The common description of the sum
As one commentary describes the rule for employees who are outside the social insurance scheme, the indemnity is fifteen days of basic wage for each of the first three years of service, and then one month of basic wage for each year after that. Part years are usually counted in proportion.
Some descriptions also mention a ceiling of two years of pay on the total. We repeat this only as what commentary says. It is thinly sourced, different guides differ, and it should be checked against the text and current practice before anyone acts on it.
Social insurance for Bahraini nationals
Commentary says Bahraini nationals are generally covered by social insurance rather than by the indemnity described above. If that is right, the employer pays contributions into the scheme during employment, and the benefit comes from the scheme at the end, not from the employer's own pocket.
Which category an employee falls into, and what happens in mixed or unusual cases, is not something to guess. Ask the employer's accountant or the relevant authority, and write the answer in the employee file.
What to confirm before you rely on a number
Several points cause disagreement. Which wage counts: basic wage only, or basic wage with regular allowances. How a month is turned into days. How part years are rounded. Whether the contract promises more than the minimum. And whether the employee is under social insurance at all.
Write down the answers you are given and who gave them. If the figure matters, because someone is leaving or a dispute has started, confirm it with the Labour Market Regulatory Authority or with a lawyer. Do not settle it from a guide alone, including this one.
A small worked example
Suppose an employee outside social insurance has served five years and the basic wage that counts is BHD 400.000 a month. Using the description above, the first three years give fifteen days each, which is forty-five days of the daily rate. The next two years give one month each, which is two months, so BHD 800.000. Add the two parts and compare the total with any ceiling that applies.
Change the wage that counts, the day divisor or the contract terms and the answer moves. That is why the confirmations above matter, and why any single figure should be read as an estimate.
Our calculator, and where TAQNIX ERP fits
Our free end-of-service calculator does the sum for you from the dates and the wage that counts. It gives an estimate, shows its working, and does not replace the confirmations above.
TAQNIX ERP is a different tool. It is a program on a Mac that opens in the browser and handles invoices, quotations, orders, point of sale and payment tracking, with 10% VAT per line in Bahrain. It has no salary or HR module, so it does not work out indemnity.
General information, not legal or tax advice. Confirm rules with the authority or your accountant.
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