Benefits And Compensation In Bahrain

A well-designed compensation and benefits policy is the key to retaining employees. 

Employee benefits are perks employees receive above their salaries. They can be classified as non-wage benefits provided to the employee. Health insurance, child care, maternity cover, and benefits for retirement are a few benefits provided to employees. An employer should create a standard compensation package that includes such benefits to keep employees motivated and satisfied with their job. Not just that, employee benefits also help companies attract top talent.

There are many forms of employee benefits in Bahrain. While some are mandatory benefits, others are optional.

Like many countries in the Middle East, Bahrain provides its nationals with extensive employee benefits without any taxation. Usually, employee benefits in Bahrain include but are not limited to medical care, maternity cover, sickness, pensions, unemployment benefits, and child care. However, foreign workers may or may not get such perks. 

The labor law of Bahrain governs the employees by mentioning the rights and easy human resource management for the employers. The law states:

• There are no minimum wages stated under Bahrain’s compensation and benefits policy. However, the median monthly salary of the people in Bahrain is 1,534 BHD. The salary varies according to the industry and company.
• Employees are not liable to pay income taxes. Workers, including expats in Bahrain, are exempted from paying income taxes. This helps people save more money and live a high-quality life. 
• Some provisions in Bahrain’s compensation and benefits policy are considered commanding principles for employers. They must provide their employees with entitlements for – 
• Annual and sick leaves 
• Industry-standard wages 
• Eight working hours 
• Employees are protected against discrimination in wages based on race, color, gender, religion, or language. 
• Pilgrimage leave is also provided to Muslim employees for fulfilling the obligation of undertaking the Hajj.
• Female employees are entitled to maternity leaves of 60 days, and male employees are entitled to 1 day of paternity leave.
• Individuals in Bahrain are covered by social insurance, administered by the Social Insurance Organization (SIO).
• Article 57(a) of the Labor Law guarantees employees in Bahrain a minimum of twenty-four (24) hours of rest every week.
• Article 172 of the Labor Law mandates that employers offer basic health care to their employees.

Managing employee compensation packages in Bahrain is a costly and essential task for employers. There are a few necessary benefits that businesses globally must offer their employees, such as contributions toward social security and unemployment insurance, and Bahrain is no exception. However, there are also some optional employee benefits in Bahrain provided to the employees at the discretion of the employers. 

Selecting the employee benefits and designing the employee benefits program are essential components of the compensation package in Bahrain. It is directly proportional to the employer’s investment costs in hiring, retaining, and motivating employees, thus meeting the business’s overall objectives. Accordingly, employers must plan their employee benefits programs carefully.

Employers must consider the following pointers while designing an employee benefit and compensation package in Bahrain:

Analyzing the objectives and budget of the employee benefits policy

Identifying the policy’s goals is a critical first step in establishing an employee benefits program. It will serve as a general guideline for selecting and designing the benefits package. 

Employers should also consider company size, industry, and collective bargaining agreements while drafting the policy’s benefits objectives. However, one should remember that these objectives are static and should be revised over time to cater to the evolving employee needs.  

Evaluating employee needs 

To establish the optimal benefits selection and design based on the needs of the employees, employers must conduct a needs assessment of all employees. 

An analysis of the current workforce demographics helps determine the demands of various employee groups. Employers can use the assessment results and compare them against existing benefits to prioritize them. For example, paid time off may be more important to younger employees, whereas retirement income plans are crucial for older employees. 

Formulating the benefit plan

After completing the needs assessment and gap analysis, the employer can create Bahrain’s compensation and benefits policy. Using the information gathered from various sources, employers can prioritize different benefits and determine which perks to include in their compensation plan. Next, they must calculate the costs of delivering the priority benefits, compare them to the benefits budget, and finalize a plan.

Communicating the intended benefits to all employees

Devising a solid communication strategy is vital for benefits planning and administration. The commitment of employees depends on their comprehension of the advantages. 

Without employee participation, the employer’s efforts to create the compensation and benefits policy may be fruitless, no matter how well-designed it is. Hence, it becomes crucial to let employees know how their feedback has influenced the benefits program.

Developing a periodic evaluation plan to quantify the plan’s efficacy 

Periodic evaluation of the benefits program is essential to ensure that it achieves the organization’s goals while meeting employee expectations. Employee benefits are usually affected by changes in the business climate, the economy, the regulatory environment, and labor demographics in the country. Hence, performance evaluation ensures that the plan keeps up with the industry standards.

Employees in Bahrain are entitled to some benefits that employers have to provide mandatorily. Some statutory benefits offered to the Bahraini employees include:

• A minimum of 30 days of annual paid leaves and time off at the time of national holidays celebrated in Bahrain. 
• Businesses in Bahrain are operational five days a week, typically from Sunday to Thursday. 
• If working overtime or on holidays, the employees are entitled to 25% extra of their daytime (7 am to 7pm) salary or wage. For night shifts (7pm to 7 am), overtime pay is 50% of an employee’s regular salary.
• Healthcare benefit is another guaranteed employee benefit provided to employees in Bahrain. Bahrain offers its citizens free healthcare benefits or is provided to them at subsidized rates. However, expats can access the same plans by purchasing their own healthcare insurance.
• Employers are prohibited from discriminating between employees based on their age, sex, religion, language, and ethnicity.

Bahrain is a popular choice for both professional and qualified expats, who are drawn to the country’s openness to foreign cultures and tax-free environment, among other things. They are entitled to collect their full pay and wages on the due date stipulated in their employment contract.

Some other compensation and benefits in Bahrain provided to the employees are allowances for housing, utility, and transportation. According to the Labor law of Bahrain, foreign workers or Expatriates are also entitled to mandatory health insurance.

According to Article 116 of Bahrain’s labor law, expat employees not covered under the Social Insurance Law are entitled to an end-of-service award on termination of their work contract. This reward amount is equal to the salary of:

• Half a month every year for the first three years of their employment
• One month for each following year
• Pro-rata basis of the employment period for a fraction of a year served under the employer/company.

Bahrain does not have any income tax deductions. As a result, companies are not required to deduct taxes from their workers’ compensation benefits.

However, employees must pay social security contributions irrespective of their nationality. The contribution rate for Bahrainis is 19% (12% from the employer and 7% from the employee). In contrast, expatriates are liable to contribute 4% (3% from the employer and 1% from the employee) to the social security scheme. 

Setting up a subsidiary is the biggest hindrance for foreign employers in providing their employees the benefits and compensation in Bahrain. 

Thus, business owners willing to expand their business in Bahrain must fulfill the necessary formalities of establishing a subsidiary before they can start hiring employees on payroll and offering them a compensation package.

Apart from the guaranteed benefits, employers may provide some supplemental benefits to their employees in Bahrain, including:

• Retirement plan 
• Savings plan 
• Child care subsidy 
• Dental insurance 
• Vision insurance 
• Employee assistance schemes
• Disability income protection
• Mental health support programs

Apart from these, marriage grants, funeral grants, death grants, and survivor settlements are also supplemental benefits for Bahrain employees.

Foreign employers must set up a local subsidiary in Bahrain to start operating and hiring employees. However, Multiplier can simplify this process for foreign companies.

By partnering with Multiplier, you need not worry about establishing a subsidiary in Bahrain. We will provide you with our existing infrastructure for employing people in the country. Additionally, we can also assist in devising a suitable Benefits and compensation system customized for Bahrain. What’s more, we’ll help you test new markets and set up the teams in Bahrain.