The Kingdom of Bahrain is working day and night to boost its economy and attract more and more people to invest here. As such, if you are an entrepreneur or an investor, starting a business in Bahrain might be something you want to look into. All things related to starting a business in Bahrain are contained in the Commercial Companies Law. It is governed by the Ministry of Industry, Commerce, and Tourism. The Ministry, under the support of the Government of the Kingdom of Bahrain, launched the system of the commercial register, which is known as SIJILAT in short.
The main goal behind introducing the SIJILAT is to optimize the process of business creation, thereby encouraging entrepreneurs within the country as well as abroad to establish a business in the country. Known primarily for its oil fields and having a strong oil mining, production, and export business, Bahrain is set to diversify its image and expand its horizons to include non-oil segments of business as well. In the 2018 Ease of doing business index, Bahrain was only showing progress in areas related to Oil, whereas, in 2020, it improved manifold, and an increase in GDP in the non-oil categories was seen by 3 percent.
If how to start a business in Bahrain is lingering in your mind, you must know that there are a number of procedures that need to be taken care of. While there are appropriate authorities to help and guide you through the process, as a domestic entrepreneur, the process is comparatively easier than it is for a foreigner. This is because there can be a language barrier, and foreigners would also need to apply for the proper work permits and visas. However, apart from these, the requirements and procedures are the same for all people starting a business in Bahrain.
Process of setting up a business in Bahrain
The process of starting a business in the Kingdom of Bahrain is laid down in the Procedures Guide for Establishments and Commercial Companies. This is a very comprehensive guide that lays down about legal structures of companies in Bahrain, tax registrations, company registrations, and much more. All the basic requirements and procedures of starting a business and running it successfully are mentioned in this. While starting a business in Bahrain, the following steps must be followed by individuals:
- Business Idea: As with any country in the world, it all starts with a marketable idea that is either new in the market or high in demand but low in availability. For foreign nationals looking to start a business in Bahrain, this can be a big pro as they are more likely to find gaps in the market as far as demand for a product or service and lack of supply is concerned. Since Bahrain is starting to expand and grow into new fields, there is a lot of scopes to start a business there.
- Creating a business plan: A business plan is crucial for any new business. It would help you not only in realistically gauging how far you can expand your business but more importantly, it plays a key role in helping entrepreneurs get credit. The business plan must create your idea, the demand in the market, and how you see it making a profit. It must contain plans for expansion and growth over a fixed period of time.
- Deciding on the legal structure of the company: There are various types of companies recognized in Bahrain, and as such, new business owners and investors must decide upon the legal structure before starting a business in Bahrain. It is important because you cannot register your company without finalizing this, and it also helps in determining the obligations of the parties involved. The most commonly recognized types of businesses in Bahrain are: –
- Limited Liability Company
- Association in Participation
- Bahrain Branch Office
- Representative Office
- Shareholding Company
- General Partnership Company
- Single Person Company
- Holding Company
- Work Permits: This is a requirement for foreign nationals who want to start a business in Bahrain. Before you can proceed with setting up your business, you need to ensure that you have the appropriate work visa or residential status in Bahrain.
- Company Registration: Without registration, no company is recognized as in existence in Bahrain. But before registration, every company needs to come up with a company name that would become the identity of the business. This name needs to be registered. Businesses must also establish a company seal. Upon completion of the registration processes, companies receive a Certificate of Commercial Registration.
- Receiving Permits: A lot of permits and licenses would be required, including Insurance, Social Security, Payroll, Tax Registrations, and construction permits. To acquire all of these permits and other business-specific licenses, business owners must be familiar with the requirements pertaining to their particular trade. For example, if running a travel and tourism business, you may require additional business-related licenses, which would not be applicable in perhaps a digital marketing business.
- Banking: After receiving the Commercial Registration Certificate, you must open a bank account. Setting up the account is quite simple once the company is registered. This account will be used for company transactions.
- Finding Office: You can buy an office space or lease it, whichever option is more suitable. An office address is important, and all employers looking to start a business in Bahrain must find a suitable space to operate.
- Hiring Employees: The Last step to successfully starting a business in Bahrain is to hire employees. Every business has different requirements for employee hiring, and it is up to the employer to decide how many people they want to hire. You can always hire more employees as your business grows. Keeping in mind your finances, you should look out for skilled labor. This is where experienced HR experts at Zimyo can certainly help you in hiring and training the best employees.
Hiring Employees in Bahrain
In order to run and expand a business, you would need to hire employees at some point. The number of employees, however, would vary on the type and size of the business. Employers must ensure that while hiring employees, they are fully aware of all the regulations with regards to employment security, employment contract, wages, working hours, and so on. The Kingdom of Bahrain requires all employers to compose and enforce employment contracts that would lay down the terms of employment, wages, working hours, overtime (if applicable), holidays and leave allowance, job descriptions, and all other relevant information. Hiring an experienced HR agency like Zimyo will surely streamline your employee hiring process.
Wages for employees are often ascertained on the basis of their education level. Since there is scope for juvenile employment, the number of wages paid to employees is calculated on their level of education as well as their experience. For example, employees with a high school degree are only eligible for BHD 270 per month, while University graduates are entitled to receive BHD 400 per month.
- Trial Period/Probation Period: As per the labor laws in Bahrain, the probationary period is generally set at about 3 months. However, it can be extended to a maximum period of 6 months. This, however, must be pre-decided and would depend upon the complexity of the job.
- Leave and Holidays: Employees working in Bahrain are entitled to 30 days’ worth of vacation time upon completing one year of employment. This is broken down to 2.5 days per month. Employees who have been associated with a firm for a shorter duration of time would be eligible for vacation time calculated on a pro-rated basis.
They also get 55 days of sick leave allowance after completing 3 months of employment. Of these 55 days, they can get 15 days of sick leave with full pay, 20 days of leave with half-pay, and additional 20 days of leave without any pay. The paid and half-paid sick leaves can be accumulated for a maximum duration of 240 days.
- Maternity Leave: Female employees who are pregnant get 60 days of paid maternity leave in Bahrain. Thereafter, they are entitled to 15 more days (consecutively or non-consecutively, as per their need) of maternity leave without pay. Male employees are only entitled to 1 day of paid parental leave upon the birth of the child.
- Termination of Services: There are certain conditions laid out for the termination of services. An employee can be terminated during the probationary period or upon the expiry of a fixed-term contract. However, in cases of failure to improve work performance, the employer must show that they gave the employee reasonable time to improve (usually 60 days). Other reasons for immediate termination of services include Redundancy, Retirement, Incapacity to work, Resignation, or Death. In all other cases, a 30 days notice period must be given to the employee.
- Pension: The age of retirement in Bahrain is 60 years. Thereafter, employees become eligible to receive a pension. Pension is available in two manners: a state-funded pension and a pension fund wherein the employer and employee keep contributing throughout the term of employment. However, employers are not legally bound to make such contributions.
- Work Hour Norms: Working hours are usually about 48 hours per week in Bahrain, with 8 hours per day being the normal shift duration. Overtime is allowed by not going over 2 hours per day. Being an Arabic country, the Month of Ramadan holds special importance, and as such, during this time, employers can only keep employees working for 6 hours per day, adding up to 36 hours per week.
How easy is it to conduct business in Bahrain?
The ease of doing business index is an international index that compares 190 countries across multiple parameters to see where each country stands in terms of how simple it is to establish and conduct business in a country. In the latest report, it was determined that the Kingdom of Bahrain moved up by ten ranks as they improved in a lot of areas. Bahrain ranked number 43 in the latest reports overall. Some of the main parameters on which countries are judged include:
- Starting a Business: In this area, Bahrain ranked at the 67th position. Scoring 89.6 on a scale of 100 with 6.5 procedures and an average time of 8.5 days. The procedures are clearly laid down in the Commercial Companies Law, and there are various agencies, both government and private, whose services can be utilized by new business owners and investors. The starting a business parameter includes various criteria, including pre-registration, registration, and post-registration processes, excluding the time it takes for individuals to collect and submit all the necessary documents.
- Managing Permits: There are various permits, including tax, work permits, residential permits, and construction permits, that need to be acquired before starting a business in Bahrain. On the parameter of Construction permits, the Kingdom of Bahrain ranked number 17, scoring 83.1 on a 100-point scale. The managing construction permits parameter contains the entire process, including submission of documents, acquiring licenses, and all necessary clearances.
- Getting Electricity: On the parameter of getting electricity, Bahrain ranked at the 72nd position. This is because it can take up to 70 days to receive an electric connection after the completion of 5 procedures. This led to them only scoring 79.7 out of 100.
- Getting Credit: Credit is extremely important for every business. You need funds not only to start but also to run the business smoothly. It would help you set a suitable budget for starting, hiring employees, and so on. On this parameter, Bahrain ranked 94 and only secured 55 points out of 100.
- Managing Payroll: In terms of Managing Payroll, the Kingdom of Bahrain has various systems in place, and there are also several platforms that help streamline the process of managing payroll. It is extremely important to consider the tax implications and obligations of the employer. Availing services of payroll management experts at Zimyo will surely take all the hassles out of your payroll-related tasks.
- Paying Taxes: In terms of Paying Taxes, Bahrain secured the first rank, with a perfect 100 score. The procedures and systems are very clearly laid down. With 3 types of taxes to be paid every year, the procedures simple to understand, and only costing 23 hours to those filing for taxes, the system is very smooth.
- Enforcing Contracts: On the parameter of Enforcing Contracts, Bahrain only secured the 59th rank. It can take about 2 years to seek resolutions in enforcing contracts. While contracts of employment are a necessity in the country, the enforcement of these and all other contracts that are needed to enter into business can be a long process.
- Resolving Insolvency: Resolving insolvency in Bahrain can be a time taking and complicated process. The country ranked at the 60th position and only has a 41.3 cents per dollar rate of recovery. Recovery can even take about 2.5-3 years, causing individuals a lot of problems.
While Bahrain has not yet ranked among the top countries in terms of conducting business, the country is constantly improving its problem areas and evolving tremendously. Those looking to start a small business can consider Bahrain as a very lucrative market. The policies for hiring employees are very straightforward, there are only 3 types of taxes that need to be paid, and there are various agencies that can help new businesses understand the legalities and obligations required for starting a business and successfully running it in the Kingdom of Bahrain.
Zimyo is a leading HR and Payroll management services provider in Bahrain with multiple years of experience. The company helps businesses hire the best talent and takes care of the financial requirements of employees, such as advances or credit for a hassle-free work experience.