End of Service Gratuity

End of service gratuity is usually paid out to employees who meet certain contractual terms or have been unfairly dismissed. Gratuity is also called leaving indemnity in the Bahrain Labour Law. Here is what the law has to say on what the employee is owed at the end of his service agreement or if he resigns or is terminated.

From The Labour Law for the Private Sector, law 33 of 2012

Article (111):

(a) If an employer terminates the contract of employment for indefinite duration within the first 3 months from the effective date thereof, the worker shall not be entitled to any compensation unless the termination is an unfair dismissal according to any of the provisions of Articles (104) and (105) of this Law. In this case, a worker shall be entitled to compensation equivalent to one month’s wages.

(b) If an employer terminates the contract of employment for an indefinite duration without cause or for an unlawful cause three months after the commencement of employment, he shall compensate the worker by the equivalent of two days’ wages for each month of service and at no less than one month’s wages up to a maximum of twelve months’ wages.

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(c) If an employer terminates the contract of employment for a definite duration without cause or with an unlawful cause, he shall compensate the worker at the equivalent of the wages for the remaining period of the contract unless the parties mutually agree at a lesser compensation, provided that the agreed compensation shall not be less than three months’ wages or the remaining period of the contract, whichever is less.

(d) If an employer terminates the contract of employment entered into for performance of a specific work without cause, or with an unlawful cause, he shall compensate the worker by the equivalent of the wage for the remaining period required for completion of the agreed work according to the nature of such work unless the parties agree upon a lesser compensation, provided that the agreed compensation shall not be less than 3 months’ wages or the remaining period thereof required for performance of the work, whichever is less.

(e) In the cases provided for in Sub-paragraphs (a) and (b) of this Paragraph, if the contract termination is considered as unfair dismissal according to the provisions of either Articles (104) and (105) of this Law, the worker shall be entitled to an additional compensation equivalent to one half of the compensation due according to the provisions of this Article unless the contract provides for a higher compensation.

(f) For the purposes of this Article, fractions of a month shall be deemed as a complete month.

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Article (112):
Without prejudice to any obligations provided for any other law, if a worker terminates the contract of employment, he shall not be obliged to indemnify the employer except in the following instances:

1. If the termination takes place at an inopportune time for the business conditions in a manner that makes it impossible for the employer to obtain a qualified replacement.

2. If the termination is intended to cause damage to the employer.

3. If the termination causes serious damage to the employer.

In all cases, an employer’s entitlement to compensation shall be conditional upon the worker’s termination of the contract of employment without complying with the notice period. The competent court shall estimate the compensation payable to the employer according to the provisions of this Article at his request.

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Article (113):

(a) A contract of employment shall be terminated upon the worker’s death. If a worker dies during the continuance of the contract, the employer shall pay to the worker’s family the equivalent of wages for two whole months, provided that the worker shall have spent in the employer’s service at least one year.

(b) A contract of employment shall not be terminated upon the employer’s death unless the contract has been entered into due to considerations related to the person of the employer or professional business that ceases upon his death.

Article (116):

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.