There are plenty of laws and regulations to consider during the expansion process. From creating a solid benefits plan to setting up a locally compliant payroll, you have to make sure everything is in place before you begin operations in the country.

Taxation rules in Bahrain

Bahrain payroll tax laws apply to both employers and employees. While there are no personal income taxes in the country, employees are responsible for paying 1% of their wages for unemployment insurance. Local employees also need to contribute 7% of their salary to social security, while international workers have to contribute 1%.

Employers must contribute 12% of a local employee’s salary to social security and 3% for international employees.

Bahrain payroll options

Companies have 3 main Bahrain payroll options:

  • Internal: Larger companies expanding to Bahrain with a commitment to the country may choose to run internal payroll. You’ll need an established subsidiary, hire a full HR team, and ensure you have the funds necessary to run an internal payroll. This choice could be costly and time-intensive.
  • Bahrain payroll processing company: Choosing to work with a Bahrain payroll processing company will help alleviate the burden of running payroll, but keep in mind that with this option, your company is still responsible for compliance. This could mean increased legal costs and hiring experts in the country to ensure that you remain compliant.
  • G-P: The easiest way to run payroll in Bahrain and stay compliant is partnering with an Employer of Record like G-P. With us, you can rest assured that all employees will be paid on time, freeing you to focus on other important aspects of your business.

How to set up a payroll in Bahrain

Before you can set up your Bahrain payroll, you have to establish a subsidiary in the country. Depending on where you incorporate and what type of entity you choose, this process could take weeks or months. You also need to establish in-country bank accounts to pay employees.

Entitlement/termination terms

We recommend outlining important entitlement and termination terms as part of a written employment contract prior to hiring employees and discussing a Bahrain payroll option. Generally, employees with indefinite contracts who are terminated after 3 months get 2 days of wages for each month worked with a minimum of 1 month’s pay and a maximum of 1 year’s pay.

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