How the Bahraini system works since March 2024
Decision No. 109 of 2023 was issued on 12 December 2023 and, by Article Four, came into force on 1 March 2024. The Social Insurance Organisation publishes the decision and the attached regulation in full, and EY records the same date and instrument. The regulation changes who holds the money rather than how much is owed.
- Article 5: the employer alone pays the Organisation a monthly contribution of 4.2% of wages for the first three years from the date the worker's employment started, and 8.4% of wages for the subsequent years until the end of service.
- Article 9: the remuneration is half a month's wages for each of the first three years of employment and one month's wages for each of the subsequent years, with fractions of a year in proportion to the time served.
- Article 10: it is calculated "on the basis of the last Remuneration of the Insured Person and not exceeding the amount of the contributions paid on his behalf". The Organisation's FAQ reads that as the last wage: the gratuity is calculated on the last wages received before the end of the contract. The employer owes the difference in contributions when the wage is raised, and may recover it when the wage is reduced.
- Article 14: service before 1 March 2024 stays under Law 36 of 2012, so the employer still owes that part directly.
- Article 13: where the worker had already been with the employer for more than three years when the regulation started, the contribution is 8.4% from the start of the regulation. The three year clock runs from the first day of employment, not from 1 March 2024.
Because 4.2% of wage for twelve months is 50.4% of a month and 8.4% is 100.8%, the contributions collected sit slightly above the accrual they fund on a wage that never changes. The gap is the point of Article 10: the Organisation pays the formula, up to what it received.
The wage the contribution applies to
Article 1 of the regulation defines wage as the amount specified in the contract of employment payable periodically to the worker, in addition to any increases and the social allowance if there is one. The Organisation's own FAQ is narrower still in describing the payout: the gratuity is calculated only on the basic salary and the social allowance, and does not include other allowances and benefits. That is why the calculator leaves housing, transport and commission out of the contribution wage by default, with a switch to see what a broader base would cost.
The regulation states no ceiling. Article 2 applies it to every covered worker "whatever the amount or type of the worker's wage", which is different from the capped social insurance wage. Article 10 also means a pay rise is not free: the employer owes the contribution differential on the higher wage, otherwise the worker's remuneration is limited to what was actually paid in.
Service before 1 March 2024 stays with the employer
Article 116 of Law 36 of 2012, the Labour Law for the Private Sector, entitles a worker who is not subject to the Social Insurance Law, in practice an expatriate, to a leaving indemnity on termination. The bands are the same shape as the ones the Organisation now pays.
| Service | Indemnity | Source |
|---|---|---|
| Each of the first three years | Half a month's wage | Article 116 |
| Each following year | One month's wage | Article 116 |
| Fractions of a year | In proportion to the period spent in service, with no minimum qualifying period stated | Article 116 |
| Wage used | Most recent basic wage plus the social allowance, if any, or the average wage of the last three months for piece rate, production and commission workers | Article 47 |
The Organisation's FAQ puts the split plainly: payment of the end of service gratuity became effective at the Organisation on 1 March 2024, and the insured person can claim dues from the employer for any preceding period after the employment ends. An employee hired before the switch therefore has two claims, one against the employer and one against the Organisation, and an employer carrying pre-2024 staff still has a provision on the balance sheet as well as a monthly cash cost.
Paying in and claiming out
Article 5 applies Articles 29 and 31 of the Social Insurance Law to payment. Lockton reports that contributions must be paid within the first fifteen days of each month, that a delayed payment carries interest at 5%, and that unpaid contributions carry a penalty of 20% for the unpaid period, with non-compliance fines from BHD 100 to BHD 500 and doubled for a repeat. The Social Insurance Law itself did not load from sio.gov.bh when this page was checked, so those figures are a practitioner summary rather than a quotation from the statute.
On the way out, the worker applies to the Organisation rather than the employer. The FAQ states that the gratuity is a lump sum and not payable in instalments, that the application can be made immediately after the employment relationship ends, that payment is made within five working days of the application once the bank account details are on file, and that service with a previous company is still owed if the worker moves. Article 6 adds that moving between branches of the same employer is not an end of service, and Article 11 pays the remuneration to the beneficiaries under the worker's home country inheritance system if they die. If an employer refuses to pay for the earlier period, the FAQ directs the worker to the Expatriate Protection Centre at the Labour Market Regulatory Authority.
How Bahraini nationals and GCC nationals are treated
Article 116 gives the leaving indemnity to a worker who is not subject to the Social Insurance Law. Bahraini nationals are subject to it, so they accrue pension rights through social insurance contributions rather than a gratuity, and Decision 109 of 2023 does not cover them either. Article 3 of the regulation also excludes nationals of the other GCC states who are covered by the unified regulation for extending insurance protection to GCC nationals working outside their own state, approved by Law 68 of 2006; their contributions follow their home state's rules.
For context on what the employer pays instead, PwC records the Bahraini private sector social insurance rates as 18% from the employer and 8% from the employee, against 3% from the employer and 1% from the employee for expatriates, on a page that states it was last reviewed on 26 July 2026. Mercans reports that the employer share rose from 17% to 18% on 1 January 2026 while the employee share stayed at 8%, and that the 4.2% and 8.4% end of service rates did not change on that date. Those social insurance rates are context only; they are not part of the end of service calculation and this tool does not compute them.
Worked example
A non-Bahraini employee on a basic wage of BHD 400 with a BHD 50 social allowance, hired on 1 January 2022, leaving on 31 December 2026. Press "Load the worked example" in the calculator to see the same lines live.
| Line | Working | BHD |
|---|---|---|
| Contribution wage | 400 basic plus 50 social allowance | 450.000 |
| Service to 29 February 2024 | 2 years 2 months at half a month a year = 1.08 months x 450 | 487.500 |
| Contributions at 4.2% | 10 months to the third anniversary x 450 x 4.2% | 189.000 |
| Contributions at 8.4% | 24 months from 1 January 2025 x 450 x 8.4% | 907.200 |
| Paid by the Organisation | 2.42 months x 450, below the 1,096.200 collected | 1,087.500 |
| Total to the employee | 487.500 from the employer plus 1,087.500 from the Organisation, the same 3.5 months the old formula gave over five years | 1,575.000 |
The employer's cash cost over the same period is BHD 1,583.700, the lump sum plus the contributions, because the contribution rate runs a little ahead of the accrual it funds.
Assumptions and exclusions
- Non-Bahraini private sector employee covered by the employment injuries branch of the Social Insurance Law. Bahraini nationals, GCC nationals and the categories listed in Article 3 of that law are outside the regulation.
- The three year band runs from the first day of employment, not from 1 March 2024, for both halves of the sum. Article 5 sets the rate band "from the date of commencement of the Insured Person's employment" and Article 9 sets the accrual band over "the first three years of employment", and EY pairs the two, 4.2% a month being half a month of wage a year and 8.4% being one month. Article 13 confirms the reading for anyone already past three years when the regulation started.
- The end date is the last working day and is counted, so 1 January to 31 December is one year. Service is measured from the first day of employment as years plus months divided by 12 plus days divided by 365, so the period before the switch and the period after it always add back to the whole.
- A part month of contributions is counted in proportion. The regulation sets a monthly contribution and no source read for this page says how the Organisation bills a partial month.
- The wage entered is treated as constant. A pay rise part way through means the real contributions differ from the estimate, and Article 10 obliges the employer to pay the differential; use the contributions field to enter the figure from an SIO statement instead.
- The pre-2024 lump sum is calculated on the basic wage plus the social allowance, per Article 47. The average wage basis for piece rate, production and commission workers is not modelled.
- Interest, penalties, fines and the Organisation's administrative charge on the account are not included, and neither are contractual benefits above the statutory minimum.
What is not settled
Four points could not be pinned to a primary source when this page was checked, so the page states them rather than papering over them.
- How a part month is billed. The regulation fixes a monthly contribution and says nothing about a month the worker joins or leaves part way through.
- How wide the reported wage is in practice. The regulation's own definition and the Organisation's FAQ point to the contractual periodic amount plus increases and the social allowance, while Lockton's description of the salary data employers upload mentions commissions, a percentage of sales or revenue, an annual bonus and applicable allowances. Check what your own establishment reports.
- Whether the fifteen day payment window and the 5% interest and 20% penalty appear in Articles 29 and 31 of the Social Insurance Law in those words. Article 5 defers to those articles, but the law text did not load from sio.gov.bh on the day this page was checked.
- When the employer must settle the pre-2024 lump sum. Article 14 sends that period back to Law 36 of 2012 and the Organisation tells the worker to claim it from the employer, but no source read for this page fixes a deadline, so the page states none.
How Axion People carries both halves
A Bahraini payroll that started before March 2024 has to report two things at once: a monthly contribution that steps from 4.2% to 8.4% on the third anniversary of each hire, and a frozen lump sum provision for service up to 29 February 2024. In Axion, the People box holds the start date, the wage and the country rule set, so the contribution is calculated with each pay run and the older accrual stays visible as a liability rather than surfacing at the final settlement. Axion reports the figures and produces the payroll output; it does not file with the Social Insurance Organisation or the Labour Market Regulatory Authority.
Frequently asked questions
How is end of service calculated in Bahrain in 2026?
For a non-Bahraini private sector employee it is now funded monthly. Under Article 5 of the regulation attached to Decision 109 of 2023, the employer alone pays the Social Insurance Organisation 4.2% of wages a month for the first three years from the date employment started, and 8.4% for the years after that. When the employment ends the Organisation pays the worker half a month's wage for each of the first three years and one month's wage for each later year, pro rata for fractions, on the last wage and not exceeding the contributions paid. Service before 1 March 2024 stays with the employer under Article 116 of Law 36 of 2012.
What wage is the 4.2% and 8.4% contribution calculated on?
Article 1 of the regulation defines wage as the amount specified in the contract of employment payable periodically to the worker, plus any increases and the social allowance if there is one. The Organisation's own FAQ says the gratuity is worked out only on the basic salary and the social allowance and does not include other allowances and benefits. Article 2 applies the regulation whatever the amount or type of the worker's wage, so the regulation states no ceiling.
What happens to service before 1 March 2024?
It stays the employer's own liability. Article 14 of the regulation says the remuneration for service before the regulation came into force follows Law 36 of 2012, and the Organisation's FAQ tells the worker to claim dues from the employer for any earlier period. Article 116 of that law owes half a month's wage for each of the first three years of employment and one month's wage for each following year, with fractions in proportion, and Article 47 calculates it on the most recent basic wage plus the social allowance.
Are Bahraini nationals covered by the same system?
No. Article 116 gives the leaving indemnity to a worker who is not subject to the Social Insurance Law, and Bahraini nationals are subject to it, so they build pension rights through social insurance instead. Decision 109 of 2023 covers non-Bahrainis, and Article 3 of the regulation also excludes GCC nationals covered by the unified GCC insurance protection regulation. PwC records the 2026 Bahraini private sector social insurance rates as 18% from the employer and 8% from the employee, against 3% and 1% for expatriates.
When must the employer pay the contribution?
Article 5 of the regulation applies Articles 29 and 31 of the Social Insurance Law to payment. Lockton reports that contributions must be paid within the first fifteen days of each month, that delayed payments carry interest at 5%, and that unpaid contributions carry a penalty of 20% for the unpaid period. The Social Insurance Law text was not readable on sio.gov.bh when this page was checked, so treat those figures as a practitioner summary rather than a quotation from the statute.
Can the end of service remuneration be less than the formula?
Yes. Article 10 says the remuneration is calculated on the last wage and not exceeding the amount of the contributions paid on the worker's behalf. The same article obliges the employer to pay contribution differentials when the wage goes up, which is what keeps the two figures in line, and lets the employer recover the difference when the wage goes down. The calculator shows the entitlement and the contributions side by side so you can see which one binds.
Related tools and guides
- End of service gratuity across the GCC in 2026, the guide behind this calculator, with all six states side by side.
- Oman gratuity calculator, the other GCC state part way through a change of rule.
- UAE gratuity calculator and the Saudi end of service calculator.
- GCC payroll compliance in 2026: WPS, GOSI and gratuity.
- All Axion tools, what is in each box and the Axion FAQ.
Sources
All sources checked on 5 September 2026.
- Social Insurance Organisation, Decision No. 109 of 2023 promulgating the Regulation of End of Service Remuneration for non-Bahrainis working in the private sector, full text of the decision and the attached regulation
- Social Insurance Organisation, End of service gratuity for non-Bahrainis, frequently asked questions
- Labour Market Regulatory Authority copy of Law No. 36 of 2012 promulgating the Labour Law for the Private Sector: Articles 1, 47 and 116
- EY, Bahrain implements new end of service benefit system from 1 March 2024 (Edict 109 of 2023, issued 12 December 2023)
- Lockton, Bahrain implements new end of service gratuity for expatriates (payment window, interest and penalties)
- PwC Worldwide Tax Summaries, Bahrain, Other taxes: social insurance contribution rates, page states last reviewed 26 July 2026
- Mercans statutory alert, Bahrain changes in social security rates and end of service benefit from 1 January 2026
This calculator gives an estimate based on the published rules and the conventions set out above. It is not legal advice and it is not a Social Insurance Organisation or Labour Market Regulatory Authority tool. Contracts and company policy can add to the statutory minimum, and the Organisation calculates the amount it actually pays. Check the figure with the Organisation or a qualified adviser before relying on it.