Payroll process in Bahrain
Bahrain, an island in the Arab area, is a perfect location for businesses to thrive. Several laws and norms must be considered during the development process. Before forming a company in Bahrain, make sure everything is in shape, especially with payroll process possibilities.
For more than 24 years, HLB HAMT has served clients throughout the GCC, the Middle East, and Africa. HLB HAMT has a long history of servicing clients in a variety of sectors. We combine our extensive experience with cutting-edge technology to offer you payroll services that are both reasonable and simple to understand. Our experts are based regionally and are familiar with all aspects of payroll processing for clients all around the world.
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Bahrain, with the most vibrant economy provides investors with a stable business climate as well as the fewest obstacles to starting and running a firm. The developing economy of the nation offers a wealth of interesting investment options, and when combined with its advantageous geography, creates an ideal setting for business establishment.
Payroll Process in Bahrain – Our features
The following details, which are below mentioned, include some of the most important Bahrain payroll regulations, procedures, and practices.
Social Contribution (SIO)
Social Insurance Organization (SIO) is the official authority responsible for providing social insurance services to all individuals covered by the Pension Civil Law and Social Insurance Law in the Kingdom of Bahrain.
The total percentage of Bahraini nationals is 23% with effect from January 2023, of which 15% is employer contribution and 8% is employee contribution. This rate will change again starting from January 2024 until January 2028, bringing the total employer contribution to 20% by 2028. Please see the table below.
There is an employer contribution of 3% for expatriate staff, but there is no employee contribution. The maximum deduction base amount is BHR 4000. Please read our article on Bahrain’s Social Security Contribution.
Bahrain Wage Protection System (WPS)
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.
The following are the steps to integrate the Wage Protection System in Bahrain:
- Opening a bank account or issuing a prepaid card for each employee.
- Paying the employee’s monthly wages on a regular basis through the service of WPS salary transfer in the banking system.
- The authority will be able to receive all information according to the shared database.
Types of statutory leaves in Bahrain
- 30 calendar days per year
- 55 Days Sick leave in a year
- First Fifteen Days – Full Pay
- Next Twenty Days – Half Pay
- Last Twenty Days – Without Pay
- 55 Days Sick leave in a year
Maternity leave – 60 Days
Hajj Leave -14 Days
Marriage leave – 3 Days
Paternity Leave – 1 Day
Compassionate Leave – 3 Days
Iddah Leave – One month paid leave
Please read our article on Bahrain leave policy here for a comprehensive understanding.
End of Service Gratuity
The end-of-service Gratuity is a monetary payment eligible to an employee as a lump sum at the time of resignation/termination/end of the contract.
Gratuity calculation is accrued against the last drawn total salary on the following basis.
- Half-month salary per year for the first three years
- Full month salary per year from fourth year onwards.
For a comprehensive understanding of Bahrain gratuity accrual and settlement, please refer to our article.
Tax and other statutory deductions:
Payroll is not subject to income tax, and hence there are no mandated tax deductions. Bahrain nationals are subject to mandatory social insurance contributions
Working Hours and Overtime
The maximum number of working hours is eight hours a day and 48 hours in a week. During the month of Ramadan, it is six hours per day for Muslim employees.
Employee shall be entitled to a remuneration equal to his\her 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. 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 rest day or on a public holiday, employee shall have the choice between entitlement to the remuneration of his/her 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
End of Service Benefits
The employee is eligible for the following post-employment perks.
- Unprocessed Salary
- End of service Gratuity
- Air ticket for repatriation
- If applicable, pay for the notice period.
- Any unused leave (Vacation).
- Any other unpaid payments or deductions
- Any other benefits or compensation mentioned in Employment Contract
In order to get a detailed understanding of the payroll process in Bahrain, please refer to our article
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