Apr 06 2021

Implementation of Wage Protection System Forthcoming

Bahrain

At a Glance

  • The Labor Market Regulatory Authority announced the implementation of a Wage Protection System for the private sector in Bahrain.
  • The system will be introduced in three phases, depending on the size of the employer, with phase one beginning May 1, 2021.
  • Employers should contact their respective banks for specific guidance and instructions.

The situation

The Labor Market Regulatory Authority announced the implementation of a Wage Protection System for the private sector in Bahrain.

A closer look

Details of the Wage Protection System are as follows:

  • Requirements. Employers in the private sector must pay the salaries for their employees through any of the approved financial agencies in Bahrain to ensure that workers’ salaries are paid on time and according to the terms and conditions agreed upon in the employment contract.
  • Penalties for non-compliance. It is expected that companies will face financial penalties for non-compliance and will be blocked from using the Labor Market Regulatory Authority portal, which allows them to file initial and renewal work permits.
  • Phased approach. The Wage Protection System will be introduced in three phases, as follows, depending on the size of the employer:
PHASE COMPANY SIZE START DATE

Phase 1

500 employees and above

May 1, 2021

Phase 2

50 to 499 employees

September 1, 2021

Phase 3

1 to 49 employees

January 1, 2022

 

Impact for employers

The Wage Protection System should simplify the monthly disbursement process for employers and mitigate the issues of labor complaints, while securing employee and employer rights. Employers should contact their respective banks for specific guidance and instructions on utilizing the system.

Impact for foreign nationals

The Wage Protection System will regulate foreign nationals’ timely receipt of their monthly salaries according to their employment contract. In theory, this should correct any issues of non-payment or delayed payments by companies.

Background

  • Wage Protection System legislative history. The law introducing the Wage Protection System in Bahrain was approved in July 2019 but has not yet been implemented. Bahrain is the last of the Gulf Cooperation Council countries to implement the Wage Protection System.
  • Wage Protection Systems in Middle East. Other countries, including Oman and Saudi Arabia, have also implemented wage protection systems. The systems have become a popular method to mitigate issues with foreign nationals receiving monthly salaries in a timely manner, particularly in non-skilled industries, which had previously led to lengthy labor disputes and strikes. The Wage Protection Systems gives protection to employees, provides an easy payment solution for employers and allows government agencies to enforce compliance around salary transfers and periods when salaries were not disbursed.

 

Looking ahead

It is likely that additional countries in the Middle East will adopt Wage Protection Systems in order to create a business environment that meets the standards of multi-national companies, which will allow them to attract further investment and diversify their economies.

This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to [email protected].