Employment and Labour Law in Bahrain 2026: Termination, Redundancy and Employee Rights

Executive Summary

Employment termination in Bahrain is governed by Legislative Decree No. 36 of 2012 promulgating the Labour Law of the Private Sector (the “Bahraini Labour Law”). The law does not set out a general list of reasons required for every lawful termination. Article 107 identifies specific cases in which an employee may be dismissed without notice or compensation.

The consequences of termination depend on the circumstances and the contract term. For an indefinite-term contract, compensation for dismissal without a justifiable reason is generally calculated at two days’ wages for each month of service, subject to a minimum of one month’s wages and a maximum of 12 months’ wages. For a fixed-term contract, compensation is generally based on wages for the remaining contract period, subject to the limits described in the Bahraini Labour Law.

The chapter also addresses redundancy, business sales, notice, termination procedures, discrimination, collective disputes, non-compete restrictions and end-of-service benefits for non-Bahraini private-sector employees.

Key Takeaways

• Article 107 lists circumstances in which an employee may be dismissed without notice or compensation.
• Compensation for dismissal without a justifiable reason differs between fixed-term and indefinite-term contracts.
• For redundancies caused by reorganisation, downsizing or partial closure, Bahraini employees must be retained where foreign employees with the same competence and experience can instead be dismissed.
• The minimum notice period is 30 days, unless the contract provides for a longer period.
• Termination requires notice to the employee. For termination for justifiable cause, the employer must conduct an investigation and notify the employee of the shortfall, depending on the case.
• A business sale automatically transfers employees to the buyer, and buyer and seller remain jointly liable for employee entitlements.
• Employee termination entitlements cannot be waived by mutual agreement.
• Decision No. 109 of 2023 introduced an end-of-service benefit system for non-Bahraini employees in the private sector, effective from March 2024.

Termination and Compensation

An employer does not necessarily need a reason to terminate an employment relationship. The Bahraini Labour Law does not provide a general list of lawful termination reasons, but Article 107 identifies cases where an employee may be dismissed without notice or compensation:

1. The employee assumed a false identity or submitted false certificates or testimonials.
2. The employee committed a fault causing serious material loss to the employer, provided the employer reports the matter to the competent authorities within two working days of learning of the seriousness of the loss.
3. Despite a written warning, the employee failed to comply with written safety instructions that were posted prominently in the workplace.
4. Without legitimate cause, the employee was absent for more than 20 intermittent days or more than 10 consecutive days in one year. The employer must first give a written warning after 10 days’ absence in the first case or five days’ absence in the second.
5. The employee failed to perform essential duties under the employment contract.
6. The employee disclosed work-related secrets without the employer’s written permission.
7. The employee was finally sentenced for a crime or misdemeanour involving dishonour, dishonesty or public morals.
8. During working hours, the employee was under the influence of alcohol or drugs, or committed an immoral act at the workplace.
9. The employee assaulted the employer or responsible manager, or seriously assaulted a work supervisor during employment or for a reason connected with it.
10. The employee failed to comply with legally prescribed rules concerning the exercise of the right to strike.
11. The employee became unfit to perform the contracted work for a reason attributed to the employee, such as cancellation of a work permit or loss of the qualifications required for the agreed work.

An employee dismissed without one of the justifiable reasons described in the chapter may be entitled to compensation. For an indefinite-term contract, the stated compensation is two days’ wages for each month of service, with a minimum of one month’s wages and a maximum of 12 months’ wages.

For a fixed-term contract, compensation is generally equivalent to wages for the remaining contract period. The parties may agree on a lower amount, but the agreed compensation cannot be less than the lesser of three months’ wages or the wages for the remaining period of the contract.

Service period for indefinite-term contracts

The chapter identifies a minimum service period for certain compensation rights under indefinite-term contracts:

• During the first three months: If the employer terminates the contract, the employee is generally not entitled to compensation under Article 111(a), unless the termination is considered arbitrary under Articles 104 or 105. In that case, compensation is equivalent to one month’s salary.
• After the first three months: If the employer terminates the contract without a valid or lawful reason, Article 111(b) provides compensation of two days’ salary for each month of service, with a minimum of one month’s salary and a maximum of 12 months’ salary.

Redundancy, Business Sales and Collective Disputes

Under Article 110, where employees are dismissed because of reorganisation, downsizing or partial closure, Bahraini employees must be retained if foreign employees with the same competence and experience can instead be dismissed. The compensation payable to employees terminated for these reasons is half of the compensation described for termination without a justifiable reason. The chapter states that no fixed number of employees must be affected for these additional considerations to apply.

In these circumstances, an employer may notify the Ministry of Labour 30 days before sending termination notices to employees in order to avoid paying the standard compensation.

A business sale does not generally give an employer freedom to dismiss employees. Employees automatically transfer to the buyer, and the buyer and seller remain jointly liable for settling employee entitlements.

Collective bargaining is recognised by Article 137, although the chapter describes it as uncommon in Bahrain. Bargaining may take place at company, business, industrial, professional or national level.

In a mass dismissal dispute, the employer and employees should initially seek an amicable settlement. If they do not reach agreement within 60 days, either side may ask the Ministry of Labour and Social Development to refer the dispute to the Collective Dispute Settlement Board. If the Board does not resolve the dispute within a further 60 days, either side may ask the Ministry to refer it to an arbitral tribunal, which issues a binding and enforceable award.

Notice and Termination Procedure

Article 99 provides for a minimum notice period of 30 days. If the employment contract specifies a longer period, the employer must follow that longer period. The chapter notes that senior managers’ contracts may provide for notice periods exceeding the minimum.

An employer may make a payment instead of requiring the employee to work through the notice period. The employee is then entitled to wages for the full notice period, or the remainder of it.

The chapter states that garden leave is permitted: the employee remains employed and paid during the notice period but is required to stay at home and not perform work.

The employer must send a notice to the employee to effect termination. Where termination is for a justifiable cause, the employer must conduct an investigation with the employee and notify the employee of the shortfall, depending on the case. If the employer does not send termination notice, the employment relationship continues and both parties retain their rights and obligations. If the employer does not conduct the required investigation or notify the employee of the shortfall, a court may consider that the employment relationship was terminated unjustifiably.

Except in the specified redundancy circumstances, the employer does not need permission from or prior notification to a third party before terminating employment.

Discrimination, Harassment and Other Protections

Article 2 bis prohibits discrimination between workers based on sex, ethnicity, language, religion and belief. The Bahraini Labour Law also prohibits sexual harassment.

If an employee is terminated on discriminatory grounds, the chapter states that the employee is entitled to additional compensation equivalent to half of the applicable termination compensation, unless the contract provides for higher compensation.

Article 192 bis provides penalties for sexual harassment during work. An employee who sexually harasses a colleague may be punished by imprisonment for up to one year or a fine of up to BHD 100. If the conduct is committed by the employer or the employer’s representative, the stated penalty is imprisonment for at least six months or a fine of between BHD 500 and BHD 1,000.

The chapter states that it identifies no additional termination protections for particular categories of workers beyond protection from discrimination or harassment. It also notes that the Bahraini Labour Law does not clearly provide special termination protection for whistleblowers, although whistleblowing is recognised as a mitigating factor under other legislation, such as the Penal Code.

AI, Confidentiality and Post-Termination Restrictions

Using artificial intelligence in recruitment or termination decisions may involve processing sensitive personal data relating to applicants or employees. The chapter states that this requires the data subjects’ approval and compliance with applicable Bahraini data protection laws and regulations.

Where AI is used in termination decisions arising from business or workforce downsizing, the employer must also ensure that the process complies with the requirement to favour Bahraini employees over foreign employees with the same competence and experience.

An employer may terminate an employee’s contract and re-engage the employee on less favourable terms, but Article 118 requires a period of 30 days between the two contracts. Otherwise, the law will treat them as one contract.

A post-termination non-compete restriction is valid only if:

• The employee was at least 18 years old when the contract was concluded.
• The restriction lasts no longer than one year after termination.
• Its geographical scope and type of work are limited to protecting the employer’s legitimate interests.

The employer may not rely on the restriction if the contract is terminated, or renewal is rejected, without justifiable action by the employee. The employer may also not rely on it if the employee had a justifiable reason to terminate the contract.

The chapter states that an employer may require a worker to keep information relating to the employer confidential after employment ends. Employers must provide an end-of-service certificate but are not required to provide references to new employers.

Employee entitlements on termination cannot be waived, even by mutual agreement.

End-of-Service Benefits for Non-Bahraini Employees

Decision No. 109 of 2023 introduced an end-of-service benefit system for non-Bahraini employees in the private sector, effective from March 2024.

Employers are required to make monthly contributions of:

• 2.4% of salary for the first three years of service; and
• 4.8% of salary for subsequent years.

Upon termination, employees receive a gratuity of half a month’s salary for each of the first three years, and one month’s salary for each subsequent year, capped at the total contributions paid.

The chapter describes the system as intended to support timely payment of end-of-service gratuity. Employers must make monthly contributions on time to avoid fines or other penalties from Bahrain’s Social Insurance Organisation.

Practical Implications for Employers

The chapter identifies several matters employers should consider when planning termination:

• Apply the correct compensation calculation for the employee’s contract type and service period.
• Give at least 30 days’ notice, or comply with any longer contractual period.
• For justifiable-cause termination, conduct an investigation and notify the employee of the relevant shortfall, as applicable.
• When downsizing or partially closing, consider the requirement to retain Bahraini employees where foreign employees of equal competence and experience could instead be terminated.
• In a business sale, account for the automatic transfer of employees and the joint liability of buyer and seller for employee entitlements.
• Ensure that the use of AI in recruitment or termination complies with the data-protection and workforce requirements described in the chapter.
• Make required monthly end-of-service benefit contributions for non-Bahraini private-sector employees.

Frequently Asked Questions

Does an employer in Bahrain always need a reason to terminate an employee?

The chapter states that an employer does not necessarily need a reason to terminate employment. Article 107 sets out specific cases in which an employee may be dismissed without notice or compensation.

What are the Article 107 grounds for dismissal without notice or compensation?

The chapter lists false identity or certificates; serious material loss caused by the employee, subject to reporting requirements; failure to follow posted safety instructions after a written warning; specified levels of unexcused absence after written warning; failure to perform essential duties; unauthorised disclosure of work secrets; a final conviction for specified offences; being under the influence of alcohol or drugs at work or committing an immoral act there; assault; failure to follow legally prescribed strike rules; and becoming unfit to perform the work for a cause attributed to the employee.

How is compensation calculated for dismissal without a justifiable reason?

For an indefinite-term contract, the chapter states that compensation is two days’ wages for each month of service, with a minimum of one month’s wages and a maximum of 12 months’ wages. For a fixed-term contract, it is generally based on wages for the remaining contract period, subject to the limits described in the chapter.

What compensation applies if an indefinite-term employee is dismissed during the first three months?

Under Article 111(a), the employee is generally not entitled to compensation if the employer terminates the contract during the first three months. If the termination is considered arbitrary under Articles 104 or 105, the employee may be entitled to one month’s salary.

What compensation applies after three months of service under an indefinite-term contract?

Under Article 111(b), where the employer terminates without a valid or lawful reason after the first three months, compensation is two days’ salary for each month of service, subject to a minimum of one month’s salary and a maximum of 12 months’ salary.

Is there a minimum number of employees for redundancy rules to apply?

No fixed number is specified in the chapter. It states that the additional considerations apply where employees are dismissed because of reorganisation, downsizing or partial closure.

What applies when employees are dismissed because of reorganisation or downsizing?

Under Article 110, Bahraini employees must be retained if foreign employees with the same competence and experience can instead be dismissed. The compensation payable to employees dismissed for these reasons is half of the compensation described for termination without a justifiable reason.

Must an employer notify the Ministry before a redundancy?

The chapter states that, in a reorganisation, downsizing or partial-closure case, the employer may notify the Ministry of Labour 30 days before sending termination notices, in order to avoid paying the standard compensation.

What happens to employees when a business is sold?

Employees automatically transfer to the buyer. The buyer and seller remain jointly liable for settling employee entitlements, and a business sale does not generally allow the employer to dismiss employees freely.

What is the minimum notice period?

Article 99 provides for a notice period of at least 30 days. If the employment contract provides for a longer period, the employer must follow that longer period.

Can an employer pay the employee instead of requiring them to work through the notice period?

Yes. The employee is entitled to wages for the entire notice period or the remainder of it.

Is garden leave permitted?

Yes. The chapter states that an employer may require an employee to remain employed and paid during the notice period while staying at home and not performing work.

What procedure should an employer follow to terminate employment?

The employer must send notice to the employee. For termination for a justifiable cause, the employer must conduct an investigation with the employee and notify them of their shortfall, depending on the case.

What may happen if the employer fails to give termination notice?

The chapter states that the employment relationship will continue and both parties will retain their rights and obligations.

What may happen if the employer does not investigate or notify the employee of the shortfall?

A court may consider that the employment relationship was terminated unjustifiably.

Must an employer obtain third-party permission before terminating an employee?

Generally, no. The chapter identifies a specific redundancy context—reorganisation, downsizing or partial closure—in which the employer may notify the Ministry 30 days before sending termination notices.

Is collective bargaining recognised in Bahrain?

Yes. Article 137 recognises collective bargaining, although the chapter says it is not common practice to agree employment terms and conditions through collective bargaining. It may take place at company, business, industrial, professional or national level.

How may a mass dismissal dispute be referred to arbitration?

The employer and employees should first seek an amicable settlement. If they do not reach agreement within 60 days, either side may ask the Ministry to refer the dispute to the Collective Dispute Settlement Board. If the Board does not resolve it within a further 60 days, either side may ask the Ministry to refer it to an arbitral tribunal, whose award is binding and enforceable.

What protection applies to discrimination in termination?

The chapter states that Article 2 bis prohibits discrimination based on sex, ethnicity, language, religion and belief. An employee terminated on discriminatory grounds may be entitled to additional compensation equivalent to half of the applicable termination compensation, unless the contract provides for more.

What penalties for sexual harassment are described in the chapter?

An employee who sexually harasses a colleague during work may be punished by imprisonment for up to one year or a fine of up to BHD 100. If the conduct is committed by the employer or the employer’s representative, the stated penalty is imprisonment for at least six months or a fine between BHD 500 and BHD 1,000.

Does the chapter identify special termination protection for particular worker categories?

No. The chapter answers that no additional category-specific termination protection is identified beyond protection from discrimination or harassment.

Does the Bahraini Labour Law clearly protect whistleblowers from termination?

The chapter states that the Bahraini Labour Law does not clearly provide whistleblower protection. It notes that whistleblowing is recognised as a mitigating factor under other legislation, such as the Penal Code.

Can an employer terminate an employee and re-engage them on less favourable terms?

The chapter says this is possible, but Article 118 requires 30 days to lapse between the two contracts. Otherwise, the contracts are treated as one contract.

What should employers consider before using AI in recruitment or termination?

The chapter says AI use may involve processing applicants’ or employees’ sensitive personal data, requiring their approval and compliance with applicable Bahraini data-protection laws and regulations. In downsizing decisions, employers must also observe the requirement to favour Bahraini employees over foreign employees of equal competence and experience.

Can an employee waive termination entitlements in a settlement agreement?

No. The chapter states that employee entitlements upon termination may not be waived, even by mutual agreement.

When is a post-termination non-compete restriction valid?

According to the chapter, the employee must have been at least 18 when the contract was concluded; the restriction may last no more than one year after termination; and its geographic and work scope must be limited to protecting the employer’s legitimate interests. The chapter also identifies circumstances in which the employer may not rely on the restriction, including where the employee had a justifiable reason to terminate.

Can confidentiality obligations continue after employment ends?

Yes. The chapter states that an employer may require a worker to keep information relating to the employer confidential after termination.

Must an employer provide a reference to a former employee’s new employer?

No. The chapter states that an employer must provide the employee with an end-of-service certificate but is not required to provide references to new employers.

What difficulty may employers face when terminating Bahraini employees?

The chapter notes that employers who terminate local employees may lose other benefits, such as a reduction in the number of work permits available to hire expatriate employees.

What end-of-service benefit contributions apply to non-Bahraini private-sector employees?

Under Decision No. 109 of 2023, effective from March 2024, employers contribute 2.4% of salary monthly for the first three years of service and 4.8% for subsequent years.

How is the end-of-service gratuity calculated under Decision No. 109 of 2023?

The chapter states that, upon termination, employees receive half a month’s salary for each of the first three years and one month’s salary for each subsequent year, capped at the total contributions paid.

Why does the chapter say timely end-of-service contributions are important?

It states that employers must make monthly contributions on time to avoid fines or other serious penalties from Bahrain’s Social Insurance Organisation.

Source

This website version is based on the published Legal 500 Bahrain Country Comparative Guide 2026 chapter, contributed by Alsayed Jaffer Mohamed, Mohamed Ali Shaban, and Mohamed Altraif.

View the Legal 500 Bahrain Chapter