Indemnity in Bahrain: The Rules, Who Pays and How to Claim

Indemnity in Bahrain is the end-of-service payment the Labour Law owes a private-sector worker when the contract ends: 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. It runs on your last basic wage plus your social allowance, if you receive one. There is no minimum service period, and neither resigning nor being dismissed without notice reduces it. What did change, on 1 March 2024, is who hands you the money: for anyone hired before that date, the Bahrain indemnity now comes in two parts, one from the employer and one from the Social Insurance Organisation (SIO).

Indemnity in Bahrain: 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:

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, and an error in it compounds over every year of service. On BHD 600 basic with a BHD 50 social allowance, leaving the allowance out of ten years' indemnity understates it by BHD 425 (BHD 5,100 instead of BHD 5,525).

Article 47 applies the same wage to your unused leave and to any notice compensation, which is why the Bahrain final settlement calculator prices all three on one base.

From there the arithmetic is mechanical: 15 days' wage for each of the first three years, 30 days for each year after, and the last part year prorated at the rate of the year it falls in. The Bahrain indemnity calculator runs it on your own dates and shows the year-by-year breakdown, so this guide stays with the questions around the number: what resigning or dismissal changes, and who pays which part when your service straddles March 2024.

The March 2024 SIO change: who pays which part

This is the part most guides to end of service benefits in Bahrain 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.

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:

1. 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.
2. 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.

How to claim your indemnity from the SIO

Since 1 March 2024 the indemnity can have two payers, and you claim from each in a different way.

From the SIO, for service since 1 March 2024. The SIO's end-of-service page sets out the route:

1. Check that your bank account details are registered on the SIO website. The SIO names this as the first step.
2. Apply on the SIO website, logging in with your electronic key at the advanced level, and attach a copy of your bank account number.
3. Apply as soon as the job ends. There is no waiting period and no fee.
4. The SIO pays the whole amount as one lump sum and says it pays within 5 working days of the application. LMRA's wages and indemnity booklet of December 2024 gave 10 working days, so allow for either.

Changing employer costs you nothing here: the SIO pays for the time you spent with the previous company too.

From your employer, for service before 1 March 2024. That share is still the employer's, paid as a lump sum directly to you when the contract ends (LMRA's booklet). Article 40(b)(4) sets the deadline: immediately when the employment ends, or within seven days of your last day if you resigned. The same deadline covers the rest of what the employer owes you at the end, such as notice pay and your leave balance.

If either payment does not arrive:

• Complain to LMRA's Expat Protection Centre in North Sehla, or call LMRA's Grievances and Protection Directorate on 995. The SIO's own page sends workers whose employer refuses to pay to the same centre.
• If it goes to court, Article 6 exempts workers' labour cases from court fees (the court can still order costs against a claim it dismisses), and Article 136 sets the limit: a labour claim cannot be brought more than one year after the contract ended.
• Do not sign away what you are owed. Article 5 voids any settlement that reduces or waives your rights under the Labour Law if it is made during the contract or within three months after it ends. The "Before you sign anything" section at the end of this guide covers what to check first.

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.

In figures: on BHD 550 basic, six years of service pays BHD 2,475 (45 days from the first tier and 90 from the second), and that is the same whether the worker resigns or the employer ends the contract.

Dismissal without notice does not change it either. Article 107 lets an employer end the contract "without notice or compensation" on one of the serious grounds it lists, such as forged certificates or a long unexcused absence after written warnings. It says nothing about the indemnity, Article 116 grants it whenever the contract ends, and no article of Law 36/2012 takes it away. Guides that describe summary dismissal as forfeiting the indemnity are repeating the previous law.

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: BHD 425 over ten years on a BHD 50 allowance.
• Assuming a one-year minimum. Article 116 prorates from day one, so eight months of service earns a proportional share, not nothing.
• Treating dismissal without notice as forfeiture. Article 107 removes notice and compensation, not the indemnity.
• 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.

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. Our guide to Bahrain labour law covers the rest of the law, from contracts and probation to dismissal and the labour court.

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