Key Takeaways for Hiring in Bahrain
- Bahrain offers a pro-business environment with zero income tax, mandatory social contributions, and a recent overhaul to its expat end-of-service system.
- While employment laws protect both employers and workers, HR teams must navigate strict documentation, EOSB contributions via the SIO, and new healthcare requirements.
- Managing payroll in BHD and leave rules like Iddah and Hajj in Bahrain requires precision and strict compliance.
Continent
Asia
Capital
Manama
Currency
Bahraini Dinar (BHD)
Language
Arabic
Payroll Cycle
Monthly
VAT
10%
Quick Facts For Hiring In Bahrain
Bahrain Employment Contract Overview
You’ll need a clear, detailed contract in Bahrain that covers everything from notice and probation to pay and benefits. Here’s what to include to stay compliant:
What Do You Need To Include In A Bahraini Employment Contract?
To stay compliant in Bahrain, your employment contracts need to spell out key information about the role, working terms, and pay. Here are the key details to include:
Employee Information
- Full name
- ID number
- Role / Job title
- Start date
- Contract duration
- Working hours
- Probation and notice conditions
- Termination provisions
- Compensation details
Note: Contract duration for Bahraini nationals must be at least 12 months. There’s no limit for expats.
Onboarding Process
Onboarding in Bahrain typically includes the following steps to ensure a smooth transition for new hires:
- Pre-Employment Documentation — Collect necessary personal information and documents for work permits and visas.
- Employment Contract — Prepare a written employment contract in Arabic, detailing job responsibilities, compensation, and other essential terms.
- Orientation — Provide training tailored to the employee’s position to ensure they are equipped for their responsibilities.
- Role-Specific Training — Provide training tailored to the employee’s position to ensure they are equipped for their responsibilities.
- Compliance and Benefits Enrollment — Ensure the employee is registered with relevant authorities and enrolled in mandatory benefit programs.
- Pre-boarding — Pre-boarding Pre-boarding
Leave And Holiday Entitlement In Bahrain
Annual Leave
Employees earn 30 working days (2.5 days per month) of paid annual leave after completing one year of service.
Employees with less than a year of service receive a pro-rated entitlement based on months worked, and leave cannot be waived or replaced by payment unless allowed by law.
Employers must schedule annual leave and allow employees to take at least 15 consecutive days each year. Short interruptions, such as emergencies of up to two days at a time and no more than six days total, can be deducted from annual leave.
Public Holidays
Employees receive paid leave for nine public holidays each year:
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January 1: New Year’s Day
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May 1: Labor Day
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Eid al-Fitr (three days)
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Eid al-Adha (three days)
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Islamic New Year
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Ashura Eve
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Ashura
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Prophet Muhammad’s Birthday
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December 16-17: National Day
If an employee is required to work on any of these official holidays, they must be compensated at 250% of their normal wage or granted an alternative paid day off.
Sick Leave
Employees become eligible for 55 days of sick leave after completing three consecutive months of service.
Sick leave includes 15 days at full pay, 20 days at half pay, and 20 days unpaid within the same year. Paid sick leave can accumulate up to 240 days in total.
A medical certificate from a government‑approved physician is required. Employers cannot dismiss an employee on sick leave if they have remaining leave.
Maternity Leave
Female workers with ≥1 year of continuous service are entitled to 60 days paid maternity leave and may take an additional 15 days unpaid leave.
Employers cannot dismiss employees during maternity leave.
After maternity leave, employees with children under six years old are entitled to six months unpaid leave (across three births), and two daily breastfeeding breaks of ≥1 hour until child is six months old (or two ½‑hour breaks until age one).
Paternity Leave
One day paid leave on the birth of a child.
Other Types of Leave
Marriage or death of spouse or close relatives (up to 4th degree kin, or spouse’s relatives up to 2nd degree): Three days of paid leave.
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Iddah Leave: Muslim female employees are entitled to one month of paid leave upon the death of a husband, followed by additional leave up to a total of three months and ten days. If their annual leave balance is insufficient, the remaining period can be taken as unpaid leave.
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Hajj Leave: Muslim employees who have completed five continuous years with the same employer are entitled to 14 days of paid leave, once during their employment, to perform the pilgrimage.
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Educational or contingency leave: Up to six days per year (maximum of two days at a time) for emergencies or exam reasons, deducted from annual leave balance.
Termination and Offboarding in Bahrain
Ending employment in Bahrain has to follow specific rules around notice, severance, and compliance. Here is what to keep in mind to help you manage exits smoothly.
| Type | Possible? |
|---|---|
| Termination for Cause (poor performance, misconduct, etc.) | Yes |
| Termination without Cause | Yes |
| Mutual Termination Agreement (MTA) | Yes |
| Redundancy | Not possible under the EOR setup |
Bahrain Employee Resignation
Form
The employee must issue a signed written resignation letter.
Notice period
30 days notice unless a longer period is contractually agreed upon.
Payment in lieu of notice or notice waiver
Employers can choose to waive the notice period, and a resignation takes effect once the notice is served unless both parties agree to waive it.
End-of-Service Benefits
Severance/Gratuity
- Employees are entitled to severance compensation calculated as half a month’s salary for each of their first three years of service, and a full month’s salary for every year of service thereafter.
- This is calculated pro‑rata for partial years and based on the most recent wage, excluding allowances other than social allowance.
For Expat Employees (Non‑Bahraini)
- Since 1 March 2024, the Social Insurance Organization (SIO) has managed end-of-service gratuity instead of employers paying it directly. Employers must contribute monthly an amount of wages.
- Employers calculate end-of-service gratuity based on the employee’s basic salary and any social allowance, excluding other allowances. The rate equals 15 days of salary for each of the first three years of service and one month of salary for every year thereafter.
- The employee must apply to the SIO to receive their gratuity payment. The SIO typically processes applications within five working days.
Other Benefits
- Employers must also provide an end-of‑service certificate upon termination or at request, detailing employment dates, job, salary, benefits, skills, termination date, and reason.
- Employers must pay employees for any accrued but unused annual leave and, for expats, provide a repatriation air ticket unless they remain in Bahrain under new sponsorship.
Employer Termination With Cause in Bahrain
Acceptable grounds
Gross Misconduct (Immediate Summary Dismissal)
Under Article 57 of the Bahraini Labour Law, employers may summarily dismiss employees without notice or gratuity for serious offenses, such as:
- Forgery or presentation of false identity documents
- Significant errors causing material loss
- Disobedience to workplace safety instructions
- Breach of fundamental duties or confidentiality
- Criminal convictions involving dishonesty or moral turpitude
- Intoxication at work or assaulting colleagues
- Unauthorized absence exceeding thresholds (e.g., over 20 intermittent days or 10 consecutive days per year).
Other Valid Causes (With Notice)
Employers can terminate employment for other valid reasons, such as misconduct (not amounting to gross), poor performance, redundancy, or business restructuring, but only with proper notice, per Articles 56, 58, and 59.
Notice
Notice period
When an employee is terminated for cause, the employer is not obligated to provide advance notice.
End-of-Service Benefits
Severance
In cases of Summary Dismissal (Gross Misconduct), the employee forfeits gratuity, meaning no end-of-service benefits are payable.
Visa and Immigration Compliance
Summary dismissal may lead to immediate cancellation of sponsorship.
Employer Termination Without Cause in Bahrain
Acceptance Grounds
Employers can terminate employment for valid reasons such as misconduct (not amounting to gross), poor performance, redundancy, or business restructuring but only with proper notice, per Articles 56, 58, and 59.
Notice
Notice period
When terminating permanent employees for reasons other than misconduct, employers must provide one month’s notice.
End-of-Service Benefits
Severance/Gratuity
Bahraini Employees or Those Not under the SIO
- Calculation:
- First 5 years: Half a month’s wage per year of service.
- Beyond 5 years: One month’s wage per year.
- Part‑year service is calculated proportionally.
- Payment Eligibility:
- Gratuity is due on termination unless the cause is lawful summary dismissal for gross misconduct under Article 57, where the employee forfeits entitlement.
Expatriate Employees (SIO-Regulated)
- Employers pay monthly gratuity contributions into the Social Insurance Organization (SIO).
- Employee Claim: Upon termination, employees apply directly to the SIO, and employers don’t pay gratuity for service periods covered by the SIO.
Other Benefits
- Unused Leave: Employers must compensate employees for accrued but unused annual leave.
- Travel Ticket (Expats): Employers must arrange or pay for a return travel ticket, unless the expatriate is moving to new sponsorship within Bahrain.
- End-of‑Service Certificate: Mandatory upon request. It must include employment dates, job title, salary, benefits, and reason for termination.
Final Payment Timing & Compliance
- Final Payment Deadline: Employers are obliged to pay gratuity, unpaid leave, and other dues immediately upon termination.
- Penalty: Delays are actionable.
Mutual Termination Agreements (MTAs) in Bahrain
MTA is a voluntary agreement signed by both parties (employer and employee) to terminate an employment contract by mutual consent.
Notice
Notice period
When terminating permanent employees for reasons other than misconduct, employers must provide one month’s notice.
Since it’s by agreement, parties can waive the standard notice requirement or customize the duration in the mutual agreement.
End-of-Service Benefits
Severance/Gratuity
Bahraini Employees or Those Not Under SIO
- Entitlement: Employees are generally entitled to end-of-service gratuity, even when the termination is by mutual agreement. The formula includes:
- Half a month’s wage per year for the first 5 years;
- One month’s wage per year thereafter;
- Plus pro‑rata calculation for partial years.
Expatriate Employees Covered by SIO (Post-March 2024)
- Benefits via SIO:: Employer contributions go to the Social Insurance Organization. The employee later claims the gratuity from SIO, and mutual agreements do not alter this mechanism.
Other Benefits
- Unused Leave: Payable upon termination.
- Return Travel (Expat): Typically included, unless alternative arrangements like new sponsorship apply.
- End-of-Service Certificate: Must be provided on request, and include details such as employment period, position, salary, termination reason.
Termination Documentation
Mutual Agreement Form: Must be in writing, signed by both parties, and should outline:
- Termination date,
- Notice arrangements (if any),
- Entitlements and settlement amounts,
- Any waivers or special agreed terms.
The agreement should explicitly state that it’s mutual and consensual.
Final Payment Timing and Compliance
Final Payment Deadline: All dues, including gratuity, unused leave, and related benefits, should be paid immediately on termination, or as specified in the mutual agreement.
Offboarding Process for the End of Fixed-term Contracts in Bahrain
If the Fixed-Term Contract Ends Normally
When a fixed-term contract reaches its agreed end date without early termination, Bahraini law doesn’t require employers to pay additional severance or compensation.
Once the contract term concludes, obligations end, unless the contract or applicable law specifies otherwise. This scenario aligns with legal norms under Bahraini Labour Law (Law No. 36 of 2012).
If the Employer Terminates Early
When an employer ends a fixed‑term contract prior to its scheduled end, the following legal principles apply:
Severance
If the employer ends a fixed‑term contract early, before its natural term concludes, Bahraini Labour Law mandates compensation to the employee-even if the termination is ostensibly for cause.
Under Article 111 of Labour Law No. 36/2012, if the employer terminates a definite-duration contract without cause (or with illegitimate cause), the employee is entitled to compensation equal to the wages for the remaining period of the contract. However, the parties may agree to a lesser amount, provided it is not less than the lesser of:
- Three months’ wages, or
- The remaining term of the contract, whichever is less.
If the termination qualifies as arbitrary dismissal (i.e. unlawful or unfair), the employee is further entitled to additional compensation equal to half of the original compensation due, unless the contract stipulates a higher amount.
Notice
Bahraini law requires at least 30 days’ notice before terminating any employment contract though contracts may specify longer notice periods in favor of employees.
Failing to observe the notice entitles the employee to wages in lieu of notice for the relevant period.
Supporting Guides
Frequently Asked Questions
Is income tax applicable in Bahrain?
No. Bahrain has no personal income tax for residents or expatriates. However, employers must comply with social security contributions based on nationality.
What are the new EOSB rules in Bahrain?
Effective March 1, 2024, expat EOSB (End-of-Service Benefits) must be pre-funded monthly via the SIO (Social Insurance Organization). Employers contribute 4.2% of salary for the first 3 years, then 8.4% thereafter. Employees do not contribute.
Are Bahraini employment contracts required to be bilingual?
Yes. All employment contracts must be in Arabic and, optionally, in another language. However, if any dispute arises, the Arabic version prevails.
What is the probation and notice period structure?
Probation can be up to 3 months (extendable to 6 for specific roles). During probation, only 1-day notice is required. After probation, the minimum notice period is 30 calendar days.
Is health insurance mandatory for employees in Bahrain?
Yes. Government health insurance is included in the work permit fee. Employers may also provide private health insurance as an added benefit.
What social security contributions are required for expatriate employees?
Employers must contribute:
What are the leave entitlements in Bahrain?
Annual Leave: 30 working days after 1 year Sick Leave: 55 days (15 full pay, 20 half pay, 20 unpaid) Maternity Leave: 60 paid days + optional 15 unpaid Paternity Leave: 1 day paid Hajj Leave: 14 days after 5 years of service (Muslims only) Iddah Leave: Up to 3 months & 10 days for widowed Muslim women
How are terminations handled under Bahraini law?
Bahraini law allows termination with or without cause, but strict notice rules and severance obligations apply. EOSB may be forfeited in cases of gross misconduct.
What’s the typical payroll cycle in Bahrain?
Payroll is processed monthly, with payment due at the end of each month. There’s no statutory payday, but consistency must be maintained.
Can I hire in Bahrain without setting up a local entity?
Yes. You can use an Employer of Record (EOR) like RemotePass to compliantly hire and pay talent in Bahrain without the burden of local incorporation or visa sponsorship.
