Bahrain End of Service Gratuity Calculation

Joharan Nachia Mohamed Eusuf


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    Article 116 of Bahraini Labor Law states categories of workers to whom the Provisions of the social Insurance Law are not yet applicable, the employer concerned shall pay to such worker, upon the termination of employment, a leaving indemnity for the period of his employment calculated on the basis of 15 days wages for each year of the first three years of service and of one-month wages for each year of service thereafter.

    Almost every employee must have heard about gratuity payment, but not many know the terms and conditions involved and how it is calculated. Here, we take you through a set of questions and answers that will help in clearing all your doubts related to end of service gratuity in Bahrain.

    1. What is Gratuity?
      Gratuity is a monetary payment eligible to an employee as a lump sum at the end of his tenure provided that the period of service exceeds one year. Gratuity payment is a liability to the employer which accrues as the employee service period progresses.
    2. Who is entitled to a Gratuity?
      Expatriate workers are entitled to a gratuity on completion of their contract. Social insurance law applies to nationals employed in Bahrain and they are not entitled to Gratuity.
    3. When does an employee become eligible for his/her gratuity payment?
      Employees are eligible for gratuity pay at the end of their service period, upon the death of the worker, by a disability preventing his work performance or by a period of sickness which exceeds his entitlement to sick and annual leave. According to Article 116, the worker shall be entitled to gratuity for the fraction of the year worked.
    4. What is the basis amount that is used to calculate gratuity?
      As per Article 47, leaving indemnity shall be calculated on the basis of the worker’s most recent basic wage in addition to social allowance, if any.
    5. What is the number of days used to accrue gratuity?

      15 days’ wages for each year of the first three years of service and one-month wage for each year of service thereafter.

      The following example shows the gratuity accrual at a given time.

      Particulars0-3 years3 Yrs And Above
         Hire date15/04/1715/04/16
         One day salary (= salary/30)33.33333.333
         Payroll MonthJanuary -2020January -2020
         Number of days in service as of 31 January 202010221387
         Number of years in service2.803.80
         Gratuity Days
         First 3 yrs42.0045.00
         3 Yrs and Above –24.00
         Gratuity Days in total 42.0069.00
         Gratuity Amount (Gratuity days*One day Salary)1,400.0002,300.000


    6. Does type of termination of an employment contract make any difference in gratuity payment?
      Termination of an employment contract can be in terms of Resignation, Non-renewal of the contract or termination by the employer. In all these cases, the employer is bound to pay end of service benefits. If an employee is terminated as per article 107, the Employer is not liable to pay any Gratuity to the employee
    7. What is the effect of unpaid leave taken during the period of service?
      Any period taken by the employee as unpaid leave is excluded when determining the service period. That means unpaid leave days are excluded when accruing gratuity. The period of service is reduced by the number of days served as unpaid leave.
    8. Can an employer withhold gratuity payment?
      As per Article 107, the employer may dismiss the worker without compensation in any of the following instances:

      • If the worker assumes a false identity or submits false certificates or testimonials.
      • If the worker committed a fault that caused serious material loss to the employer-provided that the employer shall report the matter to the competent authorities within two working days of his knowledge of the seriousness of the material loss.
      • If the worker, despite a written warning, fails to comply with written instructions which are required to be observed for the safety of workers or the establishment, provided that such instructions are posted up in a prominent place in the workplace
      • If the worker absents himself from work, without legitimate cause, for more than twenty(20) intermittent days or for more than ten consecutive days in one year, provided that such dismissal shall be preceded by warning in writing by the employer to the worker after an absence of ten days in the former instance and an absence of five days in the latter instance.
      • If the worker fails to perform his essential duties under the contract of employment.
      • If the worker discloses, without written permission from the employer, the secrets related to the work.
      • If the worker has been finally sentenced for a crime or misdemeanor involving dishonor, dishonesty, or public morals.
      • If the worker is found during the hours of work to be under the influence of alcohol or drugs, or if he has committed an immoral act at the place of work.
      • If the worker assaults his employer or his responsible manager or commits a serious assault upon any of his supervisors at work during the course of employment or for reasons connected therewith.
      • Worker’s failure to comply with the legally prescribed rules concerning the exercise of the right to strike
      • If the worker becomes unfit to do his work subject to the contract due to a cause attributed thereto such as canceling his permit to practice his work or loss of the qualifications authorizing him to do the mutually agreed work.
    9. How Gratuity is calculated during final settlement?

      Please see the below example for calculating Gratuity during final settlement.

      Total Service periodGratuity calculation
         Less than3 years15 days wage for each of the first three years of employment
         3 years and Above15 days wage for each of the first three years, One-month wage for each of the following years in service

      Please see the below example for calculating Gratuity during final settlement.

      Service period Less than 3 Years
      ( Eligible for 15 days)
      3 years and Above
      ( Eligible for 1 Month)
         Hire date24/02/1615/04/13
         Last Working Day25/01/1925/01/20
         One day Salary (= Fixed Salary/30)33.33333.333
         Number of days in service10672477
         Number of years in service 2.926.79
         Gratuity days for the First 3 yrs35.0845.00
         Gratuity Days 3 Yrs and Above113.59
         Gratuity days in total35.08158.59
         Gratuity Amount (Gratuity days*One day Salary)1,169.3335,286.301
      Whether you are someone who has resigned from work, or has been terminated by the employer, the gratuity that you are eligible to receive at the end of your service can be of great help while transitioning to your next job. Hence, it is important to be aware of the gratuity payment policies and any changes to it.

      For information on the payroll process in Bahrain click on this link

      Payroll Process in UAE

      The process of payroll is little complicated and time-consuming; hence it is always recommended to outsource your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business.

      One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.

      As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our clients’ entire payroll cycle that includes preparation of payroll reports, processing salary payment with WPS compliance, accrual management including Gratuity, pension funds, an online portal for accessing payslips, and many more. Our leadership team spends the necessary hours in every project, ensuring our clients get refined consulting services to take your business forward.

      To know more about our payroll process, click here
      Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subjected to change and not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

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