Iran: Structuring Employment Arrangements In Iran

Following the lifting of certain sanctions against Iran, global companies in a variety of sectors are looking to identify opportunities for foreign direct investment into an exciting but challenging market. One of the key considerations for any company looking to do business in Iran is how to appropriately resource their operations on the ground. In this bulletin we highlight some the key issues to consider when recruiting (or assigning) employees to work in Iran.

Legislative framework

Employment relationships in the public and private sectors in Iran are governed by the Labour Code of 20 November 1990 (the Labour Law) which has been supplemented over the years by by-laws and various regulations.  

The Labour Law does not apply to employees working in Iran's free trade zones, which are governed by the Regulations on Employment of Workforce, Insurance and Social Security 1994. For the purposes of this bulletin we have focussed on an employer's obligations under the Labour Law.

Employment relationships in the public and private sectors in Iran are governed by the Labour Code of 20 November 1990 (the Labour Law) which has been supplemented over the years by by-laws and various regulations.  

The Labour Law does not apply to employees working in Iran's free trade zones, which are governed by the Regulations on Employment of Workforce, Insurance and Social Security 1994. For the purposes of this bulletin we have focussed on an employer's obligations under the Labour Law.


All expatriate employees working in Iran must be sponsored for entry visa and work permit purposes by an entity or person that has its own right to remain in Iran. An individual's entry visa must be obtained from the General Directorate for the Employment of Foreign Nationals before the individual arrives in the country.

The individual must normally obtain a work permit within seven days of arriving in Iran. To do so, they (and their sponsor in Iran) will be required to show that:

  1. there is a lack of relevant expertise for their particular role among Iranian nationals;
  2. they are suitably qualified to fulfil their role; and
  3. they will use their expertise to train an Iranian national to eventually assume their role.

These conditions are applied strictly, reflecting the Iranian government's desire to reduce unemployment rates among Iranian nationals.

In practice, the process of applying for a work permit is undertaken at the same time as applying for the entry visa. Work permits are normally issued to expatriates for one year only and the conditions referred to above will need to be satisfied in order to renew a work permit.

Employment contracts

Employment contracts may be for fixed or unlimited terms. Copies of written employment contracts must be retained by the employer and the employee and given to the Ministry of Cooperatives, Labour and Social Welfare (the Ministry of Labour) and the relevant Islamic Labour Council (or the employee's representative).

Employment contracts must be in Farsi (or Farsi and English) and must contain the following information:

  • Name of employer and employee
  • Date of the contract
  • Job title
  • Remuneration
  • Working hours and annual leave
  • Place of work
  • Duration of the contract (if fixed)
  • Other matters required by custom and practice in relation to the specific job and/or area of employment

Specific terms of employment

  • Probationary period – probationary periods must not exceed three months. Either party may terminate employment without notice during the probationary period. If the employer terminates the employee's employment during the probationary period, the employee will be entitled to receive their remuneration for the whole period of the probationary period.
  • Minimum wage - the minimum daily wage in Iran is set by the Supreme Labour Council and is currently approximately 237,475 Rials (US$ 7.56). Employees may also be entitled to additional minimum allowances if they are married and have children.
  • Working hours - employees in Tehran typically work Saturday to Wednesday, with Thursday and Friday off for the weekend. In more rural areas, it is common for employees to work Saturday to Wednesday (eight hours per day) and a half day on Thursday (four hours). Total normal working hours must not exceed 44 hours in a week.
  • Overtime - Employees are entitled to overtime pay of up to 140% of their hourly wage provided that any overtime must not exceed four hours per day.
  • Annual leave – employees are entitled to a minimum of one calendar month's paid annual leave and can carry over nine days' annual leave from one year to the next.
  • Maternity leave – female employees in Iran are entitled to 270 calendar days' maternity leave.
  • Haj – employees are entitled to take one month's unpaid leave to perform the Haj pilgrimage once during the course of their employment. 

Social Security and income Tax

Iranian national employees and their employers are required to make contributions to the Social Security Organisation which operates a state pension scheme and provides unemployment, sickness, maternity and disability benefits. Currently, private sector employers must contribute 20% of an Iranian national employee's salary, with the Iranian national employee themselves contributing a further 7%.  Expatriate employees can, by written agreement with their employer, opt out of making social security contributions.

Employers in Iran are also required to deduct employment income tax at source for all employees (subject to certain limited exceptions) at the following rates:

Annual Salary (Rials)

Tax rate

Less than 156,000,000 (approximately US$5,000)


Between 156,00,000 Rials and 966,000,000 Rials (approximately US$30,100)


More than 1,380,000,000 Rials (approximately US$ 44,000)


Suspension of employment

Employees have the right to suspend their employment contract in a number of circumstances, including during any period:

  1. of military service;
  2. of academic study (for up to a maximum of four years);
  3. of detention which does not lead to a conviction; and
  4. during which the employer's workplace is closed due to force majeure.

Employers must reinstate the relevant employee at the end of any period of suspension referred to above and the employee's continuity of service during this period must be recognised for the purposes of calculating the employee's entitlement to end of service benefits.

Unless an employer can justify the non-reinstatement of the employee, the dismissal of an employee during an period of suspension referred to above will be considered unlawful. If the reinstatement can be justified by the employer and the employee's employment is terminated, the employee will be entitled to 45 days' salary for each year of service (inclusive of the period of suspension).

Termination of employment

One of the key issues for international companies to consider when recruiting in Iran is the difficulties faced by employers when terminating an employee's (and particularly an Iranian national's) employment.

The Labour Law permits termination of employment in the following circumstances:

  1. upon the employee's death, total disability or retirement;
  2. upon expiry of the employee's fixed term contract;
  3. where the employment contract relates to a specific project and the project comes to an end;
  4. upon the employee's resignation;
  5. where there is reduced production and structural changes imposed by economic, social and cultural developments requiring significant technological changes.

The Labour Law does not permit an employee to dismiss an employee summarily (i.e. without notice) for gross misconduct.

If an employer wishes terminate an employee's employment for misconduct and/or performance related reasons, they must first obtain approval from the relevant Islamic Labour Council or Guild Society by submitting supporting evidence of the employee's misconduct and/or poor performance (e.g. written warnings, minutes of disciplinary hearings etc). Similarly, if an employer wishes to terminate employees for redundancy (i.e. reason (e) above) they will likely be required to liaise with, and obtain approval from, a number of different authorities before proceeding with the dismissals.

However, given the Iranian government's desire to keep unemployment rates down, international companies are likely to find it different to obtain the requisite approvals to dismiss an Iranian national.

If an employer proceeds with dismissing an employee without first obtaining the necessary approvals it exposes itself to (i) penalties including fines and imprisonment; and (ii) the employee being awarded compensation and/or being reinstated to their role.

Employers must notify the Ministry of Labour of the dismissal of any foreign national within 15 days. In all cases, a foreign national must obtain an exit visa (with their employer's consent) before they will be allowed to exit Iran.

End of service entitlements

On the termination of their employment (for any reason whatsoever), employees are entitled to receive:

  • a payment in respect of their accrued untaken annual leave entitlement;
  • an end of service benefit equivalent to at least one month's salary for each year of service (employees who are made redundant may be entitled to up to two month's salary for each year of service); and
  • any otheraccrued contractual entitlements.

Dual employment arrangements

Many international companies who send expatriate employees to work in Iran will do so under a dual employment arrangement (i.e. during the employee's assignment in Iran they will continue to be employed under an employment contract in the company's host country). Companies should be aware of the implications of dual employment arrangements and should ensure that such arrangements are documented carefully to reduce the risk of an employee inadvertently double-recovering contractual and statutory entitlements in multiple jurisdictions.

Structuring Employment Arrangements In Iran

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions