Changes to the end of service gratuity regime now in force for non-Bahrani employees

At a glance

• Employers are now required to remit end-of-service entitlement contributions for all eligible employees to the Social Insurance Organisation (SIO) on a monthly basis.
• Upon termination or resignation, employees will apply to the SIO for their end of service gratuity payment (EOSG), rather than payment being made by the employer as previously.

The Bahrani government has made a change to its EOSG regime for non-Bahrani employees. Effective 1 March 2024, EOSG will no longer be paid by the employer to the employee; instead, employees must now apply to the SIO for their end-of-service entitlements. This does not apply to temporary secondments when employers will still be responsible for EOSG costs.

Employers have a one-month grace period from 1 March 2024 to submit the necessary wage data to the SIO for all eligible workers.

The gratuity calculation remains at 4.2% of an employee’s annual salary for the first three years of employment and increases to 8.4% for subsequent years until termination. Employers must pay relevant contributions into the system within the first 15 days of each month. 

Non-compliance may result in penalties and sanctions. If employers fail to pay within the specified period, interest will accrue at a rate of 5%. Additionally, employers who do not make the required leaving indemnity contributions for any given month may face an additional penalty equivalent to 20% of the unpaid contributions. A complete failure to comply with the new law may result in a penalty of BHD100-500 which will be doubled for repeated offences.