Starting in March 2024, Bahrain’s General Authority for Social Insurance (SIO, also known as GOSI) will begin implementing Resolution No. 109 of 2023 to collect retirement contributions from employers who employ GOSI-insured workers in the private sector and subsequently pay them to migrant workers.
Previously, employers paid compensation directly to migrant workers after the end of their contracts. However, few companies have allocated funds specifically to meet these obligations. It is common for employers to declare bankruptcy, file absconding lawsuits, revoke residence permits, or repatriate workers without paying their due benefits. The new regulations will require employers to pay monthly contributions directly to the SIO.
However, employers will continue to be liable to pay lump sum compensation to workers for the period of their service until the new resolution is implemented.
Migrant workers typically have only one month after their work permit expires to find a new job or leave the country. Most migrants are unable to collect their benefits in such a short time frame, and they often lack the funds to take legal action, such as hiring a lawyer to represent them.
The new decision, approved by Bahrain’s Council of Ministers on Nov. 13, 2023, will require employers to contribute the equivalent of 4.2 percent of a migrant worker’s salary for the first three years, increasing to 8.4 percent in subsequent years. Employer contributions for workers who have been employed for three years or more by March 2024 will be automatically set at 8.4 percent.
Employers are required to submit salary data of insured persons to GOSI prior to the implementation of the new system. According to GOSI, “salaries must take into account the amounts specified in the employment contract that are paid to workers on a regular basis, in addition to salary increases and social benefits.” If employers do not submit salary data, GOSI will calculate the premiums based on the submitted monthly salary as the work injury premium already paid by the employer.
Penalties
Employers who breach the new compensation scheme will be fined between BD100 (US$265) and BD500 (US$1,327), with fines doubling for repeat offences. Furthermore, fines will increase depending on the number of workers affected by each breach, up to a maximum of BD2,000 (US$5,307).
If the violation continues for more than 30 days after discovery, the penalty may be increased by up to five times. In either case, the determination of the amount payable to GOSI is at the discretion of the court. Furthermore, employers who provide false or inaccurate information to GOSI may be subject to sanctions and sentencing.
Given the widespread nature of these irregularities, various stakeholders, including the Bahrain Trade Union Confederation, have in recent years argued that the SIO should directly collect EOS contributions and distribute them to better protect workers’ rights as well as increase the SIO’s financial resources.The new decision comes at a time when Bahrain’s GOSI is suffering from significant financial difficulties, including a significant decline in its assets by Dh500 million in 2022 and investment losses totaling approximately Dh92 million.
The new rules do not change the calculation of severance pay. Severance pay is calculated based on the employee’s final salary and length of service at the rate of 15 days’ salary per year for the first three years and one month’s salary per year thereafter. According to the new resolution, the amount of payment shall not exceed the earnings of the contributions paid. Moreover, in case of a reduction in wages, the employer has the right to recover the difference in contributions.
The new policy has been presented in local media as an attempt to ease the financial burden on employers by moving from lump-sum payments to monthly contributions upon retirement. In reality, however, many employers have not made any lump-sum payments at all. As a result, the policy has been resisted by some employers and officials. Shura Council member Darwish Ahmed Al Mannai, for example, voiced his opposition to the policy, stating that the policy may increase the lifespan of pension funds, but not the lifespan of pension funds. [the new system] “It will put a strain on the private sector and limit trade activity.”
The move is a positive step towards better guaranteeing the rights of migrant workers. Bahrain will be the only Gulf country, after Oman, where the Social Insurance Institution will provide EOS benefits (the latter reform is due to take effect in three years). However, questions remain about its implementation and whether it will make it easier for migrants to claim benefits. Importantly, domestic workers are not included in this reform, as they are completely excluded from the SIO law.
One of the challenges in implementing the scheme is that migrant workers’ actual wages and benefits often differ from the figures registered with the SIO and LMRA. This is because many employers submit contracts with lower wages and benefits in order to reduce their contributions. In August this year, the LMRA and SIO signed an agreement to consolidate data on private sector wages to increase transparency, granting both sides access to the worker database. However, the progress of this effort remains unclear.
More time is needed to thoroughly evaluate the effectiveness of the new compensation system. Moreover, there is a risk that migrants whose authorization has been revoked will face difficulties in receiving benefits. This issue is particularly relevant for migrants who have unemployment insurance through GOSI. Even if they are technically eligible for unemployment benefits, those who lose their jobs and subsequently end up in irregular status may not be entitled to the benefits they should be receiving.
Either way, the new system fails to address the plight of many migrants currently stranded in Bahrain, waiting for compensation. In recent months, hundreds of migrant workers were laid off after Awal Gulf Industries, a long-established company that supplies air conditioning and refrigeration equipment for over 50 years, was liquidated due to financial difficulties. These workers, many of whom have worked for many years with dedication, were left without their fair wages and compensation, amounting to tens of thousands of dinars. Sources close to the matter say the company is suspected of forging signatures to show that workers had received compensation.
