The End of Service Benefits (EOSB) is a special benefits scheme that employers provide their employees. Indemnity in Bahrain is one of the important employee benefits for you. Bahrain Labour Law dictates that companies must provide employees with indemnity based on specific terms.
This post will help you learn more about the indemnity benefits for employees. It covers the topic of indemnity calculation Bahrain and explains the various new changes to the system. You can also get details regarding the benefits and digital optimization of indemnity calculation for your business.
What is Indemnity Calculation Bahrain?
Indemnity in Bahrain is paid to you at the end of your service term with an organization. It includes a lump sum payment, helping you with a financial gain.
The calculation of leaving indemnity depends on your tenure in the firm. It covers factors such as your final basic pay and exclusion from concepts like social insurance.
The leaving indemnity amount is beneficial to determining the future of employees in a business model. It acts as compensation for you in the case of unfair termination from the company.
Bahrain indemnity computation is a competitive tool that can help you rise in the ranks with ease of service. It follows the pattern and structure of well-defined indemnity law in Bahrain.
As per Bahrain law, indemnity calculation follows an employee-friendly model. You can trust the calculation to happen with the support of a digital channel or portal to help with the maximum benefits for your employees.
New Rule for Bahrain Indemnity
The leaving indemnity calculations for Bahrain have changed since 1st March 2024. In earlier stages, you were supposed to receive the amount from your employer at the time of termination from the company.
According to the latest updates, your employer will pay a monthly amount to the Government of Bahrain following fixed percentage rates. You can receive this amount directly from the Government at the appropriate time.
The best part about the proposed rule change of indemnity Bahrain is the ease with which an employee can receive their contributions. Since the third-party employer is absent in the final transaction, employees can choose a direct path to get their payments.
The core change from the earlier indemnity calculation process is the absence of the employer in the final settlement. Employers are part of setting up the indemnity account and making active contributions on behalf of the employees.
However, unlike earlier instances, employers cannot become a part of the final settlement in the leaving indemnity calculation and transaction of the amount from the Government to the specific employees.
The new indemnity calculation changes will have a profound impact on the working of your organization. It can make changes in the payroll processing, deduction workflows, and overall HR operations of your business model.
Who are the Beneficiaries of Indemnity in Bahrain?
The beneficiaries of indemnity include any employee in a company. You should not be getting benefits under the social insurance law. The concept only applies if you are a foreign national employed in Bahrain.
You are eligible for an indemnity payment if you are a:
- Foreign employee with at least one year of service
- An employee working full-time, part-time, or for a contract
- An employee under the Bahrain Labour Law
- An employee without Social Insurance coverage
- An employee who has completed their tenure
- Nominee of a deceased employee
Employees awaiting leaving indemnity amount may fulfill one or more of the above criteria.
Benefits of Bahrain Indemnity Models
The benefits of the indemnity calculation and payment models in Bahrain are numerous. These can be listed as follows:
- It is part of your legal entitlement to receive the indemnity benefits.
- It can be a reward for your service with the company.
- It aids you in securing a long-term financial plan.
- It comes under the staff benefits administration process.
- It offers flexibility. You can get it anytime after completing one year at your job.
- It serves as a supporting retirement plan.
- It provides a better support for your job profile.
Eligibility Criteria for Bahrain Indemnity
Bahrain indemnity is not available for you if you are a citizen working in the company. It rewards a specific set of employees matching the eligibility criteria listed below.
Time of receiving indemnity – The most preferable time of getting indemnity payment is the end of your service. You may also request the amount before your resignation.
Length of service – You should have completed at least one year of service with your company to be eligible for indemnity payment.
Employment type – You can get indemnity payment whether you are a full-time, part-time, or contract worker. However, you should be employed in the private sector.
Special cases – A preferred nominee can receive the payment in case of your death. You can collaborate with your company for deferred indemnity payments.
Remember that trade unions or work councils have zero percentage involvement in the labour laws of the Bahrain region.
Also Read: Employment & Labour Laws and Regulations Report 2024 Bahrain
Samples of Indemnity Calculation Bahrain
Are you wondering how to calculate indemnity in Bahrain? We can help you with the assistance of two sample calculations.
The calculation process of Bahrain indemnity involves the following technique.
For the first three years of the employee’s tenure since the date of joining, the indemnity amount per month is 4.2% of the basic salary of the employee.
After the completion of three years in the profession, the indemnity amount rises to 8.4% of the monthly basic salary of the employee.
In either case, the employer will pay the monthly indemnity amount to the Government of Bahrain. The employee can get this amount from the Government on request.
Sample Calculation 1:
Suppose you have a basic salary of BHD 1000 per month. Your indemnity deduction for the first three years is BHD 42 per month. After three years, it will rise to BHD 84 per month. If your total tenure in the company is five years and you decide to debit the indemnity amount at the time of resignation, you can request a sum of BHD 3528.
If your basic salary changes during this time, the indemnity pay rate will also vary accordingly. The amount will be deposited by your employer to the Government account. Once you decide to debit the indemnity amount, submit an application request to the Government.
Sample Calculation 2:
Let us say that you are working under contract with a private firm in Bahrain. The contract was signed for four years. Your basic pay for the first year is BHD 250 per month. In the second year, it is BHD 500 per month.
The company and you mutually decided to opt out of a working partnership for the third year. In the fourth and final year, you got BHD 1000 per month.
You have the option to get the indemnity amount after two years, considering the eligibility tenure of one year. However, let us consider the scenario where you opt for a payout after all four years of contract with the company.
Your final eligible indemnity amount will be (10.5*12) + (21*12) + (84*12), equalling a sum of BHD 1386.
A special consideration here is the scenario where you have been with the company before the new changes came into effect in March 2024. In this situation, your indemnity will be calculated based on the earlier rule till February 2024. From March onwards, the new policy will be under consideration.
At the time of receiving the indemnity benefits, the amount under both models will be calculated. Your final due will be a sum of the amount in both formats.
If you look at both sets of calculations, they serve as a prime example of improving your HR services related to indemnity. These and other use cases can help you recognize how to compute indemnity in Bahrain.
How Can Artify 360 HR Software Help You with the Indemnity Benefits?
If your primary aim is to get HR operations management to deal with indemnity calculation, you need assistance. Embracing cloud HR software is the best solution to deal with your case. We recommend to you Artify 360 HR Software.
Artify 360 is one of the premium HR payroll software service solutions in Bahrain. Our automated platform can help you calculate the monthly indemnity payment of each employee. We can assist you in promoting an error-free HR management model regarding the indemnity calculation.
From an employee perspective, you can check and verify your indemnity details using the Artify platform. However, we cannot assist you with the reception of the amount from the Government. You have to submit the request personally to get the indemnity benefits. The support of HR software systems is to help you have proper documentation regarding the pending dues in the indemnity deduction.
You can place a request with us to see how to manage indemnity calculation Bahrain. We can help you with a free demo version version the working of Artify 360.
