay
- 20 days without pay
- In Bahrain, the workweek is generally 40 to 48 hours, eight hours per day, with daily hours restricted to six hours per day for Muslim workers during Ramadan.
- Friday and Saturday are the weekend days; the workweek runs Sunday through Thursday.
- For each additional hour rendered during the day, the worker is entitled to his hourly wage plus 25% of the said rate.
- Meanwhile for each additional hour rendered during the night, the worker should receive his hourly wage plus 50% of the said rate
- As per the Bahraini Labor Law, the notice period shall not be less than 30 days.
- However, the employers are bound to follow a longer notice period if it was mentioned in the employee's contract.
- Unless terminated under Article 107 of the Labor Law, employees are entitled to salary and benefits up to the termination date, notice (or payment in lieu), payment in lieu of accrued but untaken annual leave, the cost of a flight/air ticket to repatriate the employee to their home country unless the employee has obtained alternative sponsorship to remain in Bahrain, an end of service gratuity payment (EOSG) and reimbursement of unpaid business expenses.
- In case of employer termination, employees are eligible for payment of an EOSG which accrues at the rate of half a month's wage for each of the first 3 years of service and 1 month's wage for each of the following years of service.
- The calculation is pro-rated for any fractions of a year of service that have not been completed.
13th / 14th Month Pay
- There is no statutory requirement to pay the 13th or 14th month.
- The labour code dictate that the payment must be given in advance but it is the payment that has been accumulated.
- If the employer delay the payment, they will have to pay interest on the delay for each day.
- There is no personal income tax (PIT) regime in Bahrain.
- Capital gains and income of residents or non-residents not paid in Bahrain are not subject to tax or social insurance rules in Bahrain.
There are non-deductible expenses in Bahrain as there is no personal income tax.
- To work in Bahrain, all expatriates must have a valid work permit.
- To be allotted work visas, an entity that employs expatriates must satisfy the following conditions:
- It must be established in Bahrain.
- It must be registered with the Labor Market Regulatory Authority (LMRA).
- It must have a certain percentage of Bahraini workers (between 5% and 50%, depending on the industry).
- The following documents are normally required to apply for a work visa:
- Copy of passport (validity of a minimum of six months).
- Pre-employment medical certificate as per the LMRA guidelines, showing that the employee is fit to work
- Signed offer letter or contract
- Copy of diploma or qualifications
- Copy of marriage certificate (if applicable)
- The LMRA can take up to 10 working days to process the visa application.
- After processing, the LMRA publishes the visa status online.
- Each applicant is allocated an application identification and the visa status can be checked online through the LMRA website.
- Before the employer proceeds with the visa application, it is suggested that the employee inform the future employer as to whether he or she previously worked in Bahrain.
- This ensures that he or she is not given a duplicate personal identification card (Smartcard).
- In addition, the employee should inform the employer as to whether he or she holds a current valid Bahraini visa, such as a multiple re-entry business visa.
- After the employee enters the country, another medical exam needs to be carried out to confirm that the employee is fit to work.
- On completing all the above and providing proof of an address in Bahrain, an expatriate employee can obtain the Smartcard.
Type of Visa/Permit
1 to 2 years
value added tax
- VAT has been implemented in Bahrain as of 1 January 2019.
- The general VAT rate is 5% and applies to most goods and services, with a number of exceptions where certain goods and services may be subject to a 0% rate or be exempted from VAT.
- No withholding tax is imposed in Bahrain
- Termination is possible on these grounds: during the probationary period, on the expiry of a fixed term contract, dismissal with notice provided it is for a valid reason, following a failure to improve performance after reasonable opportunity (60 days), resignation, incapacity or death, redundancy, retirement (age 60) and summary dismissal (by reason of any of the grounds listed in Article 107 of the Labor Law).
- Employees who have not exhausted their statutory sick leave entitlement are protected from dismissal on grounds of health, unless their full sick leave entitlement has been taken (i.e., 55 days per year of service).
- The worker may accumulate the balance of sick leave on full or partial pay to which the worker is entitled for a period not exceeding 240 days.
- Female employees are protected from dismissal during maternity leave and by reason of their marriage.
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
- Statutory benefits also include social security benefits
Social Security Benefits
payments and invoicing
Since there is no PIT regime in Bahrain, there are no tax return or payment requirements associated with PIT.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Bahrain ranked 43rdh in the World in 2019 in terms of ease of doing business.
|Christmas Bonus Over Vacations %||0%|
|Severance per Year %||Employees are entitled to severance pay equal to one month's pay after completion of one year of employment (8.24% of annual salary)|
|Vacations %||Employees are generally entitled to 30 days of annual paid leave after one year of service (8.33% of annual salary)|
|Notice %||Employees are entitled to 30 days of notice period for one year of service or more (8.24%)|
|Christmas Bonus Over Notifications%||0%|
|Total percentage of Salary (yearly)||The total employment accruals as a percentage of salary per anum are equal to 24.72%|
Additional information (Country Accruals)
|Description||The current rate of contributions to the SIO is 19% for local employees (12% employer; 7% employee) and 4% for expatriate employees (3% employer; 1% employee). These contributions to the SIO are to be withheld by the employer and remitted to SIO on a monthly basis.|
Employer Accruals Additional information
|Annual Leave||Employees are generally entitled to 30 days of annual paid leave after one year of service.||This equals 8.22% (30/365 days) of annual income|
|Maternity Leave||Women are generally entitled to 75 days of maternity leave:
• 60 days of paid leave
• 15 days of unpaid leave
|This equals 16.4% (60/365 days) of annual income|
|Sick Leave||Generally, employees are entitled to 55 days of sick leave per year:
• 15 days at full pay
• 20 days at half pay
• 20 days without pay
|This equals 4.1% of annual income. Additionally, 50% of 5.48% of annual income.|
|Overtime||For each additional hour rendered during the day, the worker is entitled to his hourly wage plus 25% of the said rate. Meanwhile for each additional hour rendered during the night, the worker should receive his hourly wage plus 50% of the said rate. Overtime limit is 40 hours a month.||Normal hourly rate is around 9.25 BHD. Overtime is paid at an additional 2.32 BHD during the day.|
|Severance||In case of employer termination, employees are eligible for payment of an EOSG which accrues at the rate of half a month's wage for each of the first 3 years of service and 1 month's wage for each of the following years of service.||This equals 4.16% (0.5/12 months) of annual income|
|Social Security||The current rate of contributions to the Social Insurance Organization is 19% for local employees (12% employer; 7% employee).||This equals 12% of annual income|