Bahrain Payroll & HR Insight from a Global Payroll Outsourcing Leader
This guide is a must read before you either outsource your Bahrain payroll or build a local HR and Payroll function. As a Global Payroll Provider, Mercans can guarantee your full compliance with all the applicable regulations.
Along with competitive costs, easy access to the rest of the Middle East and a well-established business infrastructure, you will find that Bahrain has experience in understanding the needs of foreign businesses and responding to them.
The government regards foreign investment as key to its Economic Vision “2030 long-term plan” for improving the competitiveness of the economy, creating skilled jobs for Bahrainis and enhancing living standards. For this reason, the Bahraini Government is committed to building on their existing advantages, aiming to build the Middle East’s most attractive centre for business.
1.2 Registrations and Establishing an Entity
The company is required to have a legal entity established in order to process a payroll.
Some industries are prohibited in Bahrain (for example, gambling or the import and industrial use of restricted chemicals) whilst some industries are protected for investment by Bahraini Citizens; GCC citizens and Companies (for example, a diverse range of industries ranging from printing presses, accounting services and the import / export and sale of racing car fuel)
There are several types of company entities in Bahrain including:
- Bahraini Shareholding Company (B.S.C) – Public
- Closed Shareholding Company (B.S.C) – Closed
- Limited Liability Company
- Partnership Company
- Simple Commandite
- Commandite by Shares
- Single Person Company
- Foreign Company Branch
- Holding Company
The Commercial Registration of companies can be done at the Bahrain Investors’ Centre. The processing time for registering a business is estimated to be between one to three working days and must be renewed on an annual basis. For some commercial activities, a license or approval is required.
It is currently not mandatory to make employee salary payments from an in-country bank account. However, Bahraini government has announced plans to roll out Wage Protection Systems (WPS) in the near future. Upon the implementation of the WPS, employers will be required to process all salary payments locally through the WPS. Third-party payments can be either made through a local bank account or credit card.
Bank opening days and hours vary from branch to branch. Generally opening days are Saturday – Wednesday or Sunday to Thursday and general opening times are from 07:30 – 13:00 and then 16:00 – 18:00.
1.4 Working Week
In accordance with the Bahrain labour law, the maximum working hours are 8 hour per day and 48 hours per week. The customary working week in Bahrain tends to vary between 40 and 48 hours depending on company policy. Office hours are usually from 08:30 or 09:00 to 17:30 or 18:00. There are no differences in time keeping between summer and winter. In the month of Ramadan, the working day is reduced to six hours and legally this should apply to all staff but many companies only apply it to Muslims who fast during daylight hours.
Friday is the Muslim rest day and if your company has a five-day working week the other day off will probably be either Thursday or Saturday. Saturday is the more popular choice for international companies as taking Thursday off would mean a reduction in the number of operational days in common with much of the rest of the world. Conversely, other companies insist on Thursday as the school ‘weekend’ is Thursday and Friday.
1.5 Basic Facts about Bahrain
Full name: Kingdom of Bahrain
Population: 1.64 million (2019 estimate)
Major Language: Arabic
Major Religion: Islam
Monetary Unit: 1 Bahraini dinar = 1,000 fils
Main Exports: Petroleum and petroleum products, aluminium
GNI per Capita: US $44,700 (World Bank, 2018)
Internet Domain: .bh
International Dialling Code: +973
How to say: –
Good morning صباح الخير
Good evening مساء الخير.
Do you speak English? هل تتكلم بالإنجليزية؟
Good bye وداعا
Thank you شكرا
See you later اشوفك بعدين
As there are no income tax obligations in Bahrain, there is subsequently no tax year.
There are no tax deductions in Bahrain, however employees do contribute towards social security. Bahraini Nationals and expatriates contribute towards SIO (Social Insurance Organization – official authority responsible for providing social insurance services).
Also, there is a regulated minimum salary for Bahraini Nationals (based on job description).
The SIO contribution for expatriates are typically paid by their employer; however, the employer has the right to deduct the SIO contributions from the employees’ salaries.
There is no individual income tax in Bahrain.
The current rate of contributions to the SIO is 19% for local employees (12% employer; 7% employee) and 4% for expatriate employees (3% employer; 1% employee), subject to BD 4,000 per month contribution base maximum.
The employer’s contribution is 12% of gross wages for insurance against old age, disability and death (applicable only to Bahraini employees) and 3% of gross wages for insurance against employment injuries (applicable to all employees).
The employee’s contribution is 7% of gross wages for insurance against old age, disability and death (applicable to Bahraini employees only) and 1% of gross wages for insurance against un-employment.
SIO contributions are calculated by the authorities based on the contractual salaries reported by employers in January of the respective calendar year.
Monthly social security contributions must be paid by the 15th of every month.
2.3 Healthcare Fee
The Ministry of Health shall provide basic health care to all employees and employers are required to pay to the Ministry cost of such health care which is determined as follows:
- BD 72 per annum in respect of every non-Bahraini worker.
- BD 22.5 per annum in respect of every Bahraini worker.
Healthcare Fee is payable to the Ministry of Health as previously advised through the Labour Market Regulatory Authority by collecting it at the time of issuance and renewal of work permits in respect of non-Bahraini workers, and through the SIO in respect of Bahraini workers.
As there are no income tax obligations, there is no monthly, quarterly or annual reporting to be adhered to, with the exception of the monthly and annual SIO declaration and contributions described above.
2.5 New Employees
Employers must register their employees in the Kingdom of Bahrain with the Ministry of Labour and Social Affairs and receive a certificate of registration.
The employer must also register it’s employees with the Social Insurance Organization (SIO) and contributions must be paid monthly for compulsory insurances against old age, disability and death (for Bahraini employees only), and against work-related injuries including death (for all employees).
When an employee is hired the employer has to enlist with the Pension Authority. This is generally managed by the legal firm and/or representative that are responsible for the legal registration of the company.
Each legal entity has guidelines stating the deadlines for registrations.
On the termination of employment of a foreign national two things must be considered:
- Leaving indemnity: An indemnity must be paid, which will depend on length of employment and whether it was the Employee or Employer that terminated the employment.
- Plane ticket: The Employer pays for a plane ticket for the Employee to leave the country, to a location specified in the employment contract or to the country of the Employee’s nationality.
It is legally acceptable in Bahrain to provide employees with online payslips.
It is not specified how long payroll reports must be kept for in Bahrain.
Article 25 of the Law of Commerce requires businesses to keep their commercial books and the documents supporting the entries made therein for a period of 10 years commencing from the date of the closing of books.
It also requires that all correspondence should be kept for a period of five years commencing from the date of despatch or receipt thereof.
4.0 Employment Law
Every worker who has completed one year’s continuous service with their Employer shall be entitled to leave on full pay for a period of not less than 21 days for each year which increases to a period not less than 28 days after five continuous years of service. A worker shall be entitled to such leave upon a quantum merit in respect of the proportion of their service in that year. A worker may not waive their entitlement to leave nor receive the payment in lieu of taking their holiday entitlement.
An Employer is permitted to schedule the date of annual leave. Such leave, other than the first half of the prescribed entitlement, may be taken at intervals with the consent of the worker.
An Employer may approve the deferment of the annual leave entitlement at the written request of a worker for a period not exceeding three years provided the worker shall take 10 consecutive days of his annual leave entitlement in each year.
A female worker shall be entitled to maternity leave on full pay for forty-five 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 date of her confinement. Such maternity leave shall include the period before and after confinement.
Further, she may have an additional leave without pay for 15 days. When a female worker returns to her employment after maternity leave she shall be entitled to a period or periods of rest in order to feed her newly born child and the total of such periods shall not exceed one hour each day and shall be in addition to the normal intervals of rest granted to all the workers.
Paternity leave entitlement is up to five days after the birth. There are no additional benefits.
A worker who has satisfactorily completed the probationary period shall have the right, in case of sickness certified by a doctor nominated by the Employer or by the responsible doctor at any Government Medical Institution, to be granted the following sick leaves during every year:
- 15 days on full pay
- 15 days on half pay
- 15 days without pay
In case of a disagreement as to the limitation of the duration of the medical treatment, a certificate signed by the responsible doctor at any Government Medical Institution shall be valid in this respect.
The entitlement of a worker to sick leave on full or partial pay may be accumulated for a period not exceeding 182 days. In the event that the period of absence of a worker due to sickness exceeds their sick leave entitlement, such excess may be deducted from their annual leave entitlement.
6.0 Visas & Work Permits
All foreigners wishing to work in Bahrain must obtain work visas and permits. The application for these documents should be made to the Labour Market Regulatory Authority prior to the applicant travelling to Bahrain. It is advisable to go through an agent to apply for a working Visa on an Employee’s behalf as they will be familiar with all aspects of the process and will already know all the procedures involved in applying for the Visa.
Submitted to: Labour Market Regulatory Authority
Issued by: Labour Market Regulatory Authority.
Visa Application Requirements:
- Visa Application Form
- Employee’s passport
- Passport size photograph
- Sponsorship Letter: a letter of employment indicating Employer’s name/organization, commercial registration number, Employee’s capacity, salary, contract duration, Employee’s name, birth date and nationality
- Copy of the contract
- Health record from an authorised clinic
- BD100 fee
Residency Permit (Family Visa)
Submitted to: Labour Market Regulatory Authority
Issued by: General Department for Nationality & Passport Residence
Residency Permit Requirements:
- Application Form
- Copy of the Employee & Employees family’s passport
- Employee’s Sponsorship Letter
- Employee’s Contract
- Family health record from an authorised clinic
- BD22 fee per applicant
CPR Card (Identification Card)
Submitted to: Central Informatics Organization
Issued by: Central Informatics Organisation.
- Employee (or spouse) passport
- Sponsorship letter stating names of dependents
- Marriage certificate (for spouse) and birth certificate (for children)
- BD1 fee per applicant
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SIMPLIFYING EMPLOYMENT TASKS WORLDWIDE
Local Presence. Regional Strategy. Global Success.
We are a borderless people engagement enabler, committed to make your teams happy. Driven by technology and innovation, we pride ourselves in being global people experts with striking local presence. We deliver bespoke human capital management services and innovative global payroll solutions to empower international businesses.
We are your reliable HR function outsourcing partner, delivering innovative HCM solutions, along with cutting-edge human capital management advice, to ensure consistent business growth, regardless of the size and industry of your company. We develop SaaS software and outsource HCM solutions tailored to 5,000+ clients across all continents.
Mercans operate globally, ensuring timely measurable results and bottom-line savings. We employ 500+ payroll and human resources specialists with in-depth local knowledge. Thanks to success-oriented teams striving for excellence and taking care of your organization’s tasks within budget, we have gained the trust of major multinational companies.
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