Bahrain end-of-service for expatriates: SIO contributions and the old leaving indemnity (2026)
Since 1 March 2024 a Bahrain employer pays the SIO 4.2% of each expatriate's monthly wage for the first three years of service and 8.4% after that, and the employee pays nothing. When the job ends, the SIO pays half a month's wage per year for the first three years and a month's wage per later year, on the last wage and capped at the contributions paid. Service before 1 March 2024 is still paid by the employer under Article 116 of the Labour Law.
End-of-service contributions in Bahrain
- SIO contributions at 4.2% then 8.4%
- Top-ups after a pay rise
- Indemnity for pre-March 2024 service
Expatriate end-of-service pay in Bahrain moves to monthly SIO contributions
What happened
Prime Minister's Decision No. 109 of 2023, issued on 12 December 2023, took effect on 1 March 2024. From that date the employer pays the SIO a monthly end-of-service contribution for each non-Bahraini private sector worker: 4.2% of wage for the first three years and 8.4% after that.
What it means for you
End-of-service is now a monthly payroll cost rather than a lump sum at exit, and the SIO pays the worker when service ends. Service before 1 March 2024 is still the employer's to settle under the Labour Law.
Dates to know
- 12 December 2023Decision No. 109 of 2023 issued
- 1 March 2024Monthly SIO contributions began
Source: Legislation and Legal Opinion Commission. We check this page every week. Last checked .
End-of-service pay in Bahrain is the award an expatriate private sector worker receives when their employment ends. For service since 1 March 2024 it is funded in advance: the employer pays a monthly contribution into a special account at the Social Insurance Organisation, and the SIO pays the award. For service before that date, the Labour Law calls it a leaving indemnity and the employer pays it directly. Bahraini workers are not in this system, because they are insured for a pension under the Social Insurance Law.
How is end-of-service paid to expatriates in Bahrain now?
Through the SIO. Since 1 March 2024 the employer pays the SIO a monthly contribution for each non-Bahraini private sector worker, and the SIO pays the award when service ends. The system was set by Prime Minister's Decision No. 109 of 2023 under Article Ten of Law No. 14 of 2022.
The system covers non-Bahraini workers insured under the work-injury branch who work under an employment contract, whatever the contract's length, type, wage, gender, nationality or age. Work done abroad for the employer counts too. The contributions go into a special account inside the social insurance fund, and payouts from it cannot exceed the contributions collected.
How much does the employer pay the SIO each month?
4.2% of the worker's wage for the first three years of service with that employer, then 8.4% until service ends. The employer pays it alone, so nothing is deducted from the worker's pay. A worker who had already served the same employer for more than three years before 1 March 2024 attracts 8.4% from the start.
Wage here means the amount in the employment contract paid periodically, plus any increases and the social allowance where one is paid. If an employer did not file its workers' wage data with the SIO within a month of the decision's publication, contributions were worked out on the wage registered for the work-injury branch. Contributions are paid on the same schedule as other social insurance contributions under Articles 29 and 31 of the Social Insurance Law.
How is the SIO end-of-service award calculated?
Half a month's wage for each of the first three years of service and one month's wage for each later year, with part years paid pro rata. It is worked out on the worker's last wage and cannot exceed the total contributions paid for that worker. Only actual service for which contributions were paid counts.
Because the cap is the contributions paid, a pay rise has to be matched by contributions. Article 10 of the system makes the employer pay any shortfall in contributions caused by a wage increase. If the wage was reduced, the employer may recover the excess contributions when the award is paid. If the worker dies, the award goes to their heirs under the inheritance rules of the worker's own country.
What does the award come to in practice? A worked example
Our arithmetic: an expatriate who joins on 1 March 2024 on a steady BHD 1,000 a month and leaves after exactly five years. The employer pays the SIO BHD 42 a month for 36 months and BHD 84 a month for 24 months, BHD 3,528 in all. The award is BHD 3,500, which is under the cap, and the SIO pays it.
Contributions: 4.2% of BHD 1,000 is BHD 42 a month, so BHD 1,512 over the first three years. 8.4% of BHD 1,000 is BHD 84 a month, so BHD 2,016 over years four and five. Total BHD 3,528. Award: half a month's wage for each of three years is BHD 1,500, and a full month for each of two later years is BHD 2,000, so BHD 3,500. This is an illustration using the rates in Decision No. 109 of 2023, not a quote. A rise in pay part way through changes both lines.
What happens to service before 1 March 2024?
It is still settled by the employer under the Labour Law, not by the SIO. Article 116 gives the same formula: half a month's wage for each of the first three years and a month's wage for each later year, pro rata for part years. Article 47 bases it on the last basic wage plus any social allowance.
Article 14 of the SIO system keeps pre-March 2024 service under Law No. 36 of 2012. For workers paid by the piece or on commission, Article 47 uses the average wage over the last three months instead. Under Article 40, money owed when employment ends must be paid at once, or within seven days if the worker left of their own accord. Late payment of wages carries compensation of 6% a year for up to six months, rising by 1% for each later month to no more than 12% a year.
Does resignation or dismissal reduce the award?
Neither text reduces the award for resignation. Article 116 of the Labour Law and Articles 9 and 10 of the SIO system both pay the award when service ends, with no lower rate for a worker who resigns. Compensation for unlawful dismissal is a separate payment under Article 111.
Article 111(b) of the Labour Law gives a worker on an indefinite contract who is dismissed without a lawful reason after the first three months 2 days' wage per month of service, at least one month's wage and no more than 12 months'. That sits on top of the end-of-service award. Unused annual leave is also paid out when employment ends, unless the worker refused scheduled leave in writing (Article 59(d)).
Who is outside the SIO end-of-service system?
Bahrainis, who are insured for a pension instead, and GCC nationals covered by the unified GCC insurance protection scheme under Law No. 68 of 2006. Workers in the groups excluded by Article 3 of the Social Insurance Law are also outside it.
Moving a worker to another branch of the same employer is not an end of service. If the worker is seconded to another business owner, the employer that insured the worker keeps paying the contribution. When a business changes hands, the new owner must keep paying the contributions for the insured workers.
Key figures
| Detail | Value |
|---|---|
| Employer contribution, years 1 to 3 | 4.2% of wage each month, paid by the employer alone. (source) |
| Employer contribution, year 4 onwards | 8.4% of wage each month until service ends. (source) |
| Start date | Contributions began on 1 March 2024. The decision was issued on 12 December 2023. (source) |
| Wage for contributions | The contractual wage paid periodically, plus increases and the social allowance where paid. (source) |
| Award formula | Half a month's wage for each of the first three years, one month's wage for each later year, pro rata for part years. (source) |
| Award cap and basis | Calculated on the last wage and paid at the end of service, up to the total contributions paid. (source) |
| Long-serving workers at the switch | A worker with more than three years' service with the employer before 1 March 2024 attracts 8.4% from that date. (source) |
| Service before 1 March 2024 | Paid by the employer under Article 116 of the Labour Law: half a month's wage a year for 3 years, then a month a year. (source) |
| Wage for the Labour Law indemnity | Last basic wage plus any social allowance; for piece or commission pay, the average of the last three months. (source) |
| Who is excluded | GCC nationals under the unified GCC insurance protection scheme (Law No. 68 of 2006) and groups in Article 3 of the Social Insurance Law. (source) |
| Legal basis | Article Ten of Law No. 14 of 2022 placed non-Bahraini workers in an end-of-service system set by Prime Minister's decision. (source) |
Frequently asked questions
Is the SIO end-of-service contribution deducted from the employee's salary in Bahrain?
No. Article 5 of the system in Decision No. 109 of 2023 says the employer alone pays the contribution to the SIO each month.
Who pays the end-of-service award when an expatriate leaves?
For service since 1 March 2024, the SIO pays it from the contributions the employer made. For service before that date, the employer pays the leaving indemnity directly under Article 116 of the Labour Law.
Does a worker who resigns get less end-of-service pay in Bahrain?
Not under the texts. Neither Article 116 of the Labour Law nor the SIO system sets a lower award for resignation.
Why does the contribution double after three years?
The rates mirror the award, which doubles from half a month to a full month's wage per year after the third year. On our arithmetic, 4.2% of a monthly wage over twelve months is about half a month's wage, and 8.4% is about one month's wage.
Do Bahraini employees get this end-of-service award?
No. Bahrainis are insured for a pension under the Social Insurance Law, with employer and employee contributions, so the expatriate end-of-service system does not apply to them.
Each of the six Gulf states writes its own labour law, its own end-of-service rules and its own quota for hiring citizens. When Teamed is your legal employer, we apply the right rules for the country each person works in and update your contracts, policies and payroll as the law changes, so you never have to read a statute to stay compliant.
