Employer of Record (EOR) Bahrain
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Navigating the intricacies of international employment in Bahrain is a complex endeavor. That’s where the expertise of an Employer of Record (EOR) in Bahrain becomes indispensable. As the legal employer, the Employer of Record takes charge of various employment facets, ensuring strict adherence to Bahrain’s labor laws and regulations.
Roles and Responsibilities of the Employer of Record in Bahrain:
- Legal Compliance: Ensure the worker’s employment aligns with Bahrain’s labor laws and regulations.
- Payroll Management: Oversee the local payroll process, ensuring accuracy and timeliness.
- Tax Filing: Handle the filing of employment-related taxes and necessary paperwork.
- Benefits Administration: Provide legally mandated benefits to employees as required by Bahraini law.
- Payslip Distribution: Furnish detailed payslips to employees, maintaining transparency in compensation.
In Bahrain, our Employer of Record services extend beyond mere legal compliance. By partnering with Mercans as your trusted Employer of Record in Bahrain, you gain a hassle-free solution without the need for entity setup. Our dedicated team manages tasks such as payroll, taxes, and the provision of legally mandated benefits, facilitating a seamless employment experience for your global workforce.
With Mercans as your Employer of Record in Bahrain, you can confidently navigate legal intricacies, ensuring your workers’ employment aligns with local laws. Our role extends to overseeing local payroll procedures, managing the submission of employment-related taxes and essential documentation, and providing workers with detailed payslips.
Count on Mercans, your dedicated Employer of Record in Bahrain, for a compliant and streamlined employment experience for your international workforce.
Things you need to know before hiring in Bahrain
Employment Contracts in Bahrain
Employment contracts:
In contrast to several other GCC nations, Bahrain doesn’t mandate a government contract. Nevertheless, to secure an employee’s work permit and residence visa, the employer-employee contract needs registration with the LMRA. According to Labor Law, contracts ought to be in Arabic. However, in cases where contracts are formulated in a different language, an Arabic-translated version might be appended to fulfill this mandate.
Contract Creation Process Using the Service Agreement Portal
Enrollment Steps:
Receive Enrollment Invitation:
After completing enrollment in the Registration Centre, the registered worker, such as Mohammed, will receive an SMS with the following details:
- Name: Mohammed
- Contact Number: 000000000
- LMRA ID: 00000000
- Portal Activation Code: xxxxxxxx
Activate Your Account:
- Visit https://sa.lmra.gov.bh/
- Click on “Sign In.”
- Enter the provided details (LMRA ID and activation code).
- Create a password for your account.
Creating a New Agreement:
- Visit the Service Agreement Portal: Go to https://sa.lmra.gov.bh/
- Sign in using your account credentials.
Create a New Agreement
- Click on “Create a New Agreement.”
- Fill in the details of the agreement.
- Service: Living room painting
- Compensation: 250 BHD
- Agreement Dates: 01/25/2023 to 01/27/2023
Service Receiver Approval
- The service receiver (e.g., Mohammed) will receive an SMS to review the new agreement.
- Click on the link provided in the SMS to approve or reject the agreement: Link
Getting Paid
- Ensure that payments are received through bank transfer or Benefit to safeguard your rights.
- A reminder for registered workers: Document your services via the Service Agreement Portal for a seamless payment process.
By following these steps, both the service provider and receiver can utilize the Service Agreement Portal to create, review, and approve service agreements, ensuring a transparent and secure process for all parties involved.
Probation Period
A probationary period is allowed for a maximum duration of three months. Within this period, either the employer or the employee can conclude the contract by providing a notice period of at least one day to the other party. Upon completion, the time spent in the probationary period contributes to the employee’s total period of service.Working Hours
The typical workweek in Bahrain ranges from 40 to 48 hours, contingent on company policies. Standard office hours typically span from 08:30 or 09:00 to 17:30 or 18:00, and this schedule remains consistent throughout the year without variations between summer and winter. During the month of Ramadan, working hours are legally reduced to six hours for all staff, although some companies may only implement this reduction for fasting Muslims.
Friday serves as the designated rest day in adherence to Muslim practices. In companies with a five-day workweek, the additional day off may fall on either Thursday or Saturday. International companies often opt for Saturday as the supplementary day off to align with global operational standards. Conversely, certain companies adhere to Thursday as the ‘weekend’ due to the local school schedule, which designates Thursday and Friday as the customary weekend.
13th Month Salary
There is no requirement for employers to pay a salary for the 13th month in Bahrain.
Employees vs Independent Contractors Compliance in Bahrain
| Aspect | Regular Employees | Independent Contractors | Agency Workers (Temps) |
|---|---|---|---|
| Employment Type | Fixed-term or unspecified length, usually permanent and full-time. Possible part-time positions. | Individuals with established businesses or professional licenses. | Employees provided on a temporary basis by licensed agencies. |
| Contract Registration | Contract must be registered with the LMRA for residence visa and work permit. | Employer likely responsible for obtaining licenses for independent contractors. | Agency remains the sponsor for temporary workers under their sponsorship. |
| Probationary Period | Can have a probationary period of 3 to 6 months, depending on industry and work conditions. | Not specified. | Not specified. |
| Language Requirement | Contract must be written in Arabic; often translated from another language as an attachment. | Not specified, but implied that contracts may be in other languages. | Not specified. |
| Obligations to LMRA | Contract registration, updating of documents, and reporting changes to LMRA. | Not specified, but likely depends on the nature of the contract. | Agency likely responsible for registration and compliance. |
| Corporate Registration | Foreign employers cannot engage directly unless registered under the Commercial Registry. | Not specified. | Not specified. |
| LMRA Registration | Mandatory LMRA registration for foreign employers with allocated work permits. | Not specified. | Likely required for agencies providing temporary workers. |
| Monthly Fees for Expats | Monthly fees required for each expat employee as per LMRA Law. | Not specified. | Not specified. |
| Payment Currency | Recent motions to make payroll in local currency using local payroll service. | Not specified; no enforcement as of late. | Not specified. |
| Work Permits and Visas | Valid work permit and residence visa sponsored by the employer. Applies to all except Bahrain and GCC nationals. | Alternative visas and work permits may be available for short-term work. | Agency sponsorship for temporary workers. |
| Language of Documentation | Employment records and contracts must be documented in Arabic; translated versions may be attached. | Not specified, but likely depends on the language used in the original contract. | Employment-related records and contracts required in Arabic; translated versions may be attached. |
Social Security in Bahrain
Who is Subject to Social Security Contributions?
All foreign and local staff, including Bahraini and non-Bahraini workers, are required to register with the Social Insurance Organization (SIO).Income Subject to Social Security
Social security contributions are calculated based on employees’ monthly basic salary, including commissions, bonus, and allowances.Initial Employer Registration with the Social Security Authority
Employers must register their employees with the Ministry of Labor and Social Affairs to receive a certificate of registration.Registration of New Hires and Leavers with the Social Security Authority
New hires must be registered with the Ministry of Labor and Social Affairs and SIO. On termination, employers must consider end-of-service indemnity and provide a plane ticket for the departing employee.Registration of Salary Changes
Any changes in salaries, including updates and adjustments, can be carried out online after the initial in-person registration.Declaration and Remittance
Social insurance contributions must be paid in the local currency and are due by the 15th of each month.GCC Nationals Working in Bahrain
GCC nationals working in Bahrain are subject to social security contributions based on specific rates applied to their monthly income.Bahraini Nationals Working in Other GCC Countries
Bahraini nationals working in other GCC countries are registered at the Labor Market Regulatory Authority (LMRA) and are not subject to social security contributions.Consumption Taxes
Bahrain has implemented Value-Added Tax (VAT) starting from 1 January 2019.Consumption Taxes
Bahrain has implemented Value-Added Tax (VAT) starting from 1 January 2019. Refer to the Corporate Tax Summary’s Other Taxes section for comprehensive details on Value-Added Tax and Excise Duty.Net Wealth/Worth Taxes
Bahrain does not impose any net wealth or worth taxes.Local Taxes
Individuals may potentially encounter stamp duties, customs duties, and municipal taxes.Social Security Contributions
The existing contribution rates to the Social Insurance Organization (SIO) stand at 19%, comprising 12% from employers and 7% from local employees, while expatriate employees contribute 4% (3% employer; 1% employee). Employers are mandated to withhold these contributions and remit them to the SIO on a monthly basis.Law and Authorities
- Personal Income Tax: There is no individual income tax in Bahrain.
- Social Security: Employers and employees contribute to social insurance based on prescribed rates, with a maximum monthly contribution. The ongoing compliance of the pension scheme is monitored by SIO.
- Reporting: Employers must ensure ongoing compliance with the pension scheme based on criteria set in the provisioning law of SIO.
Payroll in Bahrain
Minimum wages in Bahrain
Bahrain does not have a set minimum wage rate. Workers in the public sector are paid 300 BHD.
Payroll Cycle
Payment Frequency:Salaried employees receive their payments on a monthly basis, typically towards the month’s conclusion.
Mercans Payroll Expertise:Benefit from Mercans’ proficient payroll capabilities, ensuring smooth operations in:
Payroll Cycle Management
Efficiently process payments for both employees and contractors, adhering to local currency norms.Comprehensive Payroll Services
Covering setup, processing, and administration, Mercans handles the entire payroll spectrum.Statutory Compliance
Ensure adherence to statutory obligations through precise filings and timely payments.Bahrain Employee Hiring Cost
Consider a hypothetical scenario in Bahrain, where a local employee is hired with a monthly gross salary of $10,000 USD (3,769.62 BHD). After deductions, the estimated monthly net salary amounts to $9,300.00 USD (3,505.75 BHD), resulting in a total monthly payroll cost of $11,200.00 USD. This example outlines the financial aspects associated with employing a local staff member in Bahrain, taking into account salary and related costs.
Termination in Bahrain
In Bahrain, the termination of employment contracts is governed by specific regulations outlined in Articles 97 and 98 of the Labor Law. The termination process varies depending on the nature and duration of the employment contract:
Automatic Termination at Contract Expiry
Employment contracts terminate automatically upon reaching the end of their specified duration.Renewal by Express Agreement
Contracts set to expire may be renewed for additional terms through an express agreement between the employer and employee.Termination Upon Completion of Specific Work
- Contracts formed for the performance of a specific task cease upon the completion of that task.
- Renewal is possible if both parties agree to engage in another project or task.
Indefinite Duration Contracts
Contracts are considered indefinite in various scenarios:- When the contract lacks a specified duration.
- If the agreed-upon duration exceeds five years.
- When the total duration, including renewals, surpasses five years.
- If parties continue working post-expiry without an explicit agreement for renewal.
These regulations provide a clear framework for the termination and renewal of employment contracts, emphasizing the importance of explicit agreements and compliance with specified durations. Employers and employees are encouraged to navigate termination procedures in alignment with the stipulated legal provisions.
Employee Benefits in Bahrain
Annual Leave
Every employee is entitled to a 30-calendar day annual leave with full pay, a statutory benefit that cannot be waived, postponed, or substituted for payment except in accordance with the law or upon termination of employment. Employers have the authority to schedule annual leave dates, with the possibility of taking leave intervals, excluding the first half of the entitlement, upon the worker’s consent. Deferment of annual leave is permissible for up to three years, provided the employee takes a minimum of 10 consecutive days each year. Accrued but unused leave must be either carried forward to the next year or compensated every two years or upon termination.
Maternity Leave
Female employees are entitled to 60 days of maternity leave with full pay, extendable by an additional 15 days without pay. Upon return, employees enjoy an additional two hours each day for nursing until the child reaches six months, allowing for two breastfeeding periods of not less than one hour each.
Paternity Leave
Paternity leave extends up to five days following the birth, without additional benefits.
Sickness
Under Bahrain law, sickness absence entitlement is 55 calendar days: full pay for the initial 15 days, half pay for the next 20 days, and no pay for the remaining 20 days. Probationary employees are not entitled to sick leave.
Overtime
Employees working overtime are entitled to their wage for the day plus overtime pay, determined by a percentage of the employee’s wage, depending on whether the overtime falls on a weekday or weekend.
Pilgrimage
Muslim employees with five consecutive years of service are entitled to 14 working days of leave with full pay to perform Hajj once during their period of service.
Expenses
In Bahrain, expenses are not required to be processed through the payroll.
Public Holidays
Employees in the private sector are entitled to full-pay leave on designated public holidays, including New Year’s Day, Labour Day, Eid Al Fitr, Eid Al Adha, Al Hijra New Year, Ashoora, Prophet’s Birthday, National Day, and Accession Day. Private sector companies can decide whether to grant time off during public holidays, offering the option of another day off in lieu or a payment equivalent to 150% of salary if employees choose to work. If a public holiday falls on a weekend, employers must provide a day off in lieu.
Personal Income Tax in Bahrain
There is no individual income tax in Bahrain.
Work Permit in Bahrain (page 16 and 17)
To reside and work in Bahrain, all expatriates must obtain an employment residency visa from immigration authorities and a work permit from the Labor Market Regulatory Authority (LMRA). GCC nationals, while exempt from residency visas, need to register with the LMRA for work permits.
Entry to Bahrain requires a visa, excluding GCC citizens. Various visas are available, including:
- Visa on Arrival: Obtainable by nationals from certain countries, including the U.K, U.S, Japan, Hong Kong, and Malaysia. Valid for three months, it must be renewed every two weeks, even while in Bahrain.
- Business Visas: Issued for business visits and representation purposes. Duration varies based on the passport holder’s nationality, restricting activities to official company business.
- Tourist Visas: For holiday or pre-expat contract fact-finding trips, requiring application unless eligible for visa upon arrival. Some nationals are entitled to visa-on-arrival, but it does not allow economic activity during the stay.
- 72-Hour Visa: Obtained on arrival at Bahrain International Airport or King Fahad Causeway, mainly for business visits, trade delegations, exhibitions, and seminars.
- Work Visas: Applied for by sponsors on behalf of foreign employees. Requires a signed employment contract, sponsor stamp, and, if outside Bahrain, a medical report from an LMRA-approved health center in the employee’s home country.
Note: Some passport holders are restricted from entering Bahrain.
Work Visa Application Requirements:
- Visa Application Form
- Employee’s passport
- Passport size photograph
- Sponsorship Letter (indicating employer details, employee’s name, birth date, nationality, etc.)
- Copy of the contract
- Health record from an authorized clinic
- Fee of BHD 100
Residency Permit (Family Visa) Application Requirements:
- Application Form
- Copy of the employee and family’s passport
- Employee’s Sponsorship Letter
- Employee’s Contract
- Family health record from an authorized clinic
- Fee of BHD 22 per applicant
CPR Card (Identification Card) Application Requirements:
- Employee (or spouse) passport
- Sponsorship letter stating names of dependents
- Marriage certificate (for spouse) and birth certificate (for children)
- Fee of BHD 1 per applicant
EOR Solutions in Bahrain
- EOR for Prospective Employees: Mercans offers seamless Employer of Record (EOR) solutions for businesses that have already identified their ideal candidates in Bahrain. Our services encompass every aspect of the employee lifecycle, ensuring compliance with Bahrain labor laws and regulations.
- EOR + Recruitment: For those seeking assistance in talent acquisition, our EOR and recruitment services provide a holistic solution. We tap into our extensive network and expertise to help you find, onboard, and retain top talent, streamlining your expansion into the Bahrain market.
- Visa Sponsorship and Global Mobility: Navigating the intricacies of expatriate employment is simplified through our visa sponsorship and global mobility services. We facilitate the relocation of your international workforce, ensuring compliance with Bahrain immigration and employment laws.
- AOR for Contractor Payments: Businesses grappling with contractor payments can leverage our Assistance on Record (AOR) services. We handle the complexities of contractor payments, guaranteeing accuracy and compliance.
- Converting Freelancers to Employees: Mercans supports the transition from independent contractors to permanent employees in Bahrain. Our expertise ensures smooth conversions while adhering to legal requirements.
- HCM Integration: Integrate Mercans’ EOR services seamlessly with your HCM system in Bahrain for real-time data exchange, enhanced compliance, and cost-efficiency. Trust our expertise for a unified, compliant, and efficient approach, elevating your workforce management and payroll operations.
Conclusion
In conclusion, opting for Employer of Record solutions in Bahrain streamlines the complexities of international workforce management, ensuring legal compliance and seamless operations. With comprehensive services covering legal, payroll, and HR aspects, businesses can confidently expand into Bahrain’s market, enjoying flexibility and efficient entry into the workforce landscape. Employer of Record solutions offer a strategic and hassle-free approach for companies seeking success in the dynamic business environment of Bahrain.