When the employment relationship ends, the employee often thinks about matters such as: what is end of service indemnity bahrain? This right is considered one of the employer’s main obligations. Under Bahraini Labour Law, end of service indemnity bahrain is calculated based on the type of contract, the length of service, and the reason for termination.
Under Bahraini Labour Law regarding End-of-Service Indemnity, the employer is required to pay this indemnity to the employee who is entitled to it without delay or reduction. In this article, we explain in detail how End-of-service benefit bahrain is calculated under Bahraini Labour Law.
We also answer the most important questions employees ask about their financial rights upon the end of the employment relationship.
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What is end of service indemnity bahrain?
It is a sum of money granted to an employee who is not subject to social insurance upon the end of their service, in accordance with Article (116) of the Labour Law in the Private Sector issued by Law No. (36) of 2012.
Eligibility for the indemnity
An employee working under an indefinite-term contract is entitled to End-of-Service Indemnity if they resign or if their service is terminated. In fixed-term contracts, the employee is entitled to the indemnity upon the expiry of the contract, provided that it is not renewed.
How the indemnity is calculated
The indemnity is calculated based on the employee’s basic wage:
Half a month’s wage for each year of the first three years.
One full month’s wage for each additional year after the first three years.
The indemnity is calculated on a pro rata basis if the employee does not complete a full year.
Exemptions and exceptions
An employee is not entitled to End-of-Service Indemnity if their service is terminated due to gross misconduct or serious violations in accordance with Article (113) of the law.
Labour Law Provisions on end of service indemnity
The law governing the indemnity has been subject to a number of amendments, which we have summarized in the following table:
| Article / Decision | Correct Legal Substance | Practical Effect |
|---|---|---|
| Article (116) of the Labour Law | An employee who is not subject to social insurance is entitled to end of service indemnity: half a month’s wage for each year of the first three years, and one month’s wage for each year of the following years, with fractions of a year calculated in proportion to the period served. | This is the main article for calculating the indemnity before the application of the new system to previous periods in March 2024. |
| Article (107) of the Labour Law | Cases of serious termination listed exhaustively, such as assuming a false identity or submitting forged documents, or committing an error that results in substantial material loss subject to the legal conditions, or being absent without a legitimate reason for the periods prescribed by law. | It is not permissible to expand the grounds for depriving the employee or forfeiting their rights beyond these cases. |
| Article (108) of the Labour Law | The employer may not terminate the employment contract for disciplinary reasons without observing the provisions of the law, the decisions issued in implementation thereof, the work regulations, and the penalties regulation. | Mere allegation of a violation is not sufficient; legal and disciplinary procedures must be respected. |
| Prime Minister’s Decision No. (109) of 2023 | Issuing the end-of-service indemnity system for non-Bahrainis, effective from 1 March 2024. | It is the regulatory basis for the new phase after that date. |
| Article (5) of the new system | The employer is required to pay a monthly contribution to the Authority at a rate of 4.2% of the wage for the first three years, and 8.4% for the following years. | Entitlements for new periods are managed under the new system, not under the previous traditional method. |
