Hire in Iran through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary or branch office.

In the context of Iran, an EOR can be particularly useful for international companies looking to tap into the country's skilled workforce or explore business opportunities without navigating the complexities of local labor laws and regulations directly. By partnering with an EOR, companies can focus on their core business activities while the EOR handles the intricacies of employment, payroll, and compliance.

How Does EOR Work?

The EOR model operates through a series of interconnected steps:

1. Client Agreement: The company (client) partners with an EOR provider, outlining the terms of their collaboration.

2. Employee Selection: The client identifies and selects the employees they wish to hire in Iran.

3. Employment Contract: The EOR legally employs the selected individuals, creating compliant employment contracts under Iranian law.

4. Payroll Management: The EOR manages payroll, ensuring employees are paid accurately and on time, in accordance with local regulations.

5. Benefits Administration: The EOR handles employee benefits, including social security contributions and any mandatory benefits required by Iranian law.

6. Tax Compliance: The EOR takes responsibility for withholding and remitting the appropriate taxes to Iranian authorities.

7. HR Support: The EOR provides ongoing HR support, addressing employee queries and managing administrative tasks.

8. Compliance Management: The EOR stays up-to-date with changes in Iranian labor laws and ensures ongoing compliance.

Benefits of Using an EOR

Utilizing an EOR in Iran offers several advantages:

1. Rapid Market Entry: Companies can quickly establish a presence in Iran without the need to set up a legal entity, saving time and resources.

2. Risk Mitigation: The EOR assumes legal responsibility for employment, reducing the client's exposure to potential compliance risks.

3. Local Expertise: EORs possess in-depth knowledge of Iranian labor laws, ensuring full compliance with local regulations.

4. Cost-Effectiveness: Companies can avoid the substantial costs associated with establishing and maintaining a local entity.

5. Flexibility: EORs allow businesses to scale their workforce up or down quickly, adapting to market demands.

6. Focus on Core Business: By outsourcing employment administration, companies can concentrate on their primary business objectives.

7. Access to Talent: EORs facilitate hiring local talent, allowing companies to benefit from Iran's skilled workforce.

8. Simplified Expansion: For companies testing the Iranian market, an EOR provides a low-risk way to establish a presence before committing to a more permanent setup.

By leveraging an EOR's services, companies can navigate the complexities of Iran's labor market with greater ease, tapping into opportunities while minimizing administrative burdens and compliance risks.

Iran's employment landscape is a dynamic mix of opportunities and challenges. With a young, educated workforce and a growing service sector, the country is poised for economic growth. However, it also faces hurdles in job creation and bridging the skills gap. The interplay of traditional values and modern business practices shapes Iran's unique work environment.

Overview of Labor Laws

Iran's labor laws aim to protect workers' rights while balancing employer interests. Key aspects include:

• A standard 44-hour workweek with overtime pay for additional hours
• Mandatory social security contributions from both employers and employees
• Minimum wage regulations that are reviewed annually
• Provisions for maternity leave and annual paid vacation
• Restrictions on termination of employment, requiring just cause

These laws apply to both Iranian nationals and foreign workers, ensuring a level playing field in the labor market.

Cultural Considerations

Understanding Iranian workplace culture is crucial for successful business operations:

• Respect for hierarchy: Decision-making often follows a top-down approach
• Indirect communication: Subtle messaging is preferred over direct confrontation
• Importance of relationships: Building trust and personal connections is vital
• Work-life balance: Family obligations are generally respected, but overtime may be expected
• Gender segregation: Some workplaces maintain separate spaces for men and women

Adapting to these cultural norms can significantly enhance workplace harmony and productivity.

Challenges of Direct Hiring

Direct hiring in Iran presents several challenges for foreign companies:

1. Complex regulatory environment: Navigating Iran's labor laws and bureaucratic procedures can be daunting for foreign entities.

2. Language barrier: While English is widely used in business, official documentation is typically in Persian.

3. Sanctions impact: International sanctions can complicate financial transactions and limit access to global talent pools.

4. Local presence requirement: Foreign companies often need to establish a legal entity in Iran to hire directly.

5. Cultural nuances: Understanding and adapting to local business practices and cultural norms can be challenging for foreign employers.

6. Skills mismatch: Despite a well-educated workforce, finding candidates with specific skill sets may be difficult in certain sectors.

These challenges underscore the potential benefits of partnering with a local expert or using an Employer of Record service to navigate Iran's employment landscape effectively.

Iran's payroll and tax system is a complex structure that involves contributions from both employers and employees. The system is designed to support social welfare programs, healthcare, and retirement benefits for the country's workforce. Understanding the intricacies of this system is crucial for both employers operating in Iran and employees working within the country.

In Iran, the payroll process involves careful calculation of various deductions and contributions, including income tax and social security payments. The Social Security Organization (SSO) plays a central role in managing these contributions and providing benefits to workers. Both employers and employees are required to make contributions to the SSO, which funds various social welfare programs.

The tax system in Iran is progressive, meaning that higher earners pay a larger percentage of their income in taxes. This system aims to create a fair distribution of the tax burden across different income levels. Let's delve deeper into the specific responsibilities of employers and employees within this system.

Employer Contributions

Employers in Iran have several financial obligations when it comes to payroll and taxes:

1. Social Security Organization (SSO) Contributions: Employers are required to contribute 23% of an employee's monthly gross salary to the SSO. This forms a significant part of the total 30% SSO contribution, with the remaining 7% coming from the employee.

2. Tax Withholding: Employers are responsible for withholding income tax from their employees' salaries. The amount withheld is based on a progressive tax system and depends on the employee's annual taxable income.

3. Reporting: Regular reports must be filed with the Iranian tax authorities. These reports detail employee salaries, taxes withheld, and SSO contributions.

4. Payment of Contributions: Employers must ensure timely payment of both their own SSO contributions and the withheld employee contributions to the relevant authorities.

5. Compliance: Employers need to stay updated with any changes in tax laws or SSO contribution rates to ensure ongoing compliance.

Employee Contributions

Employees in Iran also have financial responsibilities within the payroll and tax system:

1. Social Security Organization (SSO) Contributions: Employees contribute 7% of their gross salary towards social security. This is typically withheld from their salary by the employer.

2. Income Tax: Employees are subject to income tax based on a progressive tax system. The tax rate increases as taxable income rises, but there is an annual tax exemption threshold below which income is not taxed.

3. Additional Deductions: In some cases, employees may have additional deductions from their salary, such as private health insurance contributions or union dues, if they have opted for these benefits.

4. Tax Filing: While employers handle most of the tax withholding and reporting, employees may need to file annual tax returns, especially if they have additional sources of income.

5. Profession-Specific Variations: Some professions, such as commercial drivers, may have slightly different contribution rates. For instance, commercial drivers contribute 9.5% instead of the standard 7% to the SSO.

Understanding these contributions is essential for both employers and employees in Iran. For employers, it ensures compliance with local laws and regulations, avoiding potential penalties. For employees, it provides clarity on their take-home pay and the benefits they're entitled to through their contributions. As with any complex system, it's advisable to consult with local experts or authorities for the most up-to-date and detailed information on payroll and taxes in Iran.

Iran offers a comprehensive set of employee benefits, combining mandatory provisions with optional perks to create attractive compensation packages. As an Employer of Record (EOR), Rivermate expertly navigates the complexities of Iranian labor laws, ensuring full compliance with mandatory benefits while also helping companies implement optional benefits that align with their organizational goals and employee needs. This approach not only guarantees legal adherence but also enhances employee satisfaction and retention in the Iranian market.

Mandatory Benefits

• One month of paid annual leave, with an additional week for hazardous professions
• Approximately 22 paid public holidays annually
• Employer contributions to the State Social Security Fund
• Paid sick leave, subject to Social Security Organization approval
• 90 days of paid maternity leave for female employees
• Overtime compensation at 40% above regular hourly wage
• Severance pay for eligible employees, calculated as one month's salary per year of service
• Probationary period allowance in employment contracts

Optional Benefits

• Profit-sharing schemes or bonuses
• Transportation allowances to cover commuting costs
• Subsidized meals or meal vouchers
• Interest-free or low-interest loans for various purposes
• Supplemental private health insurance plans
• Gym memberships or on-site fitness facilities
• Flexible working arrangements (e.g., telecommuting, compressed workweeks)
• Childcare assistance or on-site childcare facilities
• Educational assistance through tuition reimbursement programs
• Recreational activities and team-building events

By leveraging Rivermate's expertise in managing both mandatory and optional benefits in Iran, companies can create competitive compensation packages that attract top talent while ensuring full compliance with local labor laws.

The process of termination and offboarding in Iran is governed by strict legal regulations that prioritize employee rights and job security. Understanding these procedures is crucial for both employers and employees to ensure compliance with Iranian labor laws and maintain fair employment practices.

Grounds for Termination

In Iran, employment contracts can only be terminated under specific circumstances outlined by the Iranian Labour Law. These include:

• Death or retirement of the employee
• Total disability of the employee
• Expiration of a fixed-term employment contract
• Completion of a specific task in a temporary employment contract
• Employee resignation with proper notice

It's important to note that employers cannot unilaterally dismiss employees outside of these legal grounds, emphasizing the strong protection of workers' rights in the country.

Lawful Dismissal Procedures

When termination is necessary and lawful, employers must follow specific procedures:

1. For misconduct or violation of company regulations:

   • Provide written warnings
   • Follow a documented disciplinary process

2. For redundancy or economic reasons:

   • Obtain approval from the Islamic Labor Council or Labor Discretionary Board
   • These bodies assess the legitimacy of the redundancy and ensure fair treatment

Notice Requirements

The notice period for dismissal can vary depending on the circumstances and the employee's contract. However, Iranian labor law emphasizes providing reasonable notice to allow employees time to find alternative employment.

Severance Pay

Upon lawful termination, employers are required to provide severance pay to employees who have completed at least one year of service. The calculation is as follows:

• One month's salary for each year of service
• Based on the employee's last salary

Offboarding Process

While specific offboarding procedures may vary between companies, a typical process in Iran might include:

1. Communicating the termination decision to the employee
2. Completing necessary paperwork and documentation
3. Returning company property
4. Conducting an exit interview
5. Providing final pay and severance
6. Issuing necessary certificates or references

By adhering to these guidelines, companies operating in Iran can ensure a smooth and legally compliant termination and offboarding process while respecting employee rights and maintaining positive relationships.

Iran has strict regulations for foreign workers seeking employment in the country. While the process can be complex, understanding the key requirements can help streamline the visa and work permit application process.

Visa Requirements

Foreign nationals planning to work in Iran typically need to obtain a work visa before entering the country. The process usually involves the following steps:

1. Job offer: Secure a job offer from an Iranian employer.
2. Visa application: Apply for a work visa at an Iranian embassy or consulate in your home country.
3. Supporting documents: Submit required documents, including a valid passport, passport-sized photos, and a letter of invitation from the Iranian employer.

Work Permit Process

Once in Iran with a valid work visa, foreign workers must obtain a work permit. The process generally includes:

1. Employer application: The Iranian employer applies for the work permit on behalf of the foreign worker.
2. Ministry approval: The Ministry of Cooperatives, Labour, and Social Welfare reviews and approves the application.
3. Residence permit: Upon work permit approval, the foreign worker must apply for a residence permit.

Key Considerations

• Quota system: Iran maintains a quota system limiting the number of foreign workers in certain sectors.
• Renewals: Work permits are typically valid for one year and must be renewed annually.
• Restrictions: Some professions and industries may have additional restrictions or requirements for foreign workers.

It's important to note that regulations can change, and the process may vary depending on the specific circumstances. Employers and foreign workers should consult with local authorities or legal experts for the most up-to-date information and guidance on visa and work permit requirements in Iran.