Payroll Process for the bahrain . 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.
Currency: Bahrain Dinar.
1BHR=193.56 INR as on 1-Sep-2021.
- 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.
- 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
- 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 and 4% for expatriate employees (3% employer; 1% employee). The maximum month contribution base amount is BHR 4000.
- 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.
- 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.
C. 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.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.
- 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.
- 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
- 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
- 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.
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.
Gratuity Calculations:
Article 116 of Bahraini Labor Law states categories of workers to whom the Provisions of the social Insurance Law are not yet applicable, the employer concerned shall pay to such worker, upon the termination of employment, a leaving indemnity for the period of his employment calculated on the basis of 15 days wages for each year of the first three years of service and of one-month wages for each year of service thereafter.
Almost every employee must have heard about gratuity payment, but not many know the terms and conditions involved and how it is calculated. Here, we take you through a set of questions and answers that will help in clearing all your doubts related to end of service gratuity in Bahrain.
- What is Gratuity?
Gratuity is a monetary payment eligible to an employee as a lump sum at the end of his tenure provided that the period of service exceeds one year. Gratuity payment is a liability to the employer which accrues as the employee service period progresses. - Who is entitled to a Gratuity?
Expatriate workers are entitled to a gratuity on completion of their contract. Social insurance law applies to nationals employed in Bahrain and they are not entitled to Gratuity. - When does an employee become eligible for his/her gratuity payment?
Employees are eligible for gratuity pay at the end of their service period, upon the death of the worker, by a disability preventing his work performance or by a period of sickness which exceeds his entitlement to sick and annual leave. According to Article 116, the worker shall be entitled to gratuity for the fraction of the year worked. - What is the basis amount that is used to calculate gratuity?
As per Article 47, leaving indemnity shall be calculated on the basis of the worker’s most recent basic wage in addition to social allowance, if any. - What is the number of days used to accrue gratuity?
15 days’ wages for each year of the first three years of service and one-month wage for each year of service thereafter.The following example shows the gratuity accrual at a given time.
Particulars 0-3 years 3 Yrs And Above Hire date 15/04/17 15/04/16 Salary 1,000.000 1,000.000 One day salary (= salary/30) 33.333 33.333 Payroll Month January -2020 January -2020 Number of days in service as of 31 January 2020 1022 1387 Number of years in service 2.80 3.80 Gratuity Days First 3 yrs 42.00 45.00 3 Yrs and Above – 24.00 Gratuity Days in total 42.00 69.00 Gratuity Amount (Gratuity days*One day Salary) 1,400.000 2,300.000 - Does type of termination of an employment contract make any difference in gratuity payment?
Termination of an employment contract can be in terms of Resignation, Non-renewal of the contract or termination by the employer. In all these cases, the employer is bound to pay end of service benefits. If an employee is terminated as per article 107, the Employer is not liable to pay any Gratuity to the employee - What is the effect of unpaid leave taken during the period of service?
Any period taken by the employee as unpaid leave is excluded when determining the service period. That means unpaid leave days are excluded when accruing gratuity. The period of service is reduced by the number of days served as unpaid leave. - Can an employer withhold gratuity payment?
As per Article 107, the employer may dismiss the worker without compensation in any of the following instances:- If the worker assumes a false identity or submits false certificates or testimonials.
- If the worker committed a fault that caused serious material loss to the employer-provided that the employer shall report the matter to the competent authorities within two working days of his knowledge of the seriousness of the material loss.
- If the worker, despite a written warning, fails to comply with written instructions which are required to be observed for the safety of workers or the establishment, provided that such instructions are posted up in a prominent place in the workplace
- If the worker absents himself from work, without legitimate cause, for more than twenty(20) intermittent days or for more than ten consecutive days in one year, provided that such dismissal shall be preceded by warning in writing by the employer to the worker after an absence of ten days in the former instance and an absence of five days in the latter instance.
- If the worker fails to perform his essential duties under the contract of employment.
- If the worker discloses, without written permission from the employer, the secrets related to the work.
- If the worker has been finally sentenced for a crime or misdemeanor involving dishonor, dishonesty, or public morals.
- If the worker is found during the hours of work to be under the influence of alcohol or drugs, or if he has committed an immoral act at the place of work.
- If the worker assaults his employer or his responsible manager or commits a serious assault upon any of his supervisors at work during the course of employment or for reasons connected therewith.
- Worker’s failure to comply with the legally prescribed rules concerning the exercise of the right to strike
- If the worker becomes unfit to do his work subject to the contract due to a cause attributed thereto such as canceling his permit to practice his work or loss of the qualifications authorizing him to do the mutually agreed work.
- How Gratuity is calculated during final settlement?
Please see the below example for calculating Gratuity during final settlement.Total Service period Gratuity calculation Less than3 years 15 days wage for each of the first three years of employment 3 years and Above 15 days wage for each of the first three years, One-month wage for each of the following years in service
Please see the below example for calculating Gratuity during final settlement.Service period Less than 3 Years
( Eligible for 15 days)3 years and Above
( Eligible for 1 Month)Hire date 24/02/16 15/04/13 Last Working Day 25/01/19 25/01/20 Salary 1,000.000 1,000.000 One day Salary (= Fixed Salary/30) 33.333 33.333 Number of days in service 1067 2477 Number of years in service 2.92 6.79 Gratuity days for the First 3 yrs 35.08 45.00 Gratuity Days 3 Yrs and Above – 113.59 Gratuity days in total 35.08 158.59 Gratuity Amount (Gratuity days*One day Salary) 1,169.333 5,286.301
Whether you are someone who has resigned from work, or has been terminated by the employer, the gratuity that you are eligible to receive at the end of your service can be of great help while transitioning to your next job. Hence, it is important to be aware of the gratuity payment policies and any changes to it.
Reference Links:
https://hlbhamt.com/payroll-process-in-bahrain
https://hlbhamt.com/bahrain-end-of-service-gratuity-calculation/