Indemnity calculation in Bahrain runs on one formula: half a month's wage for each of your first three years of service, then a full month's wage for every year after that. The wage it applies to is your last basic wage plus your social allowance, if you receive one, and the daily figure is that monthly wage divided by 30. There is no minimum service period and no reduction for resigning. What did change, on 1 March 2024, is who hands you the money.
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Based on Bahrain Labour Law for the Private Sector No. 36 of 2012, Article 116
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Bahrain Labour Law for the Private Sector No. 36 of 2012, Article 116
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The formula, and where it comes from
Article 116 of the Labour Law for the Private Sector (Law No. 36 of 2012) sets the entitlement in a single sentence: a worker is entitled on termination of contract to "a reward equivalent to the wage of half a month for each year of service for the first three years and the wage of one month for each subsequent year."
Translated into days, that gives you a two-tier schedule:
| Year of service | Rate per year | Days accrued |
|---|---|---|
| Years 1 to 3 | Half a month | 15 days each |
| Year 4 onward | One month | 30 days each |
The tiers are cumulative, not retrospective. Reaching your fourth year does not upgrade your first three years to the higher rate. Someone leaving after six years holds 45 days from the first tier and 90 days from the second, for 135 days in total.
Two rules that follow from the article's wording catch people out. It grants the reward "for the fraction of a year pro rata the period of service", so a partial year is paid proportionally and there is no one-year qualifying period. And nothing in Article 116 makes the amount depend on why you left, so resignation, dismissal and contract expiry all pay the same.
Which wage the calculation actually uses
This is where the ranking guides contradict each other. Search for this topic and you will find pages stating that indemnity is calculated on basic salary only, and other pages stating it includes allowances. Both are describing the same rule badly.
Article 47 settles it. Leaving indemnity is calculated on the worker's last basic wage plus the social allowance, if any. That phrase is precise, and the precision matters:
- Include your basic wage and your social allowance (العلاوة الاجتماعية), a specific line item on Bahraini payslips, not a catch-all for allowances.
- Exclude housing, transport, mobile, fuel and similar allowances. They are not social allowance, and they do not enter the calculation.
- Exclude overtime, bonuses and commission from the monthly figure you start with.
There is one exception worth knowing. If you are paid on a piece-rate or production basis, or on a fixed wage plus commission or a percentage, Article 47 calculates your entitlement on the average wage over your last three months rather than a single last figure. Salespeople on commission-heavy packages are the usual case, and almost no guide mentions it.
The practical takeaway: take the two eligible lines off your payslip, add them, and divide by 30. That daily wage drives everything that follows.
Worked examples
Every figure below comes from the same rules the calculator on this page applies.
Two years of service, BHD 400 basic
Daily wage: 400 ÷ 30 = BHD 13.333. Two years sit entirely in the first tier: 2 × 15 = 30 days. 30 × 13.333 = BHD 400.
A neat coincidence worth remembering: at the half-month rate, two full years of service is worth exactly one month's wage.
Ten years of service, BHD 600 basic plus BHD 50 social allowance
Monthly wage: 600 + 50 = BHD 650. Daily wage: 650 ÷ 30 = BHD 21.667.
| Component | Days | Amount |
|---|---|---|
| Years 1 to 3 | 45 | BHD 975 |
| Years 4 to 10 | 210 | BHD 4,550 |
| Total | 255 | BHD 5,525 |
Leaving the BHD 50 social allowance out of the wage base would have cost this worker BHD 425.
Four years and seven months, BHD 450 basic
Partial years are where arithmetic errors creep in. Daily wage is BHD 15.
| Component | Days | Amount |
|---|---|---|
| Years 1 to 3 | 45 | BHD 675 |
| Year 4 | 30 | BHD 450 |
| Remaining 212 days (of year 5) | 17.425 | BHD 261.37 |
| Total | 92.425 | BHD 1,386.37 |
The part year is prorated at the rate that applies to the year it falls in, so those 212 days accrue at the 30-day rate: (212 ÷ 365) × 30 = 17.425 days.
Six years, resigning voluntarily, BHD 550 basic
Daily wage BHD 18.333. Tier one gives 45 days, tier two gives 3 × 30 = 90 days, so 135 days in total: BHD 2,475.
Resigning changes nothing. That figure is identical to what the same worker would receive if the employer had terminated the contract.
Eight months of service, BHD 350 basic
Daily wage BHD 11.667. With 243 days served and no completed year, the whole entitlement is prorated at the first-tier rate: (243 ÷ 365) × 15 = 9.986 days, giving BHD 116.51.
Small, but not zero. Anyone who tells you nothing accrues in your first year is repeating a rule from a different country.
The March 2024 SIO change: who pays which part
This is the part most Bahrain guides handle poorly, and it is the question people actually have when they resign in 2026.
Under Resolution No. 109 of 2023, from 1 March 2024 the leaving indemnity of non-Bahraini private-sector workers stopped being a lump sum the employer pays out at the end. Instead the employer pays a monthly contribution to the Social Insurance Organisation:
- 4.2% of the monthly wage during the worker's first three years of employment
- 8.4% of the monthly wage from year four onward
Those percentages are not arbitrary. Twelve months at 4.2% comes to 50.4% of a monthly wage, which is Article 116's half month per year. Twelve months at 8.4% comes to 100.8%, which is the full month. The scheme was calibrated to reproduce the existing entitlement, not to replace it.
The amount you are owed did not change. Only the payer did.
Service on both sides of the line
Anyone hired before March 2024 and leaving now has service on both sides:
- Service up to 29 February 2024 stays your employer's direct obligation, paid as a lump sum under Article 116.
- Service from 1 March 2024 is funded through SIO contributions and claimed from SIO.
Here is the trap. Because the rate rises after your third year, an even split of time is not an even split of money.
Take a worker who started on 1 September 2021 on BHD 500 basic and leaves on 1 September 2026. That is five years, and it divides exactly in half at the transition date: 2.5 years before, 2.5 years after. The money does not divide in half.
| Period | Service | Rate applied | Days | Claim from | Amount |
|---|---|---|---|---|---|
| 1 Sep 2021 to 29 Feb 2024 | 2.5 years | 15 days/yr (tier 1) | 37.5 | Employer | BHD 625 |
| 1 Mar 2024 to 1 Sep 2026 | 2.5 years | 15 then 30 days/yr | 67.5 | SIO | BHD 1,125 |
| Total | 5 years | 105 | BHD 1,750 |
The employer's half covers the low-rate early years. SIO's half picks up the last six months of tier one and both full years at the 30-day rate, so it carries nearly twice the value. If you assume a 50/50 split of the total, you will chase your employer for BHD 875 they do not owe, and under-claim from SIO by BHD 250.
The calculator above flags which portion of your service falls on each side of the date. It reports that split in years rather than in dinars, deliberately: your employer's records and SIO's account are the authority on the money, and a rounded currency split that did not add back to the headline total would do more harm than good.
What to check before you assume
Two details are worth confirming with SIO directly rather than taking from any guide, this one included:
- Whether your employer actually registered you and paid. Contributions are due electronically by the 15th of each month. If your employer skipped months, the balance in your SIO account will not match what you accrued.
- How the 3-year contribution tier is counted for pre-2024 hires. The rates are tied to years of employment with the employer, but if you want certainty about which rate applied to your months, ask SIO for your contribution record.
SIO pays the gratuity as a lump sum on application, with no fee, and publishes the process for non-Bahrainis on its own end-of-service page.
Resignation, termination and contract expiry
Bahrain treats all three the same, and this is the single most misunderstood point in the Arabic-language guides in particular, several of which publish a tiered scale: nothing under one year, one third between one and three years, two thirds between three and five, full entitlement after five.
That scale is Saudi Arabia's. It comes from Article 85 of the Saudi Labor Law and has no basis in Bahraini law. Article 116 contains no resignation reduction and no qualifying period. If someone has quoted you a reduced figure because you resigned, ask them which article they are relying on.
The one genuine exception is lawful summary dismissal for one of the serious grounds the Labour Law lists. That is a narrow carve-out, not a general rule about resignation.
Common mistakes
- Using total salary. Housing and transport allowances are not part of the base. Only basic plus social allowance.
- Using basic salary alone when a social allowance exists. The mirror-image error, and it costs real money, as the ten-year example shows.
- Assuming a one-year minimum. Article 116 prorates from day one.
- Upgrading early years to the 30-day rate. The first three years stay at 15 days each, permanently.
- Splitting the employer and SIO portions pro rata by time. The tier change makes that wrong whenever service crosses both the transition date and your third anniversary.
- Waiting for your employer to pay the post-March-2024 part. They no longer hold it. You claim it from SIO.
Frequently Asked Questions
How much indemnity do I get after 5 years in Bahrain?
One hundred and five days of wage: 15 days for each of the first three years (45) plus 30 days for each of years four and five (60). On a BHD 500 monthly wage that is BHD 1,750. Multiply your daily wage, meaning basic plus social allowance divided by 30, by 105.
Who pays my end-of-service indemnity in Bahrain, my employer or SIO?
Both, if your service spans 1 March 2024. Your employer pays the portion you accrued up to 29 February 2024 as a lump sum. The portion from 1 March 2024 onward was funded by monthly employer contributions to the Social Insurance Organisation and is claimed from SIO. If you started after that date, the whole benefit comes from SIO.
How is a partial year of service calculated in Bahrain?
Proportionally, at the rate that applies to the year the days fall in. Divide the leftover days by 365 and multiply by 15 if you are still in your first three years, or by 30 if you are in year four or later. There is no rounding up to a full year and no minimum service period.
What if I am paid on commission or piece rate?
Article 47 uses a different base for you. If you are paid on a piece-rate or production basis, or on a fixed wage plus commission or a percentage, your indemnity is calculated on your average wage over the last three months rather than on a single final figure.
Do I lose my indemnity if I resign before three years?
No. Bahrain has no resignation reduction and no qualifying period. Guides that show one third of the entitlement between one and three years are quoting Saudi Arabia's Article 85, which does not apply in Bahrain. Resignation, termination and contract expiry are all paid identically under Article 116.
Does the LMRA calculate end-of-service indemnity?
No. The Labour Market Regulatory Authority handles work permits and labour market regulation. The indemnity entitlement comes from the Labour Law, and since March 2024 the post-transition portion is administered and paid by the Social Insurance Organisation.
How long does SIO take to pay the gratuity?
SIO pays the accumulated benefit as a lump sum on application, free of charge. Apply as soon as your employment ends, and check that your contribution record has no missing months before you accept the figure.
Before you sign anything
Work out your own number first. Take your basic wage plus social allowance, divide by 30, multiply by 15 days for each of your first three years and 30 days for each year after, and prorate whatever partial year is left. Then check which side of 1 March 2024 your service falls on, because that decides who you ask.
If your employer's figure is lower than yours, the reason is almost always one of three things: they used basic salary without the social allowance, they applied a resignation reduction that does not exist in Bahraini law, or they quietly excluded your post-March-2024 service on the grounds that SIO holds it, without telling you to go and claim it.
You can run your own figures on the Bahrain end-of-service calculator, which shows the year-by-year breakdown and flags the employer and SIO split. If you are working out a full final settlement, the leave salary and overtime calculators cover the other two components. Workers in Kuwait can read the equivalent rules in our guide to Kuwait labour law indemnity.
This is guidance, not legal advice. The governing text is Law No. 36 of 2012, Articles 47 and 116, and your own contract may grant more than the statutory minimum.