2025 Bahrain Workforce Law: Major Amendments Explained

Bahrain Labour Law Amendments for 2025

Bahrain's labour environment is facing drastic shifts in 2025 in the form of new rules and legislative changes seeking to reconcile worker protections with the country's economic goals, especially amidst mounting demands to back small and medium-sized businesses (SMEs). The reforms, sought to increase the sustainability and equity of the labour market, are taking place at a time when companies are experiencing increased economic pressures in the form of lowered purchasing power, cash flows, and international economic uncertainty.

A latest warning from a Bahraini Member of Parliament (MP) highlights the increasing concern that such regulatory changes will have a disproportionate effect on SMEs, which form the backbone of Bahrain's economy. The MP called on the government to introduce mitigating steps that protect traders and smaller business owners from being penalized too hard and unduly restricting their operations.

In this article, we examine the main legislative updates to Bahrain's labour legislation for 2025, the difficulties they might pose for companies, and the measures employers need to undertake in order to stay compliant while protecting their business.

Economic Pressures and the Case for SME Support

Reforms to Decree-Law No. 12/2024, which revise Article 40 of Bahrain Law No. 19/2006, are timely as companies, especially SMEs, are going through challenging financial circumstances. The more discretionary imposition of penalties is indicative of increasing frustrations among traders who are kept waiting to comply with regulations, frequently because auditors are giving priority to larger firms over smaller ones.

In most instances, the SMEs with few resources find it difficult to submit compulsory financial reporting and audits in time, exposing them to penalties The amendments are viewed as a chance to provide micro-enterprises with the breathing space necessary to adapt, innovate, and stay afloat in a difficult economic climate.

But with more regulation on labour compliance, such as tighter enforcement against unlicensed employees and foreign labour abuses as reported by the Labour Market Regulatory Authority (LMRA), companies have to be careful.

Significant Labour Law Changes Bahrain Employers

1. Private Health Insurance Mandatory

One of the most significant changes in 2025 is the long-awaited enforcement of compulsory private health insurance for all private-sector workers. While Bahrain's Health Insurance Law was passed in 2018, enforcement had been postponed. Nevertheless, the Ministry of Health has verbally assured that complete enforcement will be implemented in 2025.

Employers would need to check the Sehati Portal regularly for official word and be prepared to obtain compliant health insurance for their employees in order to stave off fines. The step brings Bahrain's employee healthcare protection standards into the international mainstream but places a burdensome compliance burden on employers that are already running lean budgets.

2. Consolidation of Bahrainisation Targets

Bahrain continues to make its citizens the priority in terms of employment with increased Bahrainisation policies. A draft law in consideration recommends that foreign workers occupy no more than 30% of the total workforce in private-sector commercial institutions.

The effort, as part of Bahrain's overall national employment strategy, targets the recruitment of 20,000 Bahrainis and training for an additional 10,000 by the end of 2024. Employers who exceed the suggested foreign worker quota will be subject to fines of as much as 20% of the foreign worker's salary, so it is crucial that businesses review workforce structure and hiring methods.

3. Visa Fee Increases and Possible Conversion Ban

Visa requirements are also being made stricter. With Decree No. (119) of 2024, the cost of converting a visit visa into a work visa under the same sponsor has jumped from BHD 60 to BHD 250, and likewise for conversions for family reunification visas. Companies that fall short of Bahrainisation targets will have to pay twice the amounts.

Moreover, a draft law is once more up for discussion that would ban the conversion of visit visas to work permits, resurrecting a contentious policy that had been implemented briefly and subsequently overturned because of heavy business criticism. If re-enacted, the legislation would make it impossible for employers to transform entry visas into residence permits to work under any situation, an act that may profoundly affect hiring processes, especially in SMEs using flexible staffing solutions.

4. End of Service Entitlement Changes

Resolution No. 109 of 2023, also referred to as the Leaving Indemnity Resolution, was implemented in March 2024 and is still affecting employer commitments in 2025. It is now mandatory for employers to contribute monthly to the Social Insurance Organisation (SIO) to pay end-of-service benefits for employees, as opposed to direct payments to employees at the time of termination.

The highlights are:

1. 4.2% of the annual salary of the employee for the initial three years and 8.4% thereafter.
2. Payments should be made within the first 15 days of a month, subject to 5% interest on late payments.
3. Pre-March 2024 entitlements are still the direct liability of the employer.

Companies should be careful to report salaries properly and have adequate cash flows in order not to incur penalties and legal issues.

Proposed Labour Changes for 2025

1. Forced Vacancy Announcements

Draft legislation presented in October 2024 aims at forcing all companies to present job vacancies to the Ministry of Labour so that they can be advertised on its electronic job portal. This is in an effort to enhance job matching and provide for equitable access to opportunities for Bahraini job candidates. Failure to comply may entail a fine between BHD 200 and BHD 500, so employers must remain current on the developments of the law and incorporate such postings into recruitment processes.

2. Further Worker Protections in Dismissal Situations

Two other proposals are up for parliamentary scrutiny:

1. Fixing formal notice to authorities prior to suspending workers for severe misconduct, possibly curtailing employer discretion.
2. Increasing the time allowed for employees to pursue dismissal claims from 30 days to 60 days, providing workers with extra time to appeal against dismissals.
3. While intended to safeguard workers, these reforms might make internal disciplinary procedures more complex and extend workplace disputes, imposing a higher administrative burden on companies.

Handling the New Labour Environment

With these far-reaching changes looming, SME employers in Bahrain, in particular, need to embrace proactive action in their HR plans, labor planning, and fiscal management to conform to changing regulations.

Recommended Actions:

1. Audit your labor to verify Bahrainisation goals are being achieved.
2. Check health insurance coverage for entire staff and keep an eye out for updates on the Sehati Portal.
3. Budget for rising visa charges and rethink dependency upon visit-to-work visa switching.
4. Ensure timely SIO contributions and proper salary reporting to prevent penalties.
5. Prepare for compulsory job vacancy postings in case the legislation is passed.
6. Keep abreast of dismissal procedure changes and make necessary internal policy adjustments.

Conclusion

Reforms to Bahrain's labour law seek to encourage national employment, protect workers, and update the labour market in Bahrain. But if not implemented sensitively and backed by support measures for SMEs, these reforms may put even more pressure on the very companies that are key to economic growth. As emphasized by the recent parliamentary overture, the government has to maintain a fine balance between regulation and assistance to create an atmosphere in which companies are able to prosper, Bahraini nationals are able to find gainful employment, and the economic aspirations of the country are achieved. Employers are recommended to remain active with the current developments and seek professional advice to smoothly translate these changes, ensuring compliance and sustainability of business in the years to come.