Bahrain’s government will now collect contributions for migrant workers' indemnity and disburse them directly

Given the widespread abuse, various stakeholders, including the General Federation of Bahrain Trade Unions, have argued in recent years that the SIO should collect EOS contributions directly and distribute them not only to better protect workers' rights but also to boost SIO’s coffers. The new decision comes amidst Bahrain's GOSI grappling with significant financial challenges - Opens in new tab, marked by a substantial reduction in assets by half a billion dinars and investment losses totalling approximately 92 million dinars in 2022.

The new regulation does not introduce any changes regarding the calculation of the end-of-service indemnity. This indemnity is calculated based on the employee’s last-drawn salary and length of service at the rate of 15 days' monthly wage per year for the first three years and one month’s wage per year from then on. According to the new resolution, the payout amount shall not exceed the proceeds of the contributions paid. Furthermore, employers have the right to recover the difference in contributions in the event of reduction in wages.  

The new policy has been portrayed in local media as an attempt to alleviate the financial burden on employers by transitioning from a lump-sum indemnity payment at the end of service to monthly contributions. However, in reality, many employers fail to make the lump sum payment altogether. Consequently, this policy has encountered resistance from some employers and officials. For instance, Shura Council member Darwish Ahmed Al Mannai - Opens in new tab voiced disapproval of the policy, arguing that while it may extend the lifespan of pension funds, [the new system] “would strain the private sector and curtail its trade activity.”

The move is a positive step toward better guaranteeing the rights of migrant workers. Bahrain will join Oman - Opens in new tab as the only two Gulf countries where the social insurance organisation will distribute EOS benefits  (with the latter's reform set to be implemented in three years). However, questions remain about its implementation and the ease of accessibility for migrants to claim their benefits. Importantly, domestic workers are not included in this reform, considering that they are entirely excluded from the SIO law. 

One challenge to the system’s implementation is that migrant workers’ actual salaries and allowances often differ from the figures registered in the SIO and LMRA. This is because many employers submit contracts with lower wages and allowances to reduce contribution fees. In August of this year, the LMRA and the SIO signed an agreement - Opens in new tab to unify data related to private sector wages for more transparency, granting both entities access to the worker database. However, the progress made on this initiative remains unclear.

More time is necessary to thoroughly evaluate the effectiveness of the new indemnity system. Additionally, there is a risk that migrants with terminated permits may encounter difficulties in accessing their benefits. This issue is particularly pertinent for migrants who contribute to unemployment insurance with GOSI. Despite being eligible for unemployment benefits on paper, those who lose their jobs and subsequently fall into irregular status may find themselves ineligible to receive the benefits they are due.

In any event, the new system fails to address the plight of the numerous migrants currently stranded in Bahrain awaiting their indemnity. In recent months, hundreds of migrant workers from Awal Gulf Industries - Opens in new tab, a well-established company providing air conditioning and refrigeration equipment with over 50 years of operation, became redundant after the company liquidated due to financial challenges. These workers, many of whom had dedicated many years of service, were abandoned without receiving their rightful salaries and indemnity, amounting to tens of thousands of dinars. Sources close to the matter reveal that the company allegedly falsified signatures of workers to indicate receipt of their dues.