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Doing Business With a Bahrain PEO

Doing Business With a Bahrain PEO

Bahrain is a popular trade hub in the Middle East. Its location and growing population make it an ideal consumer market for foreign businesses. Being an advanced middle-east nation, Bahrain is well connected with the world. Hence, it will be the perfect destination for setting up your foreign subsidiary.

While Bahrain offers enormous opportunities for foreign investors, doing business here requires careful planning and knowledge of the country’s rules and regulations. Additionally, complying with administrative procedures and documentation requirements while establishing a business in Bahrain can take much longer than anticipated. Since Bahrain’s business and employment legislation differ regionally, unexpected delays could drive up costs and lead to revenue losses.

A reputable global Bahrain PEO, such as Multiplier, can help streamline your company’s growth. Our in-house professionals can manage employee onboarding and payroll while guaranteeing compliance with local regulations.

Why Use a Bahrain PEO?

Bahrain is a small Middle Eastern country with a strong economy, particularly in the oil and gas and financial services industries. Although the oil industry is the biggest contributor to its economy, Bahrain’s government has taken numerous measures to diversify its economy by promoting other industries.

There are numerous prospects for foreign firms in Bahrain, but you must be well-versed with its complex employment and business legislation if you consider expanding here. Apart from navigating Bahrain’s legal canvas, employers must also overcome the language barrier to conduct business here smoothly. 

After establishing a Bahrain subsidiary, companies must hire employees (both locally and globally) and incorporate them into the payroll structure. All operations are time-consuming and costly – from the subsidiary establishment process to employee onboarding and payroll management. 

This is where a Bahrain PEO will come to your rescue.

Establishing a subsidiary or branch office in Bahrain to hire employees isn’t always the best solution because it takes time and money. HiringIt is more cost-effective to hire through a Bahrain PEO (Professional Employer Organization) or Bahrain EOR (Employer of Record) is more cost-effective. 

The best thing about partnering with a Bahrain PEO is that they will function on a co-employment model, sharing a huge chunk of your responsibilities, including employee onboarding, payroll management, employment contract generation, etc.

Bahrain PEO Costs

Typically, PEO costs vary according to the services the company avails of. During the early discussions and negotiations with your Bahrain PEO partner, you can mutually agree on the rates for the services you want to take for your organization.

At Multiplier, we follow a simple and transparent costing structure with fixed rates. There are no hidden costs. Furthermore, the rate does not change if your employee’s income or bonus increases. You can plan your budget without worrying about unexpected PEO costs.

All operations remain transparent and straightforward whenWhen working with a Bahrain EOR firm like Multiplier, all operations remain transparent and straightforward. Our experts can walk you through the cost structure to get full value for your money.

How to Hire in Bahrain?

Employers usually conduct a formal interview process to hire candidates and offer employment contracts to chosen individuals within three months of their arrival in Bahrain.

Bahrain employment law allows for fixed-term and indefinite-term employment contracts, giving employers multiple hiring alternatives.

Before employing personnel in Bahrain, employers must understand the following pointers:

Employment laws

As amended, Law No. 36 of 2012 (the Labor Law) is the primary law controlling employment relations in Bahrain’s private sector. Its provisions demonstrate Bahrain’s efforts to protect employees by defining their fundamental minimum rights in various areas, including leave entitlements, overtime pay, healthcare, termination, and severance.

The labor law offers businesses broad leeway to go beyond the minimum threshold, also providing additional advantages and benefits to ensure that employees receive the maximum benefit, 

Article 39 of the Bahrain labor code states that all employees must be treated equally irrespective of their pay structure, origin, language, religion, gender, etc. It helps keep Bahrain’s legal system at par with international standards. Any discrimination that can affect the mental state of the employees is strictly prohibited. 

You can partner with an employer of record in Bahrain to understand the laws governing all of the laws that govern employment in Bahrain.

Employment contracts

Employers must create employment contracts in Arabic along with a common language known to both the company and the employee. There should be two copies of the contract, one for the employer and one for the employee. 

As required by country law, it must include details like:

  • The employee’s job location 
  • The employee’s duties and nature of work
  • Working hours
  • Holidays and other leaves 
  • Salary
  • Payment cycle
  • Bonus & compensation 
  • Termination terms

Employers must mention the salary and other benefits in Arabic, using only the Bahraini dinar to depict these figures. A Bahrain PEO EOR can help you draft all the necessary documents.

Probation period

The maximum duration of the probation period in Bahrain is three months. The Ministry of Labor can extend the probation period to six months.

The duration of the probation period must be mentioned in the employment contract. The employee or the employer can terminate the employment contract during this period by providing a day’s notice before the termination date.

Taxation

No personal income taxes apply to the employees’ salaries in Bahrain. Hence, employers do not deduct income tax from their employee’s salaries.

However, all employees are liable to pay Social Insurance Organization (SIO) from their salaries – the percentage of contribution differs for Bahraini and expat employees. 

Social Insurance

Individuals in Bahrain are covered by social insurance, administered by the Social Insurance Organization (SIO). Under Legislative Decree No. 24 of 1976 promulgating the Social Insurance Law, the employees are protected against aging, disability, death, work-related injuries, and unemployment in both the public and private sectors.

Employers must register with the SIO and then contribute according to the norms that have been declared beforehand:

  • Bahraini Employees have to contribute 19% of their income. The employer contributes 12% of this, and the employee contributes 7% to social insurance, covering old age, disability, death, and unemployment.
  • Expats have to contribute 4% – employer contributions 3% percent and 1% for non-Bahraini employees. 
  • Four thousand Bahraini dinars is the maximum monthly earnings subject to contributions (BHD 4,000).

Payroll

As discussed earlier, there is no personal tax in Bahrain. However, employers in Bahrain must collect the unemployment insurance and social insurance contribution from the employees’ paychecks. 

Before you establish your payroll in Bahrain, you must first establish a subsidiary in the nation. This process could take several weeks or months, depending on where you incorporate and what company you choose. You’ll also need to open a Bahraini bank account to pay staff.

A company can select among the different payroll options in Bahrain, including remote, internal, local payroll firms, or a global PEO has to offer. 

Employment benefits

In Bahrain, employers offer several benefits to their employees (both local employees and expats) throughout their employment journey. These benefits include leave entitlement, overtime compensation, primary healthcare, etc. 

Bahrain has a well-established public healthcare system. Bahraini citizens are entitled to free or significantly subsidized medical treatment. While foreign nationals have access to the same facilities and doctors as Bahraini citizens of Bahrain, they must pay for healthcare services.  Thus, health insurance is strongly recommended. Supplemental health insurance benefits are not common in the workplace, but they can be negotiated.

Housing, transportation, and utility allowances are prevalent in Bahrain. Hence, employees should negotiate their remuneration with employers, including such allowances.

Employee severance and termination

Employees with indefinite contracts in Bahrain who are dismissed after three months, i.e., after the probation period, are generally entitled to two days’ salary for each month worked. Irrespective of the cause for termination, employers must offer an employee a minimum of one month’s pay and a maximum of twelve months’ pay.

For employees on fixed-term contracts, employers must offer the total payment they would have received for the contract term. However, both parties may agree to an alternative arrangement of paying at least three months’ salary or the remaining period, whichever is less.

In Bahrain, employees who are not protected by the Law on Social Insurance (GOSI) are entitled to an indemnity, also known as an End of Service Gratuity, at the end of their employment term. This indemnity should be estimated at half a month per year for the first three years of service and a month per year after that.

Why Multiplier?

Multiplier can help streamline your employee onboarding and payroll management needs if you want to expand your business into Bahrain. Our Bahrain PEO professionals may help speed your onboarding process without requiring you to establish a Bahrain subsidiary.

Our in-house experts can also automate employment contract generation and arrange for employee insurance & benefits, contingent workforce management, etc. We’ll ensure everything is done per Bahrain’s employment laws and regulations.

Our Bahrain PEO Simplifies Your Expansion

When you use our one-stop Bahrain PEO services, you can expect a smooth business expansion process:

  • Our Professional Employer Organization serves as a co-employer for your company, assisting with onboarding, payroll, salary and benefits policy formulation, and other essential HR services.
  • The EOR solution from Multiplier operates as the primary employer, allowing you to engage in full-time employee onboarding without setting up a firm in Bahrain.
  • Our worldwide payroll processing system includes an all-in-one payment solution for easy administration of all payroll-related challenges.
  • Our PEO Bahrain assists you in catering to your employees’ needs by creating a global-standard, comprehensive, and inclusive benefits plan. A well-structured pay plan aids in the recruitment and retention of top people.
  • Our price options are affordable and transparent, with no surprises.

You can get in touch with our Bahrain PEO experts today to understand the services and solutions we offer to different companies and how we can help your organization onboard the best talent.

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Frequently Asked Questions

The foreign employees pay 1 percent of their salaries towards social security while the employer pays 3 percent for every foreign employee they hire.

The local employees have to contribute 7 percent of their total income towards social security in Bahrain. The employer pays the remaining 12%.

All the monetary values must be stated in Bahraini dinar on any offer letter or employment letter issued in Bahrain.

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