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Guide to Hiring in Bahrain
Bahrain is an attractive location for international business enterprises. Its low taxes, provisions for keeping 100 percent control of your company, and ready access to the lucrative Gulf market mean your business can position itself well for growth and profit.
Before you can start hiring in Bahrain, you need to understand the country’s labor laws, tax code, and company registration requirements. That’s why we’ve developed this comprehensive guide to hiring employees in Bahrain. We’ll explain what you need to know and offer a few tested tips for success.
What to Know Before Hiring in Bahrain
As you learn how best to build teams in Bahrain, you’ll need a solid grasp of certain employment topics. These include contract law, termination and severance requirements, payroll taxes, working hours, benefits, and the general characteristics of the Bahraini job market and workforce. Let’s explore each of these topics in more detail.
1. Contracts and termination
Bahrain does not have at-will employment, so employer-employee relationships require contracts, and employers cannot terminate their employees except under specific circumstances.
Bahraini law requires companies to draft strong written contracts for each of their employees. These formal agreements must use the local language and specify the employees’ job duties, compensation, benefits, and termination requirements. You should make two copies of each contract so you can keep one on file and give one to the employee.
Bahraini law generally allows for a probationary period of three months. Under a fixed-term contract, after those three months, if a company wishes to terminate an employee, it must pay two days of wages for each month of the employee’s service. The severance must equal at least one month’s pay and no more than 12 months’ pay.
Fixed-term contracts work slightly differently. Terminated employees under fixed-term contracts must receive severance equal to the pay they would have received for the entire contract. Companies can sometimes make different arrangements for longer fixed-term contracts.
Be aware that if you must terminate your employees because of redundancy, Bahraini law requires you to release your expatriate employees first, retaining your Bahraini citizens and other Arab nationals.
2. Payroll and taxes
Unlike many other countries, Bahrain imposes no income taxes on its employees. Workers are free to keep the entirety of their gross salaries.
However, employees and companies in Bahrain do pay certain contributions. Local employees must pay 7 percent of their wages into a social security fund, and expatriates must contribute only 1 percent. All employees must pay 1 percent of their wages into an unemployment fund. Additionally, employers must contribute 12 percent of local employees’ salaries to social security and 3 percent of expat employees’ salaries.
3. Wages and working hours
The standard workweek in Bahrain is 40 to 48 hours per week, eight hours per day. During Ramadan, Muslim workers must work no more than six hours per day. The weekend typically consists of Friday and Saturday. Employees may work overtime in certain scenarios as long as they receive overtime pay of 125 percent for daytime hours and 150 percent for nighttime hours.
Employees in Bahrain must receive nine paid public holidays, including New Year’s Day, Labour Day, Eid al-Fitr, Hijri New Year, and the Prophet Muhammad’s birthday. Employees in Bahrain who have worked for their company for a year should also automatically receive 30 days of paid vacation. Employees who have worked for less than a year accrue the same vacation days at a rate of 2.5 days per month.
In Bahrain, employees should receive three days of paid time off for their weddings as well. Once during their employment, if they have worked for the same company for at least five years, they can also take up to 14 days of paid leave for a pilgrimage to Mecca.
In addition to holidays and vacation time, employees in Bahrain should receive 55 days of sick leave per year. They can take 15 of those days with full pay, 20 with half-pay, and the remaining 20 with no pay. Women may take up to 75 days of maternity leave, and the law prohibits them from working during the first 40 days after giving birth.
4. Job market and labor force
The job market in Bahrain can sometimes be challenging for employees seeking work. As far back as 2004, unemployment rates rose as high as 13 percent to 16 percent for Bahraini nationals. During the past couple of decades, unemployment rates have risen and fallen sharply a few times, reaching multiple peaks of 5.6 percent and 4 percent and sometimes falling to just above 1 percent.
The sharp peaks in unemployment often cause intense competition for jobs. Employers can expect to see high numbers of applicants during these times.
The workforce in Bahrain contains a high proportion of expat workers, especially in the private sector. According to Bahrain’s Labour Market Regulatory Authority, about 70 percent of employees in Bahrain are non-Bahraini nationals, and only 30 percent are Bahraini nationals. However, Bahrain currently has policies to encourage the employment of a higher percentage of Bahraini nationals, so these numbers may change.
Worker education levels in Bahrain’s workforce are mixed. Bahrain has the Arabian peninsula’s oldest public education system, and primary and secondary education are free. About 96 percent of Bahraini students complete their secondary education, and the literacy rate among Bahrainis 15 and older is 97.5 percent.
However, the workforce in Bahrain overall, with its high proportion of expats, differs significantly. Only about half of non-Bahrainis in the country’s workforce have completed secondary education or beyond. About 48.1 of non-Bahraini workers have completed only an intermediate education or lower.
The workforce in Bahrain is also predominantly male. Among Bahraini nationals in the workforce, 88.5 percent are male, and only 11.5 percent are female. Among non-Bahraini workers, 93 percent are male. Overall, 91.7 percent of the workforce is male, and only 8.3 percent is female.
5. Language
When your company begins recruiting and hiring employees in Bahrain, knowledge of local languages can be invaluable.
The official language in Bahrain is Arabic. Many Bahraini nationals speak the dialect known as Bahraini Arabic as their first language. However, English use is widespread throughout the country as well. English is compulsory as a second language in Bahraini schools, and it is widespread in the business world.
Among workers who are not Bahraini nationals, other languages are common. Frequently spoken languages in this group include Farsi and Urdu, the primary languages in Iran and Pakistan. Balochi, the language spoken in the Balochistan region of Iran, Afghanistan, and Pakistan, also has numerous speakers in Bahrain.
The Cost of Hiring an Employee in Bahrain
The costs to hire employees in Bahrain will vary by company and sector. However, you will need to consider both direct and indirect costs when your company budgets for new hires. These are some of the expenses you’ll want to keep in mind:
- Job postings
- Labor costs of reviewing and interviewing job candidates
- Salaries
- Payroll
- Taxes
- Benefits
- Allowances
- Bonuses, if applicable
Let’s examine the costs of benefits and allowances for your employees in Bahrain, since these tend to contribute to much of the expense of hiring new employees.
Bahrain’s healthcare system has a public and private component. Bahraini nationals receive heavily subsidized state healthcare. Expat workers use the same system but generally must purchase health insurance to avoid paying high out-of-pocket costs. Though some companies may choose to, most companies do not generally provide health insurance for their employees.
However, many employers provide substantial benefits for their employees in other areas. Companies often offer perks like housing, utility, and transportation allowances, along with paid annual trips home for expats. Many employees who have worked in Bahrain for some time are accustomed to receiving these benefits and might be surprised not to find them included with their compensation.
Hiring practices in Bahrain
Hiring someone in Bahrain may be similar to hiring someone in your home country. However, minor differences will inevitably crop up. When you begin recruiting candidates in Bahrain, you’ll need to know the standard hiring practices in the country so you can keep your company in line with the expected norms. Here are a few of the hiring practices to keep in mind:
- Background checks: The law in Bahrain allows you to conduct background checks on potential employees if you choose. Many candidates will know you have this option and be prepared for the background check to happen.
- Non-discrimination: In 2012, the King of Bahrain introduced a decree known as the New Law, which provides more worker protections and prohibits many forms of discrimination in hiring and employment. Under the New Law, companies in Bahrain may not discriminate against job applicants or employees because of their ethnicity, sex, religion, religion, beliefs, or membership in a trade union. For this reason, you may want to limit your interview questions to job-related topics.
- Employment priority: Despite the New Law, you cannot always hire whomever you choose in Bahrain. The law requires you to prioritize Bahraini citizens, followed by Arab nationals generally, as long as they have the appropriate qualifications. Only after filling spots with these candidates can you offer positions to nationals of other regions.
What does a company need to hire employees in Bahrain?
The steps to hiring in Bahrain often begin with completing a long list of bureaucratic tasks. Especially if you choose to form a subsidiary in Bahrain, you will need to meet all the formal requirements for establishing a company, including completing these steps:
- Selecting and formalizing an appropriate company name
- Filing the required registration forms with the Bahrain Investor’s Center
- Obtaining a commercial registration certificate
- Obtaining a license or other approval, if necessary
- Opening a corporate Bahraini bank account
- Depositing the required share capital
- Deciding on your official shareholders and resident manager
- Renting or building business space
- Submitting annual company registration renewals
- Submitting annual financial statements and tax returns
Additionally, when you start hiring new employees in Bahrain, you must register them with the Ministry of Labour and Social Affairs. The ministry will give your company a certificate of registration, which you must keep on file.
You must also register employees with the General Organization for Social Insurance (GOSI) so you can pay payroll taxes, making monthly contributions to the relevant insurance programs. Finally, you must register each employee with the Pension Authority to ensure correct pension payments.
Setting up a subsidiary by fulfilling these numerous requirements is costly and labor-intensive. One appealing alternative is to work with Globalization Partners’ SaaS Employer of Record (EOR) model. We have an entity in Bahrain, so you can immediately recruit, hire, onboard, and pay your employees through our AI-driven global employment platform, saving time and money.
Hiring remote employees in Bahrain
If your home country is several time zones and thousands of miles away from Bahrain, you’ll likely depend on remote interviews. You’ll need to adopt best remote practices to help your hiring run smoothly. Here are a few tips for success:
- Maintain flexibility: You may experience challenges in scheduling convenient interview times if the time difference is significant. If you prioritize openness and flexibility in this area, you can often make recruiting and hiring flow much more smoothly.
- Streamline scheduling: When your company is growing internationally, saving time wherever you can is essential. Consider improving efficiency by using a program that allows you to make interview times available for candidates to choose from. That way, you’ll reduce the need to send scheduling emails back and forth.
- Practice and prepare: Be sure you familiarize yourself with your interviewing platform before using it in interviews. Experiment with using it beforehand so you can uncover and resolve challenges before the live events. Similarly, consider coordinating with your interview team so you can transition smoothly between speakers and topics. That way, you’ll present a polished and professional appearance for candidates.
Additional tips for hiring in Bahrain
Here are a few extra tips for success in building new teams in Bahrain:
- Use the local language and currency: Be prepared for your candidates to speak any of Bahrain’s several languages. You can help ensure clear communications and enhance understanding by using the local language or languages instead of your own. Write all formal contracts in the local language, and give all monetary amounts in Bahraini dinar. You might also consider using translation services if you are unfamiliar with the necessary languages.
- Use a Bahraini bank account: When you pay your employees, you need to send their funds from an in-country account. This requirement is one of the reasons you must set up a corporate Bahraini bank account. Alternatively, you can leverage Globalization Partners’ Global Employment Platform™ to streamline hiring and payments.
- Partner with recruiting agencies: Many companies elect to work with recruiting agencies because they simplify the process of hiring expats, a common practice in Bahrain. Recruiting agencies often specialize in specific industries, such as construction or nursing. You can choose an agency with a track record of providing qualified employees in your line of work. However, obtaining expat workers through recruiting agencies is becoming less common as Bahrain implements more quotas restricting the hiring of non-Arab employees.
Let Globalization Partners simplify your international business growth
When you’re ready to build teams in Bahrain, work with Globalization Partners’ SaaS Employer of Record model. Our Global Employment Platform™ saves you time by enabling you to hire internationally in just a few clicks. Our comprehensive and AI-driven platform combines with our knowledgeable, in-country experts. Our technology expedites your hiring, keeps your company in compliance with Bahraini law, and minimizes the challenges associated with international business growth.
Request a proposal today, or browse our GlobalPedia pages to learn more about how to hire in Bahrain through our end-to-end platform.
