Bahrain unveils new pension benefits for private sector employees

Staff can purchase five years’ additional service; Kingdom introduces mandatory electronic payment of salaries

Bahrain has introduced a wide-ranging new scheme that will allow private sector employees to purchase ‘virtual’ years of service to ensure they can receive enhanced pensions in retirement.

Under the scheme, administered by the Social Insurance Organisation and approved in a vote by the Shura Council, employees can purchase up to five years’ additional service which, when paid through salary sacrifice, can be included in future pension calculations, subject to certain conditions.

The move is aimed at bringing private sector pensions into line with those received in the civil service. Bahrain has some of the most generous public sector pensions in the GCC.

“This will create equality between the employee in the private sector and the public sector or someone working in the military,” Dr Jehad Al Fadhel was quoted as saying after the vote was approved. “The people who benefit the most from this law will be Bahraini residents; the percentage of people to whom this applies is large.

“This will also motivate Bahrainis to seek jobs in the private sector. There are many benefits in the public sector but when you bring in those benefits to the private sector, there will be less pressure on the public sector.

“There won’t be long waiting queues for government jobs and there will be motivation to diversify the job market in the private sector,” she said.

The new approach to pensions will be followed in May by a new Wage Protection System (WPS), designed to protect employees – particularly those in low wage industries and domestic staff – by requiring employers to pay all salaries by bank transfer.

Banks have been upgrading their payment systems, and the scheme will also support the use of pre-payment cards and digital wallets.

Ausamah Al Absi, chief executive of the Labour Market Regulatory Authority, said the move would make it possible to track non-payment of wages and would boost enforcement.

“Every employer will have to transfer salaries in bank accounts of their staff that fulfils their contractual obligations,” he told the Zawya news service. “The scheme will initially cover those hiring a large number of workers and gradually move to those individually employed like domestic workers. “Our systems will alert us in case of non-payment of wages, whether it’s for a group of workers or an individual case,” he added. “We will know who is paying and who is not, and that will protect the rights of all parties.”

Bahrain has been introducing a range of labour market reforms in a bid to diversify its economy and increase its international competitiveness. In 2017, the Kingdom approved a flexible work permit system that encouraged freelancers and contractors to work in the country without sponsorship.

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