Employer of Record in Iran

Hiring employees in Iran for 2025 presents unique challenges due to its distinct legal and regulatory framework. Companies looking to expand their operations or engage local talent must navigate specific labor laws, tax regulations, and social security contributions. Understanding the available hiring mechanisms is crucial for compliant and efficient team building in the country.

There are primarily three avenues for engaging employees in Iran:

• Establishing a local legal entity: This involves setting up a subsidiary or branch office, which can be a time-consuming and resource-intensive process, requiring registration with various governmental bodies and compliance with corporate laws.
• Utilizing an Employer of Record (EOR): An EOR, such as Rivermate, acts as the legal employer, handling all local compliance, payroll, and HR functions, while your company retains full control over day-to-day management and tasks.
• Hiring independent contractors: While seemingly simpler, this option carries significant risk of misclassification, which can lead to severe penalties if the worker is later deemed an employee by Iranian authorities.

How an Employer of Record (EOR) Works in Iran

An Employer of Record simplifies the process of hiring in Iran by taking on the legal responsibilities associated with employment. This model allows businesses to hire staff without needing to establish a local entity.

• Manages payroll processing including salary disbursement, income tax withholdings, and all mandatory social security contributions, adhering strictly to Iranian financial regulations.
• Ensures compliance with local labor laws, covering aspects like employment contracts, working hours, leave entitlements, and termination procedures, protecting both the employee and your company.
• Administers employee benefits, which typically include social security, health insurance, and other locally mandated provisions.
• Handles visa and work permit sponsorship for foreign nationals, navigating the complex immigration processes within Iran.
• Provides ongoing HR support and guidance on local employment practices, ensuring seamless operations and adherence to cultural nuances.

Benefits of Using an EOR in Iran

Partnering with an EOR offers several strategic advantages for companies seeking to tap into the Iranian talent pool without the complexities of direct entity establishment.

• Achieve rapid market entry by hiring employees almost immediately, bypassing the lengthy process of setting up a local legal entity.
• Significantly reduce administrative burden and costs associated with managing payroll, taxes, and HR functions in a foreign jurisdiction.
• Ensure complete compliance with Iran's intricate and evolving employment laws, minimizing legal and financial risks.
• Gain access to local expertise on legal, cultural, and operational employment nuances, offering peace of mind and strategic insights.
• Mitigate potential legal liabilities related to non-compliance, misclassification, or incorrect termination practices, as the EOR assumes these responsibilities.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Iran includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Iran.

Iran's tax system includes direct and indirect taxes overseen by the Iranian National Tax Administration (INTA). Employers must fulfill social security and payroll tax obligations, contributing approximately 23% of employee salaries to the Social Security Organization and about 3% for unemployment insurance. Employers are also responsible for withholding income tax based on progressive brackets, which for 2025 are roughly:

Employers must file monthly payroll tax returns and an annual income tax return, typically due by June. Employees benefit from deductions such as social security contributions and medical expenses, which can reduce taxable income. Foreign workers and companies should consider tax treaties, residency rules, and potential permanent establishment liabilities, often requiring professional advice for compliance. The Iranian fiscal year runs from March 21 to March 20, influencing tax deadlines and reporting schedules.

Iran's salary landscape varies significantly across industries and roles, with higher wages typically found in sectors like oil & gas, technology, and healthcare. For example, senior engineers in oil & gas earn between $1,500 and $3,000 USD monthly, while software developers in tech earn $800 to $2,000 USD. Salaries are generally higher in major cities such as Tehran, and demand for specialized skills can command premiums.

The government sets a minimum wage, updated annually; as of 2025, the exact figure is pending. Employers must comply with these regulations, ensuring all employees receive at least the minimum wage. Compensation packages often include bonuses like Norooz (equivalent to one month's salary), annual bonuses, and allowances for housing, transportation, food, or hardship locations.

Salary trends are influenced by inflation, sanctions, and currency fluctuations, with demand for skilled professionals pushing wages upward. Employers should monitor these factors to remain competitive and ensure compliance with evolving regulations.

Iranian labor law guarantees employees at least 30 days of paid annual leave, including four Fridays. Leave can be proportional for employees with less than a year of service, and generally should be taken within the same year, though carryover is possible with employer approval. Employees are entitled to their regular wages during this period.

Public holidays are observed annually, typically including religious and national events, with employees receiving paid time off. Key holiday data for 2025 is summarized below:

Employers should plan for these holidays and ensure compliance with leave entitlements, including wage payments during leave periods.

Employee benefits in Iran are regulated by comprehensive labor laws, mandating key protections such as social security contributions, paid annual leave (minimum 26 days), public holidays, sick leave, maternity and paternity leave, severance pay, and Eid holiday bonuses. Employers are required to contribute to the Social Security Organization (SSO), which covers retirement, disability, unemployment, and healthcare benefits. In addition to legal requirements, many employers offer supplementary benefits like health insurance, life insurance, transportation and meal allowances, housing support, performance bonuses, training, company cars, and profit sharing to attract and retain talent.

Health coverage is provided through Iran’s public social security system, with many employers enhancing this with private supplementary insurance covering private healthcare, specialized treatments, dental, vision, and prescriptions. Retirement benefits are primarily managed by the SSO, offering pensions based on contribution history, with some companies providing additional pension schemes or end-of-service gratuities. Benefit packages vary by company size and industry, with larger firms and sectors like oil, telecom, and banking typically offering more comprehensive benefits. Employers must ensure strict compliance with labor laws, maintain accurate records, and make timely contributions to avoid penalties.

Employers should ensure compliance with legal obligations, maintain proper documentation, and consider local market expectations to optimize employee satisfaction and retention.

Employment agreements in Iran must comply with the Labour Law, covering essential clauses such as parties involved, job description, compensation, working hours (typically 44 hours/week), leave entitlements, work location, contract duration, and termination conditions. Iranian law recognizes two main contract types: fixed-term, which specifies an end date, and indefinite-term, offering ongoing employment until terminated. Fixed-term contracts are common for temporary projects, while indefinite contracts provide greater job security.

Probation periods are allowed (1-3 months), during which either party can terminate without cause and without severance pay. Confidentiality clauses are generally enforceable if reasonable, but non-compete clauses face strict scrutiny and must be limited in scope, duration, and geographic area, with a legitimate business interest demonstrated. Contract modifications require mutual written agreement, and termination procedures must follow legal protocols, including notice periods (typically one month for employees) and severance pay for employer-initiated dismissals.

Remote work in Iran is gradually expanding, influenced by increased internet access, work-life balance preferences, and global trends. While Iran's labor law does not explicitly regulate remote work, existing employment laws regarding contracts, working hours, and employee rights generally apply. Employers must clearly define remote work terms in contracts, ensure compliance with work hours, and provide protections such as social security and health benefits. Employers are also responsible for health and safety measures for remote employees, including ergonomic support.

Flexible work options are increasingly adopted, with common arrangements summarized below:

Key legal considerations include the need for clear contractual terms, adherence to labor laws, and ensuring employee rights. As of 2025, Iran is developing more defined frameworks for remote work, presenting both opportunities for flexibility and challenges related to regulation and infrastructure.

Terminating an employee in Iran requires strict compliance with labor laws, including proper notice, documentation, and procedural steps. Notice periods vary based on service length, with a minimum of 1 month for less than 6 months and up to 3 months for employees with over 10 years of service:

Severance pay, calculated as one month's last salary per year of service, must be paid along with accrued benefits such as unused vacation and bonuses. Grounds for termination include both with cause (e.g., misconduct, breach of confidentiality) and without cause, with the latter requiring higher severance obligations. Employers must document reasons, provide written notices, and may need Labor Council approval, especially for cause-based dismissals. Employees are protected against wrongful dismissal, with legal avenues available for claims, emphasizing the importance of adherence to procedural and documentation requirements to avoid legal repercussions.

Iran's freelance workforce is expanding due to increased internet access and digital platforms, offering flexible work options across sectors such as IT, marketing, translation, education, and construction. Employers must carefully distinguish between employees and independent contractors to avoid legal and financial penalties, considering factors like control, integration, economic dependence, tools, risk, and exclusivity.

Contracting in Iran typically involves written agreements covering scope, deliverables, payment, IP rights, and dispute resolution. Contractors handle their own taxes and social security, with responsibilities including income tax, VAT (if applicable), and contributions to social security. Key industry roles include software developers, designers, translators, educators, and engineers. Proper classification and clear contractual terms are essential for compliance and effective engagement.

Iran requires foreign workers to obtain specific visas and work permits before employment. The main visa types include:

The process involves securing employer sponsorship, meeting eligibility criteria, and submitting documentation to authorities. Employers should ensure compliance with regulations, as the system is complex and requires careful adherence to legal procedures.