Entrepreneurs and company owners who want to set up businesses in Bahrain and hire staff must be familiar with the country’s payroll laws and regulations.
Employers must put all of their employees on the firm payroll after business operations have begun in Bahrain in order to adhere to labor laws imposed here. So, if you need support in this endeavor, you can rely on our local consultants. We are also at your service if you want to start a business in Bahrain.
Payroll in Bahrain – Specific regulations to comply with
The payroll computation is based on income tax deductions and other required contributions, such as social security, healthcare, and others in most countries in the world. Payroll deductions in Bahrain are distinctive in the sense that employee salaries are exempt from the income tax. Thus, companies are not required to withhold income tax from their workers’ salaries.
Yet, employees are required to contribute to Bahrain’s compulsory social security program. The allowances and benefits are added to the monthly paycheck of an employee, and the statutory contributions are subtracted to determine the net compensation of a worker.
Our accountants are at the service of local and business owners dealing with HR and payroll in Bahrain and who need specific support.
How to set up Bahraini payroll
The following steps must be completed in order to correctly process payroll in Bahrain:
- enrolling employees is the first step after starting a business in Bahrain;
- draft the components of the payroll policy (such as monthly wage, vacation time, payment schedule, benefits);
- the employer must collect all relevant information from employees (such as ID documentation, addresses, bank information in order to complete the payroll process;
Once the computations are complete and the deductions have been withheld, the final payments are distributed to the Social Insurance Organization in Bahrain (SIO). Nowadays, most companies use a payroll processing system that instantly sends employee pay slips to their business accounts.
The Social Insurance Organization receives payments from both local and foreign employees working in Bahrain. So, if you are considering immigration to Bahrain, do not hesitate to get in touch with us for complete solutions that include relocation, enrollment for social security purposes and tax support. On request, we can also provide other services.
Payroll contribution rates in Bahrain
Employees in Bahrain are only required to pay into social security because Bahrain does not recognize tax residency. For expatriates, employers often cover the SIO cost. Employers also have the option to deduct SIO contributions from employees’ pay.
Here are the rates of payroll contributions in Bahrain:
- for local employees, the SIO contribution rate is 19% (12% employer, 7% employee);
- for expat employees, it is 4% (3% employer, 1% employee);
- no more than BHR 4,000 can be deducted from an employee’s wage.
You can rely on our accountants in Bahrain if you need assistance with payroll management.
Employment regulations in Bahrain from a payroll point of view
The rules that businesses must adhere to in order to maintain the payroll for their employees are outlined in Article 40 of the Bahrain Labor Code. All companies must pay full-time employees’ salaries on a monthly basis.
People who work a project basis (which can be the case of those in the oil sector) should receive two paychecks; the first should be an advance for their work in the first week, and the second should come when the project is finished.
If you need payroll services in Bahrain, do not hesitate to contact us. We are also at your service if you want to apply for residency in Bahrain.
If you need a lawyer in Bahrain, you can rely on us. One of our specialists will at your service with tailored solutions in accordance with your needs. Among the services we provide are company registration, but also legal advice in corporate and civil matters. Do not hesitate to get in touch with us right away.