Bahrain begins the final phase of its “Wage Protection System”

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Bahrain’s Labour Market Regulatory Authority (LMRA) officially launched - Opens in new tab the third and final phase of its Wage Protection System (WPS). The third phase that went into effect on 1 January 2022 will cover businesses with up to 49 workers. These small and medium enterprises employ the majority of migrant workers in Bahrain — according to the most recent LMRA data - Opens in new tab, 98% of the country’s active businesses have 49 or fewer workers.

Employers are given a six-month grace period to implement the WPS regulations. Domestic workers and Flexi-Permit holders are not included in the scheme.

Bahrain’s WPS is governed by a series of resolutions and amendments - Opens in new tab issued by the Ministry of Labour and the LMRA. Under the WPS, employers are obligated to pay wages electronically to workers via financial institutions authorised by the Central Bank of Bahrain. This includes banks - Opens in new tab or exchange and financial service - Opens in new tab companies, where employers can open a bank account or issue a prepaid card for their employees.
Wages paid through WPS - Opens in new tab are stored in a database where the LMRA can monitor and verify employers' compliance. The exact mechanisms for determining compliance are unclear, in particular for the detection of unpaid overtime work, which is not uncommon in Bahrain. The WPS also does little to safeguard migrant workers’ end-of-service benefits. Without the option to contribute to pension schemes, many migrant workers, especially those who have worked in the Gulf for a long time, rely on these benefits when they retire and return home.

After several years of delay, Bahrain began to gradually implement the WPS in May 2021. The first phase involved companies with 500 and more employees and the second phase, which began in September 2021, covers 50 to 499 workers. Though the majority of employers in the first and second phases have joined the WPS, the number of those who are committed to paying through the system remains remarkably low. Speaking about this issue last month, LMRA CEO Jamal Abdulaziz Al Alawi said - Opens in new tab that “the commitment to pay wages through the system was approximately 61%,” adding that the LMRA tries to “communicate with employers directly and continuously to ensure full compliance with paying the wages of workers registered with them.”

The low enrollment rate can be attributed to weak enforcement mechanisms, which undercut the purpose and utility of the automated system. While the WPS may detect wage violations, penalties against employers are weak, reducing the incentive for compliance. Failure to register or pay through the WPS is not fined, according to Resolution (2) for the year 2019 - Opens in new tab, and instead, employers are barred from issuing new work permits. Furthermore, official statements - Opens in new tab indicate that authorities resolve WPS offences through negotiations and amicable settlements, rather than holding violators accountable legally or imposing significant fines. The implementation of the WPS so far does little to improve the existing management of wage-theft cases.

And though the Wage Protection System may help increase transparency and monitoring capacity, the term is a misnomer as the system does little to proactively “protect” migrant workers from wage theft. The lack of a mechanism to quickly settle pending wages is a key deficiency of the system: though workers pay into an unemployment fund, they cannot access these benefits in case of a wage dispute. Authorities could also easily make use of the existing funds collected from work permit fees, but do not.

Instead, the absence of a wage fund coupled with the deferential approach towards errant employers means that workers endure drawn-out negotiations and a string of failed promises, forcing many to give up their dues and return home. This is especially the case in times of crisis, including Covid-19 - Opens in new tab and the fallout from the drop in oil prices, when migrant workers are routinely deported or forced to return home before they can be paid their dues. Once workers leave the country, it is practically impossible to retrieve any owed salaries and benefits.

For the WPS to be effective, it must be linked to an insurance scheme or a fund businesses pay into, calculated per sponsored worker. When employers default on payment, this fund should automatically kick in. The system as it exists flags defaulters based on certain metrics, and involves a grievance redressal process that may be long-drawn out. However, most lower-income workers and their dependents back home survive salary to salary, and can ill afford the inconvenience and risk of delayed payments.

The system itself, though digitised, has certain loopholes that are regularly exploited by employers. There is no automatic calculation of valid deductions, and a percentage of non-payment of total outgoing is often overlooked. So employers either deduct without cause or don't pay a percentage of workers every month, dodging any red flags that might arise. In addition to paying wages electronically, an online system that workers can access to confirm if they've received all of their owed wages on salary day would help tackle this problem more effectively.

One reason underlying the WPS’s floundering implementation may be the absence of strong institutional leadership; while the LMRA is in charge of the WPS, its primary mandate - Opens in new tabis to regulate work permits, recruitment agencies, and foreign business proprietors working in Bahrain — not to implement the provisions of the Labour Law. The payment of wages falls under the labour law and concerns the Labour Ministry, which becomes involved, to an unclear degree, in WPS-related complaints, as does the Ministry of Justice. As MR has previously reported, the involvement of numerous government agencies creates inefficiency and bureaucratic confusion, which in turn leads to erratic enforcement and significant delays in case resolution.

Competing mandates within institutions also pose an obstacle to actualising the potential benefits of the WPS. The LMRA’s recent deportation campaigns - Opens in new tab offer a quintessential example: since September 2021, the authority has conducted inspections and raids across the country and encouraged the public to report undocumented migrant workers. Most migrant workers only become undocumented because wage theft and other exploitative working conditions push them to leave their employers, and despite claims, Bahrain has not abolished the Kafala system, so this act of departure renders their status “illegal.” Though this reality is widely acknowledged, including by former LMRA directors, migrants continue to be criminalized for the crimes of others. Detained migrant workers do not have the right to an individual review of their cases, meaning they cannot defend their right to stay in the country and often lose out on claims. Thus, the same authority that is meant to ensure workers are paid their wages, is also responsible for depriving workers of their dues.

These contradictory practices are symptomatic of Bahrain’s overall unwillingness to provide straightforward protections to migrant workers.

For more information on this issue, read our previous reporting on Bahrain’s first and second phases of the Wage Protection System.

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Bahrain begins the final phase of its “Wage Protection System”

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