2. Payroll is quite a complicated and time-consuming process that requires an
eye for accuracy. The process will not be the same for all countries; each
country has its own tax laws, minimum salary requirements, pension plans,
gratuity schemes, leave policies, and many more. Here we have covered in
detail about the payroll process in Bahrain, via a set of FAQs.
3. What is the frequency of making salary payments to employees in Bahrain?
The law stipulates in Article 40 that the intervals for making salary payments to
employees should be monthly for employees paid monthly. If the work is paid per
production and the work requires at least two weeks, the worker shall be paid an
advance in the first week and the balance should be paid in the last week after
completion of the job. Employees who are paid on an hourly basis should be paid
at least once a week.
Which are the statutory pay components in Bahrain?
There are no such specific pay components in Bahrain which is mandatory as per
law. Article 66 of the Bahrain labour law defines wages as total remuneration
payable to employees which may include basic pay, housing allowance, transport
allowance and any other benefits. The law does not specifically define any
statutory components.
4. Which are the common pay components that are normally payable to employees?
Fixed components may include Basic salary, housing allowance, transport allowance; the variable
components may include Overtime, Bonus, Incentives, Sales commission, Relocation allowances, Leave
passage etc.
What is the minimum salary payable in Bahrain?
There is no Minimum Salary in Bahrain mentioned in Labour law
What is the maximum number of working hours set in the labour law?
Article 51 states that, a worker shall not be employed for more than eight hours a day and 48 hours in a
week. Muslim workers shall not be employed for more than six hours a day during the holy month of
Ramadhan.
How is overtime calculated?
Overtime is any extra hours worked by an employee beyond the normal working hours. Article 54 states
that, the employee shall be entitled to a remuneration equal to his normal working hours plus an extra of
at least 25% of such remuneration for extra hours worked during the day and at least 50% for hours
worked at night. As per Article 1, night means the time between 7 PM to 7 AM. Overtime hours in Bahrain
shall not exceed 12 hours a week. If an employee works during his rest day or on a public holiday, he shall
have the choice between entitlement to the remuneration of his normal wage plus an extra 50% or get an
extra day of rest. All working hours performed during holidays and Eid’s shall be considered as overtime
hours
5. How is gratuity accrued?
As per article 116 of Bahrain Labor Law, Gratuity calculation is accrued on the following basis.
If the service period is below 3 years at half month salary per year based on last drawn pay
If the service period is more than three years at full month salary per year.
When is gratuity paid to an employee?
Gratuity is paid at the end of employment. The end-of-service award shall be calculated based on the last
drawn salary and the worker shall be entitled to an end-of-service award for the portions of the year in
proportion to the time spent on the job.
For a comprehensive understanding of Bahrain’s gratuity accrual and settlement, please refer to our article
on Bahrain gratuity policy and settlement.
What are the statutory deductions that are made to employees in Bahrain?
In Bahrain, payroll is not subject to income tax, and hence there are no mandated tax deductions. However,
Bahrain nationals are subject to mandatory social insurance contributions.
How is Bahrain social contribution calculated? Which employees qualify for Bahrain pension
contribution?
The social security contribution is fixed at 19% of the employee’s Gross Salary for the Bahrain Nationals, of
which 12% is payable by the employer and 7% is payable by the employee.
The maximum deduction base amount is BHR 4000.
There is an Employer contribution of 3% percentage for expat staff, but there are no Employee contributions.
6. What is WPS in Bahrain?
Wage Protection System (WPS) is a scheme implemented by the Bahrain Labour
Markets Regulatory authority in collaboration with the Central bank of Bahrain.
WPS records wage payments in the private sector and guarantees payments are
made in full and on time.
Are Employees eligible for Air Ticket Benefits in Bahrain?
The labour law is silent on the issue of annual air tickets. In general, most of the
companies provide air tickets to employees annually and some of the companies
extend this payout to employee’s dependents as well.
7. What is the leave policy defined under the labor law?
A. Annual Leave
According to Article 58, a worker who has completed a one-year service with the
employer shall be entitled to a paid annual leave of not less than 30 days per year. If
an employee’s period of service is less than one year, he/she is eligible for a
proportion of his service in that year.
B. Sick leave
Sick leave is granted to an employee in the following rate:
First Fifteen Days – Full Pay
Next Twenty Days- Half Pay
Last Twenty Days – Without Pay
As mentioned in Article 65, a worker who has completed three months of continuous
service shall have the right to take sick leave, in case of sickness certificate by a
doctor nominated by the employer.
8. Maternity leave
According to Article 32, a female worker shall be entitled to maternity leave on
full pay for sixty days which shall not be deducted from her annual leave provided
she produces a medical certificate attested by the Ministry of Health stating the
expected period of her confinement. Such maternity leave shall include the period
before and after delivery. Further, she may have additional leave without pay for
fifteen days.
D. Hajj Leave
Article 67 states that, a Muslim worker who has completed a period of five
consecutive years with the employer is entitled to a fourteen-day paid leave to
perform Hajj. This shall be granted only once during the service period provided
that the employee was not granted the leave while working with a previous
employer.
E. Paternity Leave
Paternity leave is given to male employees upon the delivery of their child. Article
63, grants male employees one day paid leave upon the delivery of their child.
9. E. Marriage leave
Marriage leave is provided in the Bahrain labor law as per Article 63 and is
granted for three days, as paid leave, only once.
F. Compassionate Leave
Compassionate leave is provided and given for three days for the death of a
spouse or one of his ascendants and descendants under Article 63.
G. Iddah leave
Muslim woman whose husband has died is entitled to a one month paid leave.
Moreover, she is entitled to a three month and ten days iddah leave from her
annual leave. If the annual leave balance is insufficient, she may take the
rest of the period as unpaid leave.
Please read our article on Bahrain leave policy here for a comprehensive
understanding.
10. Is employee Medical Insurance mandatory in Bahrain?
It is mandatory that an employer provide medical insurance to the employee
during the duration of employment
Which are the currencies that can be used while making salary payments
in Bahrain?
Article 40 states, the currency used in making salary payments is the Bahrain
national currency i.e., Bahrain Dinar. And any other legally available foreign
currency is also acceptable if it is supported by an agreement.
Is bonus or incentives payment mandatory in Bahrain?
Bonus and incentives payments are not mandatory. Many companies have bonus
or incentive schemes implemented to keep employee motivation and the
structures vary from one company to the other based on their policy.
11. What are the Official Holidays in Bahrain?
Official holidays on full wage that are granted to a worker are as follows:
Hijri (Arabic Calendar) New Year
El-Adha 3 Days
Arafat Day
El-Fitr 3 Days
The Prophet’s Birthday
National Day
Ashoora 9th and 10th Muharram
New year day i.e. 1st January
Labor Day
12. What are the items included in End of Service Benefits calculation in Bahrain?
The employee is entitled to the following end of service benefits.
End of service Gratuity
Repatriation ticket if applicable
Notice period pay if applicable
Any unutilized leave (Vacation) pay
Any other outstanding payment or deduction
Employee Benefits in summary:
Salary
Gratuity
Annual Leave
Sick leave
Maternity Leave
Paternity Leave
13. Marriage Leave
Compassionate Leave
Medical Insurance
Overtime pay if applicable.
The law and procedures related to payroll system might vary for different countries,
but the mandatory requirement remains the same. An accurate and streamlined
system for payroll processing will mitigate risk and improve business operations
vastly.
14. Payroll Process in Bahrain
The process of payroll is a little complicated and time-consuming; hence it is
always recommended to outsource your company’s payroll function.
Outsourcing payroll will ensure the assistance of a team of trained payroll
professionals and it frees up the time of the organization, helping them focus
on other projects that add value to their business.
One should be extra vigilant while selecting their payroll provider, as payroll
data is highly sensitive, and one should opt for a provider that can ensure
high levels of data security.
15. CONTACT US
HLB HAMT
Level 18, City Tower-2,
Sheikh Zayed Road
PO Box 32665
Dubai – United Arab Emirates. Tel: +971 4 327 7775
E-mail: dubai@hlbhamt.com
www.hlbhamt.com
