Bahrain end-of-service for expatriates after the 2024 SIO change

The rule and its legal source

For an expatriate working in Bahrain's private sector, end-of-service money now comes from two places. The dividing line is 1 March 2024. Service up to the end of February 2024 is still a direct employer liability. Service from 1 March 2024 onward is funded through monthly payments the employer makes to the Social Insurance Organisation, and the SIO pays the worker when employment ends.

The base formula is in Article 116 of Labour Law No. 36 of 2012 for the private sector. The article covers workers who are not subject to the Social Insurance Law. On termination, such a worker receives a leaving indemnity of half a month's wage for each of the first three years of employment, and one month's wage for each later year. Part years are paid in proportion to the time served. The official text is published by the Labour Market Regulatory Authority (LMRA), and it is the reference to quote for the formula.

The 2024 change came from Resolution No. 109 of 2023. Some guides call the same instrument a decision or an edict, so check the title on the official copy before you quote it in a dispute. Under it, the employer pays the SIO 4.2% of the monthly wage for the first three years of service and 8.4% after that. The SIO's own guidance confirms that the duty applies from 1 March 2024 and that employers must pay these monthly contributions for expatriates. A worker who is owed money for a period before the scheme can claim it from the employer after the job ends.

The practical result is that one employee can have two separate balances. The employer owes the balance for service up to February 2024. The SIO holds the balance for service from March 2024, and the worker applies to the SIO for it. Many HR teams still treat the whole amount as one lump sum payable at exit. That habit causes most of the errors covered below.

How the figure is worked out, step by step

Work through the figure in the order below. Keep a note of each date and each result, because the pre-March and post-March parts are settled through different channels.

1. Record the start date of the employment and the planned or actual end date. Count completed years and months. Partial years are paid pro rata.
2. Confirm the wage used. Consultancy guides that cite the same law say the calculation uses the last basic wage plus the social allowance, and that other allowances are excluded. Confirm the exact wording of the article before you apply it in a dispute.
3. Split the service at 29 February 2024. Everything before that date is the employer's part under Article 116.
4. Calculate the employer's part. Give half a month's wage for each year within the first three years of total service, and a full month's wage for each year after that.
5. Calculate the SIO part for service from 1 March 2024. The three-year line is measured from the first day of employment, not from March 2024. So a worker who has already passed three years on 1 March 2024 earns a full month for each later year.
6. Add the two parts. Then compare the SIO part with the contribution statement from the SIO, and check that the monthly payments match the salary data reported.

Two details in step 2 need a decision from the business. Some broker notes say the salary data sent to the SIO should include every pay component, such as commissions and bonuses. Most other guides say the contribution basis is basic salary plus social allowance only. These two positions conflict. Ask the SIO which basis applies to your establishment and record the answer on file.

Worked example

Consider a worker, Asha, who joined on 1 June 2021 and whose employment ends on 31 May 2026. Her last basic wage is BHD 380 a month. To keep the arithmetic clear, the example assumes the wage did not change over the period. Real cases often include pay rises, so the wage question in the checklist matters.

The full entitlement under Article 116 is 3.5 months of wage. The first three years give 1.5 months, at half a month a year. Years four and five give 2 months, at one month a year. At BHD 380 a month, the total is BHD 1,330.

The split at 1 March 2024 works like this. From 1 June 2021 to 29 February 2024 is 2 years and 9 months, which is 2.75 years. At half a month a year, that gives 1.375 months of wage, or BHD 522.50. This is the employer's part. From 1 March 2024 to 31 May 2026, the first three-year band still has three months to run, from March to May 2024. Those three months earn 0.125 of a month's wage. The two remaining years earn 2 months. The SIO part is 2.125 months, or BHD 807.50.

The monthly contributions for the SIO part follow the percentage rule. At BHD 380, the employer's monthly payment is 4.2% of the wage for March to May 2024, which is BHD 15.96 a month. From June 2024 the payment rises to 8.4%, or BHD 31.92 a month. The SIO calculates the award on its own records, so the figure on the SIO statement is the one that governs the payout. The table is a check, not a substitute for that statement. Use the free calculator on this page to test your own dates and wage, then compare the result with the SIO figure.

Cases that change the answer

The formula above is the starting point. The cases below change either the amount, the payer or the way it is claimed.

Common mistakes

The most frequent error is paying the full balance at exit as if the 2024 change never happened. For a worker who leaves after March 2024, the SIO part is claimed from the SIO. Paying it twice, or refusing the worker's claim because the employer thinks the SIO will handle it, both create disputes. The split must be documented either way.

The second error is using the total gross salary. Housing, transport and other allowances are commonly excluded from the basic wage used in the calculation. Using gross pay overstates the figure and misstates the monthly payment to the SIO.

The third error is counting the three-year band from March 2024. The band starts on the first day of employment. A worker hired in 2019 is already in the full-month band when the scheme starts.

The fourth error is missing the payment deadline. Monthly contributions are due within the first 15 days of the month. The LMRA's booklet says late payment adds 5% of the amount due, and failure to pay adds a 20% penalty. Those costs fall on the business, not on the worker.

What to check with HR or a lawyer

Before you pay anyone, confirm five things. Confirm the start date from the employment contract and the first salary record. Confirm the wage basis used for SIO reporting. Confirm whether the contract type is treated as termination. Confirm the monthly contributions for every month since March 2024. Confirm the SIO statement for each worker, because the SIO pays claims within 10 working days of a valid application, according to the LMRA booklet.

Keep the two periods on separate records. The employer's file should show the pre-March calculation and the employer's payment. The SIO file should show the contribution history and the claim. This makes an audit or a tribunal query easier to answer.

If a contract change, redundancy or reduction in hours is planned, the notice, consultation and severance rules in the Labour Law apply, and the change should be agreed with the employee or checked with a lawyer.

Business owners who run payroll for many workers can ask an AI worker to carry the routine parts of this work. The system can read start dates and salary records from the HR file, split each worker's service at the 1 March 2024 date, and prepare the monthly SIO contribution schedule for review before the 15th. It can also draft each worker's end-of-service statement when a contract closes. A person still checks the wage basis, approves each payment, confirms the SIO figure, and answers the employee's questions. Where the payroll data is incomplete, the routine work stops and a person fills the gap.

This explains the rule in general terms; it is not legal or tax advice for your case.