Due to the high number of messages, emails and incoming calls requesting information regarding the calculation of indemnity I decided to write an article giving you an idea about indemnity calculation.
As of now most of you must already be aware that almost most of the employees except those that are not excluded by Article 2 of the Labor Law are entitled to indemnity (end of service benefits) along with other benefits on the end of their employment (either by employee or employer).
Article 47 of the Labor Law of Bahrain defines how indemnity will be calculated.
«A worker’s entitlements related to his leaving indemnity, amounts due for balance of annual leave provided for in Article (59) and the compensation due according to the provisions of Article (99) (b) and Article (111) of this Law shall be calculated on the basis of the worker’s most recent basic wage in addition to the social allowance, if any.
If a worker is employed on a piece-rate or production basis or receives a fixed wage in addition to a commission or percentage, the calculation of such entitlements shall be on the basis of the average wage of the worker during the last three months».
With the above article one thing is clear indemnity is calculated on the most recent basic pay and also keep in mind that housing etc are not counted when indemnity is calculated but now the question arises how it’s calculated and the answer is provided in Article 116 which says
«A worker who is not subject to the provisions of the Social Insurance Law shall be entitled upon the termination of his employment to a leaving indemnity at the rate of half month’s wage for each of the first three years of employment and one month’s wage for each of the following years in service. A worker shall be entitled to receive his leaving indemnity for fractions of the year in proportion to the period spent in the employer’s service».
I am still sure many of you won’t get it hence the below example to clear the doubts.
Calculation of Indemnity
A is working with B (employer) for a basic salary of 500 BD monthly. A’s contract is terminated after 5 years. What is the amount of indemnity he deserves?
- First-year indemnity = Half month salary (BD 250)
- Second-year indemnity = Half month salary (BD 250)
- Third-year indemnity = Half month salary (BD 250)
- Fourth-year indemnity = Full month salary (BD 500)
- Fifth-year indemnity = Full month salary (BD 500)
Total Indemnity to be paid = BD 1750