On 1 March 2024, Bahrain’s end-of-service gratuity (EOSB) rules for non-Bahraini private sector workers changed. The old model is gone: employers no longer calculate what’s owed on departure and pay the worker directly. Employers must now make monthly contributions to the Social Insurance Organisation (SIO), and workers claim their EOSB from the SIO when they leave.
If you haven’t registered your non-Bahraini staff on the SIO portal and begun contributing, arrears have been building since that date. The interest charge is 5% per month from the first missed deadline.
What changed: old system vs. new system
Before March 2024, end-of-service gratuity for non-Bahraini workers was the employer’s problem to solve on departure. You calculated the amount under the Labour Law, paid the worker directly, and that was that. No advance funding required — the liability sat on the books until someone left.
That model is gone. Under Edict (109) of 2023, the liability moves to the Social Insurance Organisation (SIO), Bahrain’s government body for social insurance. Employers now make monthly contributions into the SIO on each non-Bahraini employee’s behalf. When someone leaves, they go to the SIO portal to claim. The employer’s direct payment obligation for future service ends there.
One thing doesn’t change: entitlements accrued before 1 March 2024 remain the employer’s direct liability under the old calculation. If you had staff on the payroll before that date, you are running two obligations simultaneously until you clear the pre-2024 balance.
How Bahrain end-of-service gratuity is calculated
The SIO calculates entitlement on the employee’s contributory salary. Years one through three accrue at 4.2% of annual salary per year; from year four, that doubles to 8.4%.
Secondments do not pause the obligation. Under Article 24 of the Social Insurance Law, the original employer retains full contribution liability. This covers any placement with a connected establishment, for its full duration. The two parties can settle the cost between themselves — but as far as the SIO is concerned, the obligation stays with the originating employer.
Miss a payment and Article 31 applies immediately: 5% interest per month, or any fraction of a month, with no floor and no grace period.
What employers are required to do
Start with the SIO portal registration. Register all non-Bahraini employees with accurate wage data. The original deadline was one month after Edict (109)’s publication, which has long since passed. Late registration doesn’t reset the clock. The back-contribution liability has been building since you should have registered. For a walkthrough of the portal process itself, EY’s analysis of the new system covers the steps in detail.
From there, Article 27 sets the deadline at the 15th of the following month. No grace period. The 5% monthly interest charge starts the day after.
The pre-2024 entitlements need to be tracked separately. Any gratuity accrued before 1 March 2024 remains the employer’s direct obligation. Pay it under the old Labour Law calculation when employment ends. Both calculations run simultaneously for anyone hired before that date. They stay that way until the employer clears the pre-2024 balance.
What happens if you don’t comply
Late payment is the simpler exposure: 5% monthly interest on the outstanding amount under Article 31, running from the missed deadline with no minimum threshold.
Failing to register, paying on the wrong wage basis, or skipping the leaving indemnity is the more serious exposure. Article 29 adds a 20% surcharge on unpaid contributions plus the full indemnity amount. The SIO can demand both immediately, without a court order. Depending on headcount and how long the breach has run, the combined liability can be substantial.
Submitting false wage data to the SIO is an offence under Article 102, with penalties in Articles 148 and 149. Edict (109) of 2023 confirms those provisions apply to EOSB violations directly. Under Article 148, the fine runs BD 100 to BD 500 per violation. The SIO multiplies it by the number of workers affected, up to BD 2,000 total. Leave it unresolved for 30 days after an inspector files a report and the per-violation fine can increase fivefold. Under Article 149, a deliberate false information conviction carries up to one month’s imprisonment, a BD 100 fine, or both. On a second conviction, both penalties double.
Does this apply if you use an Employer of Record in Bahrain?
Yes, and the answer matters more than it might appear. The EOR is the legal employer — the SIO contribution obligation sits with the EOR, not the client company. But that doesn’t mean clients can treat it as someone else’s problem. If the EOR is paying late, on the wrong wage basis, or hasn’t registered certain employees, the legal exposure sits with the EOR. The client’s risk is practical, not legal — but it’s real.
The question to ask your EOR provider: are contributions going in monthly, on the correct contributory salary, for every covered employee? Confirm it in writing.
For how this interacts with the full EOR structure in Bahrain, see our Bahrain EOR compliance guide. If you’re still deciding whether an EOR is the right vehicle for your Bahrain entry, our Business support services covers the comparison against a registered entity.
This article is for informational purposes only and does not constitute legal, tax, or regulatory advice. Contribution rates, penalties, and compliance requirements are subject to change. Verify current figures against primary sources — the Social Insurance Organisation (sio.gov.bh), the Ministry of Labour Bahrain, and the LMRA — before acting on any information contained here. Last updated: May 2026.
