Overview on A Comprehensive Guide on Bahrain’s end of service gratuity system

A Comprehensive Guide on Bahrain’s end of service gratuity system

The Kingdom of Bahrain has recently implemented significant changes to its leaving indemnity system, marking a pivotal moment in the country's commitment to enhancing labor rights and fostering a conducive business environment. Spearheaded by His Royal Highness Prince Salman bin Hamad Al Khalifa, the Crown Prince and Prime Minister, the end of service gratuity system introduces fundamental adjustments aimed at streamlining processes and ensuring timely disbursement of end-of-service gratuity system to employees.

Understanding the Changes

The most fundamental change brought about by the end of service gratuity system is the requirement for employers to remit end-of-service gratuity contributions to the Social Insurance Organisation (SIO) on a monthly basis. This marks a departure from the previous system where employers directly paid leaving indemnity upon termination or resignation, shifting the responsibility to the SIO.

Key Provisions

The Resolution introduces several provisions aimed at enhancing the end-of-service gratuity system for non-Bahraini employees:

• Data Submission Deadline

Employers are mandated to submit all necessary wage data for insured workers, including non-Bahraini employees, to the SIO within one month of the resolution's effective date of 1 March 2024.

• Employer Responsibility

Employers will continue to bear the cost of employees' end-of-service contributions, even if they are temporarily seconded to another establishment.

• Gratuity Calculation

The calculation of gratuity remains unchanged, with rates set at 4.2% of the employee's annual salary for the first three years of employment and 8.4% for subsequent years until termination.

• Payment Schedule

Employers must make relevant contributions into the system within the first fifteen days of each month. Failure to do so will result in interest being accrued at a rate of 5%, along with an additional penalty of 20% of the unpaid contributions..... Read more >>