What is the Bahrain end-of-service indemnity, and who does it cover?
The end-of-service indemnity (often called the gratuity, or التعويض in Arabic usage) is the amount a worker earns for his years of service, payable when the employment ends. Its basis in Bahrain is Article 116 of the Labour Law for the Private Sector promulgated by Law No. 36 of 2012: "A worker who is not subject to the provisions of the Social Insurance Law shall be entitled, on the termination of his employment contract, to an indemnity at the rate of half a month's wage for each of the first three years of service and one month's wage for each year thereafter; and the worker shall be entitled to the indemnity for fractions of the year in proportion to the period he spent in service with the employer." A single unparagraphed text with no exceptions — and, as this page shows, a surprising amount of what circulates as "Bahrain rules" has no basis in it. The statutory test is coverage, not nationality: whoever is subject to the Social Insurance Law (a Bahraini compulsorily; a GCC national through the extension system) falls outside Article 116, and in practice the article matches the non-Bahraini private-sector workforce.
The scope selector above routes three groups to explainers instead of the engine: the Bahraini national (whose provision is the SIO pension — with the narrow above-BHD-4,000 exception), the GCC national (covered by his home fund), and government staff (their contracts and civil-service rules). Domestic workers have a Gulf-exceptional position covered in its own guide section below, and the calculator treats them in full. Note that periods under this law are computed on the Gregorian calendar (Article 3).
The formula, step by step — with a fully worked example
The formula has three steps. Step one — the base: your last basic wage plus the social allowance, if any (Article 47). Step two — the rate: for each of your first three years of service, half a month's wage (SIO's own page expresses it as 15 days' wage per year — the daily wage is the base ÷ 30); for each year after the third, a full month. Note that Bahrain's band turns at three years — earlier than Saudi Arabia, Kuwait, the UAE and old Oman (five years, or three at different rates). Step three — the split: the service is divided at 1 March 2024; what precedes it goes to the employer's account and what follows it to SIO's (next section), and the two segments always sum to your full indemnity.
Worked example: last basic BHD 400 with no social allowance, exactly two years of service from 1 January 2019 to 31 December 2020. Base = 400. Rate: two years in the first band: 2 × half a month = one month's wage = BHD 400.000. The split: the whole service precedes March 2024, so your employer pays it all and there is no SIO segment. Run the same numbers in the calculator above and you will see the same breakdown. Had your service run four years from March 2022 at a base of BHD 500, the total would be BHD 1,250.000: 500 from the employer (two pre-changeover years at the half-month rate) and 750 from SIO (your third service year at the half-month rate — tier position counts from your original start — and your fourth at a full month).
The March 2024 changeover — the SIO system, and who pays what
Until 29 February 2024 the indemnity was a single debt on the employer, paid when service ended. Prime Minister's Decision No. 109 of 2023 (Official Gazette, issue 3717) then created the End of Service Gratuity System for Non-Bahrainis Working in the Private Sector, run by the Social Insurance Organization and in force from 1 March 2024. The system covers every non-Bahraini private-sector worker insured under the work-injuries branch — whatever the duration, nature or form of the contract and whatever the amount or type of wage — and excludes GCC nationals under the unified insurance-extension system and the categories listed in Article 3 of the Social Insurance Law (System Articles 2–3).
The funding (System Article 5): the employer alone pays SIO a monthly contribution of 4.2% of the wage (basic + social allowance) for your first three years of service with him, and 8.4% thereafter until service ends — and nothing may be deducted from your wage for it. The rates are not arbitrary: 4.2% × 12 ≈ half a month's wage per year, matching the first band's accrual, and 8.4% × 12 ≈ a full month, matching the second. A worker whose service already exceeded three years when the system started was contributed for at 8.4% from day one (System Article 13) — tier position runs from the original start, exactly as in Oman's transitional split. And if your wage is increased, the employer must pay the contribution differentials resulting from the increase, and may recover the difference on a decrease (System Article 10, second limb).
What remains on the employer? System Article 14 is express: the Labour Law governs the indemnity for the period before the system entered into force — so your employer still owes you your pre-1 March 2024 service directly, at Article 116's rates on your last wage, as part of your final settlement. The claim that "employers no longer pay any severance" is therefore wrong for half the picture. And how do you collect the SIO part? By steps SIO itself publishes: apply immediately after the employment relationship ends, on SIO's website (sio.gov.bh), logging in with the Advanced eKey, attaching your bank account number (your bank details must first be registered on SIO's site); SIO pays within 5 working days of the application, with no fees. If your employer refuses to pay what he owes, SIO directs you to complain to the LMRA Expatriate Protection Centre, North Sehla. (One widely-shared blog claim — that your visa must be cancelled before SIO will pay — appears nowhere on SIO's page or in the System text; do not build on it.)
The system's status today (November 2026): fully operational for over two and a half years, and this research found no amending decision altering the rates, the cap or the split. The status panel on this page therefore reads the opposite way from Oman's: not "a fund is coming" but "the fund is already here" — since 1 March 2024 your post-2024 indemnity comes from SIO, and your employer owes you only the part before it.
No minimum, no fractions, no cap — three ways Bahrain is not its neighbours
First — no resignation scale. The commonest Bahrain error in circulation is a table in several similar wordings: "nothing before 3 years, half at 3–5, two-thirds at 5–10, full after 10" — sometimes attributed to "Article 116, paragraph 2". Every element is wrong: Article 116 is a single text with no paragraphs, and nothing in Law 36 of 2012 distinguishes resignation from any other ending. The table is Kuwait's Article 53 scale with an added zero band; its sibling in different numbers ("one-third at 2–5…") is a garbled Saudi Article 85. And the true ancestor of them all is Bahrain's repealed Labour Law of 1976, whose leaving-indemnity chapter really did scale resignation — one-third of the indemnity at 3–5 years' service, full after five — until the 2012 law abolished the scale outright. Your resignation today counts exactly as your employer's dismissal of you does.
Second — no minimum service. "The worker shall be entitled to the indemnity for fractions of the year in proportion to the period he spent in service" — with no threshold, and System Article 9 repeats the fraction rule verbatim. The "at least one year of continuous service" requirement printed by several live calculators appears in neither text; the borrowed one-year figure belongs to annual leave (30 days after one year, Article 58) and to the Article 113 death grant (two months' wage to the family, conditional on one year's service). Third — no cap. No ceiling appears in the article or its chapter: 25 years at BHD 200 produces BHD 4,700.000 in full. The one real limit — on the post-2024 payer, not on the entitlement — is the contributions cap of the next section.
The wage base — Article 47 and the social allowance
The indemnity stands on the "wage" that Article 47 fixes for this whole area (the indemnity, leave-balance cash and the Articles 99(b)/111 compensations): "the worker's last basic wage, plus the social allowance, if any". The basic wage itself is defined in Article 1 (definition 5) as the consideration fixed in the contract, paid periodically, plus the increases that accrue to it. Two practical consequences follow: a worker who receives the social allowance and forgets it understates his own figure (it is a separate field in the calculator for exactly this reason, not folded into the basic), and a calculator working on the "final total salary" with housing and transport folded in inflates the figure without a basis. The one exception in Article 47's own text: piece-rate, production and fixed-plus-commission workers are based on the average wage of their last three months.
If your wage was raised during service, the last wage governs your whole service on both sides of the split (Article 116 speaks of the last wage; System Article 10 computes the SIO segment on the last wage, with the employer paying contribution differentials on increases). And your decisive document in any dispute over the base is the service certificate (Article 13): free, on request, during service or at its end — stating the dates, the work performed, the wage and other benefits, experience, and the date and reason the contract ended. Obtain it before you sign any release, and compare it against your SIO contribution record.
The SIO cap on the post-2024 segment — honestly
System Article 10: "The indemnity is paid on the end of the insured's service, computed in accordance with Article 9 on the basis of the insured's last wage, and not exceeding the total of the contributions paid for him." The SIO segment is thus doubly bounded: the statutory figure on one side, what was actually paid for you on the other — and the smaller is paid. System Article 8 completes it: the service counted is the actual service "for which the contribution was paid". Why doesn't the cap bite for a compliant employer? Because Article 10 itself obliges him to top up contributions on every wage increase, and because the rates (4.2%/8.4%) are sized to the entitlement with a small rounding margin in the system's favour. When does it bite? When you were registered late, registered on a wage lower than your real one (at the launch, employers had to submit their workers' wage data; a defaulting employer's contributions were computed on the work-injuries wage instead), or when increase differentials went unpaid.
And understand the system's financial nature, so that "savings account" language does not mislead you: the gratuity account's resources are the contributions collected and the amounts arising from non-registration, under-registration and late payment, earmarked to pay the indemnity "in an amount not exceeding the value of the contributions collected", with administrative expenses of up to 7% of contribution income taken from investment returns (System Article 4) — investment returns are not credited to you. What reaches you is the statutory amount capped at contributions paid, not a growing fund balance. That is why this page has no "contributions calculator": your contributions total is a figure SIO holds in your record, not one that can honestly be reconstructed here. Your practical move: check your contribution record in SIO's e-services while you are still in service where possible, and press your employer about any shortfall as soon as you find it — a shortfall discovered after departure is far harder to fix.
How service ends — the figure is one; the separate money is another account
Because Article 116 has no scales, the ending reason changes what surrounds the indemnity, not the indemnity: resignation with at least 30 days' notice (Article 99(a)) — full. Employer termination with a legitimate reason — full. Expiry, completion of the task or mutual agreement (Articles 96–97) — full. Leaving without notice on an Article 105 ground — assault on you by the employer or his deputy, or an immoral act by the employer or his representative towards you or your family — makes your leaving a deemed arbitrary dismissal by the employer in the article's own terms. Leaving with notice on an Article 106 ground — the employer's breach of a fundamental legal or contractual obligation, or his fraud as to the terms — after a written 30-day cure demand, counts as termination without legitimate reason by him if your claim is proved. And leaving without notice with no Article 105 ground still leaves the indemnity intact; what you owe is notice compensation under Article 99(b) (the wage for the notice period or its remainder), plus further compensation only in Article 112's three cases (untimely leaving with no qualified replacement obtainable; intent to harm; grave damage) and only where notice was not observed, as the court assesses — separate accounts, not deductions from the indemnity, subject only to lawful set-off of proven dues.
The most important separate money is termination compensation (Article 111) — it does not enter this page's figures and is not deducted from them, but users constantly conflate the two. If your employer ends your indefinite contract without legitimate reason after three months, the compensation is two days' wage per month of service, minimum one month, maximum twelve months, with fractions of a month counting as a full month; in the first three months there is no compensation (unless the dismissal is arbitrary, below). If the dismissal is arbitrary on one of Article 104's six grounds (discrimination including pregnancy; union membership or activity; worker representation; a complaint or lawsuit against the employer, unless vexatious; using statutory leave; attachment of your dues), the Article 111 amount is increased by one half, and for the union/representation grounds the court may also order reinstatement. If a fixed-term contract is ended early without legitimate reason, compensation is the wages for the remaining term, or an agreed lesser sum not below three months' wages or the remaining term, whichever is less (Article 111(c); the same rule serves task contracts under 111(d)). On closure, downsizing or production-system replacement (Article 110, as amended in 2015, with the Ministry notified 30 days before the worker), compensation is half the Article 111 amount. And retirement at 60 (Article 115) is an ordinary ending for this population: the employer may end the contract then without Article 111 compensation unless otherwise agreed, and the indemnity is full in every case.
On death in service the contract ends and the indemnity remains full: the SIO segment is paid to those entitled under the inheritance system of the worker's own country (System Article 11), and the employer segment forms part of his dues, which carry the Article 48 privilege below. Added to both is a separate entitlement families often miss: the Article 113 grant — two months' FULL wage to the family where the worker dies in service after at least one year's service. Total incapacity (Article 114) ends the contract with the indemnity full; partial incapacity ends it only if no suitable alternative work exists.
Dismissal for cause — Article 107's eleven grounds, and the dispute stated fairly
The employer may terminate without notice or compensation (Article 107) only if the worker: assumed a false identity or submitted forged certificates or testimonials; committed an error causing grave material loss to the employer — provided the employer reports the incident to the competent authorities within two working days of learning of the loss's gravity; failed to observe the written safety instructions for workers or the establishment despite written warning, the instructions being written and prominently displayed; was absent without legitimate cause for more than 20 intermittent days or 10 consecutive days in one year (written warning required first — after 10 days in the first case, 5 in the second); failed to perform his essential obligations under the contract; disclosed work secrets without the employer's written permission; was finally convicted of a felony or a misdemeanour against honour, honesty or public morals; was found at work in a state of clear intoxication or under the influence of narcotics, or committed an immoral act at the workplace; assaulted the employer or the responsible manager, or gravely assaulted a co-worker or a client of the establishment during work or because of it; failed to observe the legal controls on exercising the right to strike; or became unfit for the contracted work for a reason attributable to him (for example, cancellation of his practice licence, or loss of the qualifications for the agreed work).
And the question this section exists for: does such a dismissal also take the indemnity itself? Read the two texts with your own eyes. Article 107 says "without notice or compensation" — and "compensation" in this law's vocabulary is a term of art for the termination money of Articles 99(b)/111, as Article 47 itself proves by listing the indemnity and those compensations as separate items. Article 116 grants the indemnity "on the termination of his employment contract" with no exception of any kind. System Article 10 makes SIO's payment turn on the end of service and the contributions paid — no end-reason condition at all. Compare the family: Saudi Article 80 and Qatar Article 61 name the gratuity in their forfeiture wording, and Kuwait Article 41 expressly preserves the indemnity on five of eight grounds; Bahrain's legislature wrote no such sentence in either direction. Against that, the balance of practitioner opinion treats a valid Article 107 dismissal as forfeiting the indemnity, and no Bahraini Court of Cassation ruling squarely on the point was located in this research. This page's position: the calculator shows the full amount with a prominent "contested" warning panel — it will not zero a figure the text does not zero, and it will not hide from you that your employer will argue the opposite. And remember that the dismissal itself is not the last word: a disciplinary termination must follow the law, the implementing decisions and the establishment's approved sanctions list (Article 108), including the Article 76 investigation procedure (written notification of the charge, a hearing, a recorded defence, a reasoned decision). Every Article 107 state on this page is therefore an indication, not an adjudication.
Domestic workers and the Gulf exception
Article 2(2) of the Labour Law disapplies most of the law to domestic workers and those assimilated to them (household farmers, guards, nannies, drivers, cooks) "with the exception of the provisions in Articles … (58) and (116) …" — Article 116 itself (and the leave article) is expressly carried over to them. That is a position with no Gulf parallel: elsewhere in the region domestic workers sit under separate regimes at lower rates or with nothing at all, while in Bahrain the legislator wrote the full indemnity article into their coverage. The two bands on basic + social allowance therefore apply to a housemaid or a driver exactly as they apply to a company employee.
The unsettled question is the payer. The SIO system's scope is tied to the work-injuries insurance branch, its Article 3 excludes the Social Insurance Law's Article 3 categories, and no official text or page located in this research settles whether the contribution system covers domestic workers; the leading practitioner treatment records the same uncertainty and assumes the employer pays in full. This page's calculator therefore shows the domestic worker's amount in full as owed by the employer (with no March 2024 split), with this caveat displayed — if the system's coverage is confirmed later, the post-2024 segment would move to SIO as it does for everyone else, and the total would not change either way.
Getting paid — payment, set-off, the certificate and claiming
When is the employer segment paid? Article 40(b)(4), as amended by Decree-Law 59 of 2018: on the end of the employment relationship the worker is paid his wage and all amounts due to him immediately; if he left of his own accord, within a period not exceeding seven days from the date of leaving. Delay is priced in the same article (paragraph (c)): compensation of 6% per annum on wages paid late, rising 1% for each further month of delay up to a 12% per annum cap — a line worth citing in writing when an employer stalls. The SIO segment runs on SIO's own service standard: an immediate online application and payment within 5 working days (section 3 above). And all of your dues carry a privilege (Article 48): wages and every amount due to you or your successors rank ahead of all the employer's movable and immovable property, satisfied before any other debt including debts owed to the State.
Deductions and set-off: an employer may deduct loan repayments from wages up to 10% (housing loans up to 25% with your written consent), and if you leave before repaying, may deduct the outstanding loan balance from your entitlements (Article 44). Attachment or assignment of wages is capped at 25% (50% for maintenance), with a statutory priority order (Article 45). Nothing in either article lets an employer net unproven claims against the indemnity — and one deduction is prohibited outright: the SIO contribution itself, which the employer pays alone (System Article 5). Your untaken leave is a separate settlement line, not part of the indemnity: annual leave is at least 30 days paid after one year's service (2.5 days per month, pro rata below a year) (Article 58); the employer must settle the balance at least every two years, and if the relationship ends before you have used your balance, you are entitled to the wage corresponding to it (Article 59(c)) — computed, like the indemnity, on basic + social allowance (Article 47). Note the family contrast: Bahrain prices BOTH the indemnity and leave cash on basic + social allowance, where Kuwait prices them in opposite directions.
Your documents and your route: ask for the service certificate (Article 13) before you sign any release, and check your SIO contribution record. Beware the "new contract" trick: successive contracts with the same employer separated by a gap of less than 30 days count as one contract (Article 118), so your service is continuous for tier and split alike — a transfer within the same employer's branches is not an ending at all (System Article 6), and on a change of ownership the successor continues the contributions and is jointly liable with predecessors for accrued obligations (System Article 7; Labour Law Article 7). Claiming: for the employer segment, start at the Ministry's Individual Labour Disputes Settlement Body (Article 119 — yes, that is what Article 119 actually is) for amicable settlement, then the Labour Case Management Office (Articles 120+) and the court; labour suits are fee-exempt (Article 6). Two clocks: wage claims are not heard after five years from their due date (Article 49), and Bahraini practitioner guides report from Article 135 that a claim for termination compensation must be brought within 30 days of the contract's end — a secondary citation, but the cost of missing it is high enough that you should act as if it binds. For the SIO segment: SIO's website — and for an employer who refuses his own segment, the LMRA Expatriate Protection Centre in North Sehla, on SIO's own direction.