The Kingdom of Bahrain offers a national geographic advantage for foreign investments owing to its strategic location in the Persian Gulf. Bahrain promises to be a lucrative investment for foreign investors with low operational and setup costs for businesses, 100% foreign ownership in most non-oil sectors, and just a few indirect taxes for private establishments.
Furthermore, foreign investors are typically attracted to the Bahraini market, hoping to capitalize on its highly educated, young, and bilingual workforce. Thus, hiring top talent from Bahrain promises a good Return on Investment (ROI) for employers. However, recruitment and selection in Bahrain can be complex if employers are not aware of the local labor and employment laws.
Things to Know Before Hiring in Bahrain
While the recruitment process in Bahrain companies gives first preference to deserving Bahraini locals, employers can hire expats too. One must first be well-versed with Bahrain’s employment regulations for hiring employees.
Generally, corporations looking to recruit employees must know the following aspects of the hiring process in Bahrain:
Employers or Bahraini locals must sponsor expat employees to help them obtain a work visa valid for two years in Bahrain.
The corporation’s office size and its industry determine the number of work permits a Bahraini company can issue in compliance with national regulations. The sponsoring entity must also provide valid reasons for hiring an expat, including proof of work contracts and the proof that the relevant position demands foreign expertise.
Upon arrival, the Bahraini Labor Market Regulatory Authority (LMRA) issues a labor card for the expat that acts as identity proof. All expat employees must carry this card at all times.
Unlike other GSS countries, Bahrain does not require a government contract while hiring. However, organizations need to register a strong employment contract with LMRA to hire Bahrain workers and obtain an expat employee’s work and residence visas.
The employment contract must spell out the benefits, compensation, and dismissal requirements. Employers are mandated to make two copies, one for the employee and one for themselves to have on record. Bahraini labor laws dictate that the compensation amount be written in Bahraini dinar instead of any other currency.
After hiring staff in Bahrain, employers must get a registration certificate from the Bahraini Ministry of Labor and Social Affairs by registering all employees with the ministry. They must also register employees with the Pension Authority and the General Organization for Social Insurance (GOSI).
Employers must make periodic contributions for disability, old age pension, and insurance for work-related injuries or death. Most companies hire a local legal firm or representative agency to handle these procedures.
The minimum wage denotes the lowest amount an employee can be legally paid in exchange for their services. The Bahraini government does not have any minimum wage requirement.
The amount largely depends on one’s company and industry.
The Bahraini Labor law determines the hiring process in Bahrain and the working hours of Bahraini employees, which is a maximum of 8 hours per day and 40 to 48 hours in a week. Article 53 states that the working hours can be extended to more than 8 hours in lieu of overtime but cannot exceed more than 10 hours in a day.
For each additional overtime hour in the day shift (7am to 7pm), employees are entitled to an hourly wage and 25% of additional pay. The night shifts (7pm to 7 am) are entitled to an hourly wage and an additional 50% of the pay. Article 51 states that Muslim employees cannot be compelled to work more than 6 hours a day or 36 hours a week during the holy month of Ramadan.
Article 58 of the Bahraini Labor Law stipulates that all employees are entitled to a paid annual leave of 30 days after one year of service. All employees get mandatory time off for national holidays celebrated in Bahrain as well.
Moreover, during the first year of employment, employees get 2.5 days of leave a month. Once during their employment tenure, Muslim employees who have been with the company for five years, can take 14 days of paid leave for the pilgrimage to Mecca.
All employers must include a detailed list of benefits in the employment contract. Bahrain operates under a public/private healthcare system that guarantees all citizens free or heavily subsidized healthcare treatments. However, expats must buy health insurance plans from private companies to pay for healthcare facilities.
Other perks enjoyed by expatriate employees include transportation, housing, and utility allowances. Female employees can receive up to 75 days of maternity leave. While the first 60 days are fully paid, the last 15 days are unpaid. Upon the birth of a child, fathers can take one day of parental leave.
Taxation and social security
Bahrain does not impose income tax on employees. They must only pay towards social security. The Bahrain Social Insurance Organization (SIO) has different taxation rates for local employees and expats. Employers withhold the contributions to SIO and remit them to the relevant authorities every month.
The current contribution rate for local employees is 19% (7% for employees, 12% for employers), and for expatriates is 4% (1% for employees, 3% for employers).
Procedure for dismissal
All organizations engaged in recruitment and selection in Bahrain are obliged to serve a termination notice to the employees they wish to dismiss. According to Bahrain’s labor law, the minimum notice period cannot be less than a month (30 days). However, the notice period can be longer if any contract signed by the employee dictates so. Employers can terminate an employee’s contract without offering a formal notice or compensation if the employee is found to be working under a false identity, remains absent without a justified reason, or violates the company policies.
The Cost of Hiring an Employee in Bahrain
Hiring people can be time-consuming and financially demanding. However, Bahrain Labor Laws help organizations restructure their roadmap to hiring staff.
Bahrain does not have any set minimum wage or any specific mandatory pay components under Bahraini Labor Law. Article 66 of the Bahraini Labor Law states only basic pay, transport, and housing allowances as fixed components, apart from any other specified perks mentioned in the contracts while hiring staff in Bahrain. Variable components as per individual contracts may include bonus, overtime, leave passage, relocation allowances, sales commission, etc.
Employees are also entitled to gratuity payment, calculated based on the last drawn salary. Article 116 of the Bahraini Labor Law calculates gratuity accrued as per –
- For a service period below three years, half month salary per annum based on last drawn pay.
- For an employment tenure of more than three years, full month salary per annum.
The employer payroll contributions for hiring staff in Bahrain include –
Other than the listed costs, companies looking to hire employees in Bahrain may have to consider the following factors while determining their recruitment fees in Bahrain –
- Application reviewing and interviewing
- Job advertisements
- Employee training
- Mandatory medical insurance
What Does a Company Need to Hire Employees in Bahrain?
For foreign investors to start recruitment and selection in Bahrain, they must first set up a registered company. Bahrain permits eight different business entities to choose from, such as a Closed Shareholding Company (BSC), a Limited Liability Company (LLC), a foreign company branch, and a Bahraini Shareholding Company (BSC), a partnership company, and a simple commandite, among others. An LLC is the most favored business entity as it protects both the parent company and the subsidiary from liability.
While the process of setting up different business entities varies with each other, some of the common steps required in all of them are as follows –
- Register your business/company name
- Submit the required documents and duly fill up company forms for registering your company
- Receive a commercial registration certificate
- Open a Bahraini bank account
- Set up local payroll
- Lease an office space after getting all necessary clearances
- Hire employees for different job roles
After the successful registration of their companies, employers must be mindful of the following factors during the hiring process in Bahrain –
- They must offer a detailed employment contract specifying all employment benefits, compensations, and termination conditions.
- They must mention and pay the employee salaries in Bahraini Dinar.
- Obtain a registration certificate by registering every hired Bahraini worker with the Ministry of Labor and Social Affairs, the Pension Authority, and the General Organization for Social Insurance.
- Make monthly contributions to old age, death, disability, and work-related injuries.
- They must provide medical insurance to all employees during their employment tenure.
Many companies hire a legal representative or firm to complete the registration and recruitment process in Bahrain. Alternatively, they can choose a reliable EOR service to onboard and manage their international workforce without setting up a business entity in the country.
Various options for Hiring Employees in Bahrain
When it comes to the recruitment process in Bahraini companies, there are mainly two processes:
- Establish a legal entity: Employers can set up a foreign subsidiary in the form of a Limited Liability Company (LLC) in Bahrain. It is the most preferred entity because it safeguards the parent company and the subsidiary from liability. The subsidiary is in total charge of the hiring process in Bahrain, including the administrative, legal, and taxation compliances. However, most business organizations avoid setting up a subsidiary since it is tedious and time-consuming.
- Partner with a global EOR: Most entrepreneurs nowadays partner with a global EOR company to avoid the tiresome process of setting up subsidiaries in a foreign nation. A global Employer of Record (EOR) firm like Multiplier acts as the primary employer of your employees without setting up a subsidiary in Bahrain. EORs also handle employee benefits and compensation, payroll, taxation, etc.
While conducting recruitment and selection in Bahrain, employers must remember that most employees are hired either full-time or on a contract. Though Bahraini Labor Laws permit part-time employment, it is not a common practice.
Bahrain also does not have any concept of any type of consultants, agency workers, or temporary hires (temps). Nevertheless, individuals can establish a consultancy by acquiring a professional license. There are also some licensed Bahraini employment agencies to provide employees temporarily. However, Bahrain Labor Law states that they need to remain under the sponsorship of their respective employment agencies.
The Steps to Hiring in Bahrain
While conducting a hiring process, all companies must follow a rigorous process to vet and employ the most suitable candidates in their respective positions. Before recruiting candidates, they must identify their hiring requirements, advertise, conduct interviews, and run a pre-employment background screening process.
Identify the hiring need
Companies must chalk out the precise qualifications and experience required for specific job roles.
Advertise open positions
Employers can advertise the job openings and expected requirements on popular job portals to attract applicants. They can also advertise job listings internally for referrals, encouraging existing employees to apply.
Review all the resumes and applications submitted by following a fair and uniform method to select suitable candidates for the next round of the recruitment process.
Shortlisted applicants can be called in for interviews. Employers can set up video calls for expat candidates. Recruiters can conduct standard tests to verify the candidates’ abilities further.
Run background checks
The interview round will help employers get a list of potential employees they can hire. Conduct an extensive background screening process to eliminate candidates with unreliable credit reports, criminal records, or those who have furnished false information. However, employers are not legally obliged to conduct pre-employment checks.
Take the final decision
The final step of the hiring process in Bahrain involves assessing candidates based on the different steps of the recruitment process, evaluating their previous job experiences, recommendations, and other factors.
Once the final decision is made, employers can help onboard their employees. There is no fixed way to carry out the onboarding process. You can either involve your HR staff or outsource EOR service to make the procedure easy.
Let Multiplier be Your EOR Platform in Bahrain
Establishing a business in a foreign land and hiring employees can be cumbersome and time-consuming. Thus, most foreign employers and investors partner with global EOR platforms to manage their multiple HR needs.
Multiplier is one such global EOR firm equipped to handle requirements for employee onboarding, payroll, employment contract generation, etc. Our experts at Multiplier ensure that all the operations are conducted in compliance with Bahrain’s employment and labor laws. This will free you from any legal hassles while hiring employees in Bahrain.