Fama Accounting Services, Office 2294, Building 574 Road 31 Block 611 Al Hamriya, Bahrain
Fama Accounting Services, Office 2294, Building 574 Road 31 Block 611 Al Hamriya, Bahrain
Running a business in Bahrain comes with numerous responsibilities, but few are as critical—and as strictly enforced—as labor law compliance. The Labour Market Regulatory Authority (LMRA), in conjunction with Bahrain’s Ministry of Labour and Social Development, ensures that businesses adhere to strict rules concerning employment practices, wage protection, worker rights, and more.
Yet, many companies, particularly small and medium-sized enterprises (SMEs), unknowingly commit labor violations that could lead to:
Hefty fines and legal penalties
Suspension of work permits
Business operation halts
Reputational damage that affects customer trust and future hiring
The good news? Most of these violations are completely avoidable with the right systems, processes, and awareness.
In this guide, we’ll walk you through the most common labor violations in Bahrain, explain their implications, and show you how to avoid them, ensuring your business remains compliant, protected, and respected.
Bahrain’s Labor Law, alongside LMRA regulations, mandates employers to:
Employ workers only with valid work permits
Pay salaries via the Wage Protection System (WPS)
Provide benefits such as annual leave, sick leave, and end-of-service gratuity
Maintain proper employment contracts and documentation
Ensure workplace safety and fair treatment
These regulations are not optional—they are legal obligations. Failure to comply can lead to severe administrative actions and legal disputes, putting your business operations at risk.
Non-compliance isn’t just a bureaucratic issue—it’s a serious financial and operational risk. Common penalties include:
Fines ranging from BHD 500 to BHD 5,000 per violation
Suspension of new work permit approvals
Delays in Commercial Registration (CR) renewals
Legal action from aggrieved employees
Temporary or permanent closure of business operations (in severe cases)
Additionally, Bahrain’s regulatory systems are interconnected. A violation reported to LMRA may also flag you for audits or compliance reviews with NBR (VAT authority), GOSI (Social Insurance), and even MOICT (Ministry of Industry, Commerce & Tourism).
Beyond the legal and financial repercussions, labor violations harm your business’s reputation:
Prospective employees may hesitate to join
Customers and partners may question your credibility
Internal staff morale can plummet due to perceived unfair treatment
Maintaining labor law compliance isn’t just about avoiding penalties—it’s about fostering a trustworthy, transparent, and ethical business environment that supports sustainable growth.
Let’s look at the top labor violations businesses in Bahrain commit, often without realizing the seriousness of these infractions.
One of the most severe violations under LMRA regulations is employing individuals without:
A valid work permit
Proper visa documentation matching their job role
Sometimes businesses hire workers under “trial periods” without formal documentation, which is strictly illegal. Others unintentionally overlook expired permits or pending renewals.
Solution: Maintain an active employee visa and permit tracking system. Regularly audit work permit statuses and renew them well before expiry.
Bahrain’s Wage Protection System (WPS) mandates that salaries be:
Paid through approved bank channels
Recorded in a Salary Information File (SIF) submitted to LMRA monthly
Paid on time, as per the employment contract
Failing to pay on time, paying partial salaries, or mismatches between contract-stated wages and actual payments are serious violations. These are among the most common reasons businesses face audits and penalties.
Solution: Automate your payroll process and ensure monthly WPS submissions are done without delay. Reconcile bank payments with SIF files every cycle.
End-of-service gratuity is a legal right for all employees in Bahrain. Many businesses:
Calculate gratuity incorrectly
Delay payments during termination or resignation
Ignore gratuity accruals in financial planning
Incorrect gratuity settlements can lead to labor court cases and hefty financial backlogs.
Solution: Maintain accurate gratuity provisions monthly. Ensure final settlements are processed promptly upon employee exit.
Terminating an employee without valid cause, or without following the legal notice periods and documentation protocols, is considered a serious labor law violation.
Common mistakes include:
Terminating employees verbally without written notice
Failing to provide documented performance warnings
Not paying due salaries, gratuity, and leave encashments upon termination
Solution: Follow a structured termination process with proper documentation, warning letters, and settlement calculations.
Bahrain Labor Law stipulates:
Maximum working hours per week (48 hours generally)
Mandatory rest periods (1-hour break after 5 continuous working hours)
Leave entitlements (annual leave, sick leave, maternity leave)
Common violations include:
Forcing employees to work overtime without proper compensation
Denying or delaying approved leaves
Ignoring public holiday payment regulations
Solution: Establish a transparent HR policy regarding working hours and leave entitlements. Use timesheet systems to track work hours fairly.
Employers are obligated to pay:
Monthly LMRA fees for each foreign employee
Social Insurance Organization (GOSI) contributions for Bahraini staff
Delays in these payments can lead to:
Permit application freezes
Accumulation of penalties
Legal action from labor courts
Solution: Automate LMRA and GOSI payments. Schedule internal compliance checks to ensure no missed payments.
The Wage Protection System (WPS) is a government-mandated electronic salary payment system monitored by LMRA. It ensures:
Salaries are paid transparently through bank transfers
Employees receive salaries on time and in full
Businesses maintain proper salary payment records
LMRA monitors WPS compliance strictly because it’s central to protecting workers’ rights and eliminating unfair labor practices.
Top WPS-related violations include:
Mismatch between salaries stated in contracts and actual paid amounts
Delayed salary payments beyond the agreed payday
Missing SIF (Salary Information File) submissions
Incorrect SIF formatting causing rejections or errors
Such discrepancies are easily traceable by LMRA and often result in:
Fines per employee violation
Suspension of work permit processing
Random or targeted LMRA audits
Ensuring WPS compliance isn’t complicated if you follow a disciplined approach:
Align employment contracts with actual salary disbursements.
Prepare and submit SIF files to the bank accurately every month.
Double-check payroll entries before transfers.
Reconcile WPS submission confirmations with actual bank transfers.
Maintain SIF records for at least 12 months for audit readiness.
Many businesses benefit from outsourcing payroll processing to firms like Fama Accounting, which specialize in WPS-compliant payroll cycles.
Bahrain Labor Law guarantees specific rights to employees that employers must respect. Ignorance of these rights often leads to unintentional violations.
Every employee is entitled to:
30 calendar days of paid annual leave after completing a year of service
15 days of paid sick leave per year, with partial pay afterward
Paid public holidays as announced by the government
Denying or not compensating employees correctly for these leaves is a direct violation.
Female employees are entitled to:
60 days of maternity leave (full pay)
Protection from dismissal due to pregnancy or maternity-related reasons
Employers must adjust work schedules or provide necessary facilities to accommodate maternity-related requirements.
Especially in sectors like construction, logistics, and cleaning services, LMRA mandates:
Safe working environments
Adequate worker accommodations (space, sanitation, safety)
Access to rest periods, water, and necessary protective gear
Failing to provide humane work conditions can lead to:
Immediate penalties
Suspension of work permits
Severe reputational damage
One of the primary reasons businesses fall into labor non-compliance is poor documentation. Accurate, well-maintained HR records are your first defense in any labor audit or dispute. This includes:
Valid and up-to-date work permits and visas for every employee
Signed employment contracts (bilingual if possible)
Salary payment records linked to WPS submissions
Leave records, overtime approvals, and attendance sheets
Documentation of warnings, disciplinary actions, or terminations
A well-organized HR file for each employee can save you hours of scrambling during audits and prevent avoidable penalties.
Labor laws are not static—they evolve. Your HR and administrative teams need to stay updated with:
LMRA policy updates (e.g., changes in work permit processes)
WPS submission format modifications
New leave or employee benefit entitlements
GOSI contribution regulations
Regular internal training and external workshops ensure your team remains compliant and reduces the risk of accidental violations.
Don’t wait for LMRA to audit your business. Conduct internal HR and payroll audits at least twice a year to:
Verify that permits and visas are current
Check WPS records and bank reconciliation
Ensure leave entitlements are properly tracked and honored
Validate gratuity provisions and termination settlements
Proactive internal audits help identify risks early and allow you to correct issues before they escalate into fines or legal disputes.
FamaBH provides end-to-end support for LMRA and WPS compliance by:
Managing work permit application processes
Tracking visa expiries and renewals
Preparing and submitting accurate WPS files (SIFs) monthly
Ensuring payroll processes are fully aligned with labor regulations
We proactively alert clients about upcoming deadlines and compliance requirements, ensuring your business is always audit-ready.
We assist in:
Drafting legally compliant employment contracts (Arabic + English)
Preparing amendments or addendums for changing roles
Reviewing HR documentation to align with Bahrain’s labor law provisions
With Fama BH, you avoid contract loopholes that could expose you to legal disputes.
Our payroll services ensure:
Timely and accurate salary disbursements via WPS
Salary computations that include overtime, leave adjustments, and bonuses
End-of-service gratuity calculations and final settlements
Monthly payroll reports for HR and management reviews
We help you establish internal HR policies that:
Define clear leave and attendance protocols
Set guidelines for performance evaluations and disciplinary actions
Outline complaint handling procedures
Before any LMRA or labor inspection, we conduct pre-audit readiness checks, ensuring documentation, processes, and records are compliant and organized.
Repeat offenses attract:
Higher fines per violation
Administrative fees for correctional processing
Suspension of new work permit applications or renewals until issues are resolved
In extreme cases, LMRA may blacklist companies from hiring foreign labor altogether.
Employees subjected to unfair treatment, wrongful termination, or withheld dues can escalate the matter to Bahrain’s labor courts. This can result in:
Court-ordered compensations
Mandatory reinstatements
Legal costs and reputational harm
LMRA and other regulatory bodies may blacklist repeat violators, affecting:
Your eligibility for government projects
Your standing with banks and investors
Your ability to attract quality employees
Labor law violations, when made public, can severely dent your brand image, affecting customer trust and partnership opportunities.
Here’s a handy checklist every Bahraini business should use to maintain labor compliance:
Maintain a live tracker for all employees’ permit and visa expiries.
Set automated alerts at least 60 days before expiry.
Regularly reconcile LMRA permit records with internal HR files.
Ensure SIF files are submitted before deadlines.
Match SIF data with actual bank transfers.
Issue payslips to employees each month.
Maintain records of bonuses, deductions, and adjustments.
Establish a formal grievance redressal process.
Document all complaints, investigations, and resolutions.
Provide whistleblower protection mechanisms to encourage internal reporting.
By adopting these checklists into your HR routines, you significantly reduce the chances of facing labor violations or audit penalties.
Don’t wait for LMRA to flag your business for an audit. Proactively assess your compliance posture with a free consultation from Famabh’s labor compliance experts.
What you’ll get:
A full HR documentation and payroll process review
A risk summary highlighting potential violation areas
A custom compliance plan to safeguard your business
No obligations. Just clarity and peace of mind.
Penalties range from BHD 500 to BHD 5,000 per violation, suspension of work permits, and possible business license restrictions.
It’s advisable to conduct internal HR and payroll audits every 6 months or before any major LMRA permit renewals.
Yes, Fama offers full WPS compliance services, including SIF file preparation, submission tracking, and bank reconciliation support.
Your business will face immediate penalties, and the employee will be considered working illegally, leading to further fines and possible permit suspensions.
Yes, contracts must be in Arabic or bilingual (Arabic-English) to be legally enforceable and acceptable during audits or disputes.
Minimize risks and maximize growth with our comprehensive accounting solutions in Bahrain.
Below is an overview of our general pricing packages for our suite of services in Bahrain. Costs vary depending on factors such as the services we offer.
Read some reviews and success stories from our loyal customers who achieved their goals and how our expert solutions have made a lasting impact on their growth, compliance, and financial clarity. Your success is our greatest achievement!
Client
I am so happy to have chosen this company! Right from the start it was a very easy decision, I knew I am in the right hands. They contacted me with every update they had and always kept me up to date with all the information and steps that we will proceed next.
Client
Highly recommend for anyone looking to establish a company in Bahrain! Waqas Akram and his team made the entire process smooth and stress-free. They were incredibly knowledgeable, responsive, and handled every detail with professionalism.
Client
The team was highly professional, efficient, and knowledgeable. They ensured that all paperwork and procedures were handled smoothly, saving us both time and effort. I highly recommend their services to anyone looking out there.
Client
Abdullah and the team have been great in assisting me with related tasks. In challenging timeframes they've supported me to ensure our company operations can start in Bahrain without any issues. Thank you. I will recommed their services.
Client
I was extremely impressed with their services. Their expertise made everything smooth and hassle-free. I highly recommend Setup in Bahrain for anyone looking for their business here. Their professionalism and commitment to customer satisfaction are top-notch.
With years of experience and a highly qualified team, we bring unmatched expertise and in-depth knowledge of Bahrain’s financial landscape to every service we provide.
Choosing the right audit partner is not just a compliance decision — it’s a strategic one. Our firm is trusted by businesses across Bahrain because we deliver more than just reports; we deliver value. We combine deep local knowledge, international audit practices, and a commitment to personalized service. With each engagement, we focus on clarity, accuracy, and strategic insight, helping you turn regulatory obligations into business advantages.
We’re based in Bahrain, with a team that understands the intricacies of the local regulatory landscape, including NBR, MOIC, and CBB requirements. At the same time, we follow international standards such as IFRS and ISA, making our reports credible not only in Bahrain but across international markets. Whether you’re a startup, family business, or a multinational branch, we speak your language — both culturally and financially.
One of the main reasons businesses engage in external audits in Bahrain is for Commercial Registration (CR) renewal and loan or investment applications. Our reports are formatted and signed according to MOIC standards and accepted by banks and government entities. We ensure your financials are presentable, defendable, and submission-ready — saving you time, money, and back-and-forth headaches.
Your audit is conducted by highly qualified, licensed professionals with certifications such as CPA, ACCA, CIA, CMA, and relevant MOIC registration. This isn’t just about ticking boxes — it ensures your audit is legally valid, technically sound, and professionally defensible. Every report is reviewed through a quality assurance process before delivery.
We understand that time is often of the essence, especially when audits are required for CR renewal or funding rounds. Our audit teams are efficiently structured, with clear timelines, digital collaboration tools, and a client dashboard for real-time progress updates. Fast delivery does not mean shortcuts — we maintain audit integrity at every stage while honoring your deadlines.
Our audit services span across dozens of industries in Bahrain — from logistics and healthcare to fintech, hospitality, education, and real estate. We bring industry-specific knowledge to every engagement, understanding the nuances of each sector’s operational and regulatory challenges. This ensures our audit approach is relevant, tailored, and impactful for your business.
We don’t just audit and walk away. Post-audit, we provide hands-on support for any rectifications needed, help you submit to relevant authorities, and guide you on how to improve controls, accounting systems, and VAT compliance. Our end-to-end audit service ensures that you’re not left in the dark once the report is delivered.
Auditing involves handling sensitive financial and operational data. We are committed to total confidentiality, and our systems are secured through encrypted document storage, limited-access file sharing, and strict non-disclosure protocols. You can be confident that your information is safe with us.
We believe in clear, upfront pricing without hidden charges. Whether you’re a startup needing your first audit or a complex group with multiple subsidiaries, we offer fair rates and customized packages that align with your needs and budget. Value-driven service is part of our audit philosophy.
Many of our audit clients stay with us for years — not just for audits, but for ongoing accounting, VAT, advisory, and compliance services. We build long-term relationships based on trust, responsiveness, and results. As your business grows, we scale with you — helping you stay compliant, confident, and ready for every financial milestone.
Our external audit process is designed to be seamless, structured, and stress-free for your business. From the first consultation to the final signed report, we follow a transparent and proven methodology that ensures accuracy, accountability, and complete compliance.
We begin with a discovery session, where we understand your business structure, financial year, operational complexity, and industry-specific audit requirements. Based on this, we build a customized audit plan outlining timelines, required documents, and reporting goals.
Our audit team then conducts fieldwork and testing — either remotely or on-site — by analyzing your financial records, general ledger, VAT returns, and compliance documentation. We use advanced tools to cross-verify transactions, evaluate internal controls, and flag inconsistencies.
Before finalization, we present a draft report to your management team for discussion and clarification. Once all revisions are incorporated, we issue your official signed audit report, ready for submission to banks, investors, the MOIC, or CBB.
Throughout the process, you’ll have access to a dedicated audit coordinator and real-time status updates. We ensure you feel informed, prepared, and supported — every step of the way.
Over the years, we’ve earned the trust of businesses in Bahrain by consistently delivering audits that are precise, punctual, and practical.
✅ Reputation for integrity: Our firm operates with full independence, which means our reports carry weight with banks, investors, and regulators.
✅ Client-first approach: We’re known for being approachable, responsive, and easy to work with. Our clients value our professional communication and fast turnaround.
✅ Bahrain regulatory expertise: From MOIC filing formats to NBR expectations, our auditors are fully versed in local frameworks.
✅ Proven track record: We’ve successfully completed audits for hundreds of companies — including startups, family-owned enterprises, and international branches.
✅ Comprehensive support: From audit readiness checks to post-report implementation, we stand by our clients beyond just report delivery.
Our focus is not just on issuing a report — it’s on protecting your business, strengthening your credibility, and ensuring you’re always a step ahead.
Compliance is not optional — it’s foundational. In Bahrain’s evolving regulatory environment, staying compliant with financial laws is essential for license renewals, bank relationships, investor confidence, and public trust.
We ensure that your business meets all key regulatory obligations, including:
Commercial Registration (CR) renewal audits mandated by the Ministry of Industry and Commerce
Bahrain VAT compliance audits and alignment with NBR documentation requirements
Central Bank of Bahrain (CBB) audit guidelines for financial institutions and licensed entities
Adherence to IFRS and IAS audit standards, accepted locally and internationally
Proper documentation for intercompany transactions, foreign investments, and capital structures
Audit trail support for anti-money laundering (AML) and due diligence
With us as your audit partner, you don’t just meet the minimum — you gain peace of mind that your business is operating within the full scope of Bahrain’s legal and financial framework.
Minimize risks and maximize growth with our comprehensive accounting solutions in Bahrain.
With a reputation for precision, and excellence, we are here to support your business growth while ensuring compliance with Bahrain’s financial and regulatory standards.
Copyright © 2025 All rights reserved.
Accounting, VAT, & Audit Services by famabh