Employer of Record in Iran

An Employer of Record (EOR) in Iran is a company that legally hires employees for you. This means you can build a team in Iran without setting up your own local company. The EOR takes care of payroll, taxes, benefits, and makes sure you follow Iranian labor laws. This setup makes hiring simpler and lets you focus on your business. Using an EOR provider like Rivermate helps you manage your team in Iran correctly and legally.

How an Employer of Record (EOR) Works in Iran

Using an EOR in Iran simplifies the hiring process. You find the talent, and the EOR handles the legal and administrative side of employment. This allows you to operate in the country without establishing a legal entity yourself.

Here is how it works:

1. You select your candidate. You remain in full control of hiring and managing your employee's day to day tasks.
2. The EOR legally hires the employee. The EOR becomes the legal employer and puts the employee on its payroll in Iran.
3. The EOR drafts a compliant employment contract. They create a contract that follows Iranian labor laws. A copy is given to you, the employee, and the Ministry of Cooperatives, Labor and Social Security.
4. The EOR manages HR and payroll. They handle all administrative tasks, including payroll, taxes, social security contributions, and benefits.
5. Your employee works for you. While the EOR is the legal employer, you manage the employee's daily work and responsibilities.
6. The EOR ensures ongoing compliance. They stay updated on any changes to Iranian labor laws to keep your employment arrangement compliant.

Why use an Employer of Record in Iran

Using an Employer of Record in Iran is a practical way to hire employees without the cost and complexity of setting up a local company. It allows you to enter the Iranian market quickly and efficiently while reducing risks.

Here are some key benefits:

• Avoid establishing a legal entity. You can hire in Iran without the time and expense of creating a subsidiary.
• Ensure compliance with local laws. EORs are experts in Iranian labor law, so they manage the complexities of employment regulations, reducing your legal risks.
• Simplify HR and administration. The EOR handles all payroll, tax, and benefits administration, freeing you to focus on your business goals.
• Hire talent faster. You can onboard new employees in days instead of the months it might take to set up a local entity.
• Offer competitive benefits. EORs understand the local market and can help you create benefits packages that attract and keep top talent in Iran.

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.

Hiring in Iran requires understanding a unique business culture and a legal system that strongly protects employees. The workforce is diverse and well-educated, with a growing number of young professionals in fields like tech and engineering. Navigating the local labor laws is key to your success. This guide will walk you through the essentials.

Employment contracts & must-have clauses

You must provide a written employment contract in Iran. While oral agreements are recognized, a written contract avoids future disputes. Iranian labor law is very employee-friendly, so it's crucial to get the contract right from the start.

Here are the essential clauses your employment contract must include:

• Parties involved: Clearly state the full details of your company and the employee.
• Job description: Provide a precise description of the work, duties, and responsibilities.
• Compensation: Detail the basic salary and any additional benefits or allowances.
• Working hours: Specify the daily and weekly work schedule.
• Leave and holidays: Outline the employee's entitlement to annual leave and public holidays.
• Contract duration: State whether the contract is for a fixed term or is indefinite.
• Probationary period: If applicable, define the length of the probation period.
• Place of work: Specify the location where the employee will be based.
• Date of signing: Include the date the contract is signed.

Probation periods

You can include a probation period in your employment contracts to assess a new hire's suitability.

• Unskilled workers: The maximum probation period is one month.
• Skilled and professional workers: You can set a probation period of up to three months.

During this period, either you or the employee can terminate the contract without notice. However, if you end the contract, you must pay the employee's salary for the entire probation period.

Working hours & overtime

The standard workweek in Iran is 44 hours.

Any work beyond these hours is considered overtime. You must get the employee's consent for them to work overtime. The overtime pay rate is 40% above the employee's normal hourly wage.

Public & regional holidays

Iran has a number of national and religious holidays. The dates for religious holidays change each year as they follow the lunar calendar. Some of the main public holidays include:

• Nowruz (Iranian New Year)
• Islamic Republic Day
• Eid al-Fitr
• Eid al-Adha
• Ashura

Hiring contractors in Iran

You can hire independent contractors in Iran for project-based or specialized work. This offers flexibility and can be a cost-effective way to access talent without the long-term commitments of employment.

An independent contractor is self-employed and provides services to your company under a service agreement, not an employment contract. They are not covered by Iranian Labor Law and are responsible for their own taxes and social security contributions.

A major risk in hiring contractors is misclassification. If a contractor is deemed to be an employee in practice, your company could be liable for back taxes, benefits, and other penalties. An Employer of Record (EOR) helps you avoid this risk. An EOR can legally hire employees on your behalf, ensuring compliance with all local labor laws. This means the EOR handles payroll, taxes, benefits, and employment contracts, allowing you to work with talent in Iran without the risk of misclassification.

In Iran, your approach to compensation and payroll needs to be straightforward and compliant. The system has clear rules for how you pay your team, from regular monthly salaries to mandatory annual bonuses. Think of it as a predictable structure that, once you understand it, makes managing payroll much simpler. It’s about ensuring everyone gets what they are owed, on time, every time.

Payroll cycles & wage structure

The payroll cycle in Iran is typically monthly, with salaries paid at the end of the Iranian calendar month. Payments are almost always made through direct bank transfers.

Your wage structure will include a base salary plus several mandatory allowances. These can cover things like housing, transportation, and family dependents. These allowances are a standard part of the total compensation package.

A key feature of Iranian payroll is the annual new year bonus, known as "Eidi". You are required to pay employees the equivalent of two months' basic salary for this bonus.

Overtime & minimums

The standard workweek in Iran is 44 hours. This is often structured as eight hours per day from Saturday to Wednesday, with a half-day on Thursday.

Any work done beyond these 44 hours is considered overtime. You must pay employees a premium of 40% above their normal hourly wage for any overtime hours worked. Make sure you get your employee's consent for any overtime work.

The government's Supreme Labor Council sets the minimum wage each year. This includes the base salary and the mandatory allowances mentioned earlier. This minimum amount is updated to reflect economic conditions.

Employer taxes and contributions

As an employer in Iran, you are responsible for making several contributions on behalf of your employees. These are calculated as a percentage of the employee's gross salary. The primary contributions go to the Social Security Organization (SSO), which funds retirement, healthcare, and unemployment benefits.

Employee taxes and deductions

Employees also contribute to social security and pay income tax. You will withhold these amounts directly from their monthly salary. This is handled through a Pay-As-You-Earn (PAYE) system.

The employee's share of the social security contribution is 7%. Income tax is progressive, meaning the rate increases with income. There is a tax-free amount, and income above that is taxed in brackets.

In Iran, employee benefits and leave are rooted in the country's labor laws. These laws provide a foundation for employee rights and employer responsibilities. Understanding these regulations is key to successfully managing a workforce in Iran. The framework ensures employees have protections and support. For employers, knowing these rules is crucial for compliance and for attracting and keeping talented people.

Statutory leave

Iranian labor law outlines several types of mandatory leave for employees. These provisions ensure that individuals have time off for rest, health, and family needs.

• Annual Leave: You are entitled to 26 working days of paid annual leave. This does not include Fridays, which are considered a day off. If you work in a difficult or hazardous job, your annual leave increases to five weeks. You can carry over up to 9 days of unused leave to the next year.
• Sick Leave: If you are unable to work due to illness, you are entitled to sick leave. To claim this, you need a medical certificate from a doctor approved by the Social Security Organization (SSO). The SSO covers the pay during your sick leave after the first three days.
• Maternity Leave: Female employees receive 9 months of paid maternity leave. The SSO is responsible for paying your salary during this time.
• Paternity Leave: Male employees are entitled to 3 days of paid leave after the birth of a child.
• Pilgrimage Leave: You can take one month of unpaid leave once during your employment to perform the Hajj pilgrimage.
• Marriage and Bereavement Leave: You are entitled to 3 days of paid leave for your marriage or in the event of the death of a spouse, parent, or child.

Public holidays & regional holidays

Iran has a significant number of public holidays, with many based on the Islamic calendar. This means the dates can change each year. If you are required to work on a public holiday, you are entitled to overtime pay.

Typical supplemental benefits

In Iran, benefits are a mix of what the law requires and what companies offer to stay competitive. Understanding the difference is important for both you and your employer.

How an EOR can help with setting up benefits

An Employer of Record (EOR) can simplify the process of managing employee benefits in Iran. Here’s how they can help:

• Ensure Compliance: An EOR stays up-to-date with Iranian labor laws, ensuring that your benefits packages are always compliant. This reduces the risk of legal issues.
• Streamline Administration: They handle all the administrative tasks associated with benefits, from enrollment to managing contributions. This frees you up to focus on your core business activities.
• Offer Competitive Packages: EORs have knowledge of the local market and can help you design benefits packages that attract and retain top talent.
• Simplify Payroll: An EOR manages payroll and ensures that all statutory deductions for benefits are handled correctly and on time.
• Provide Local Expertise: They have a deep understanding of the local culture and employee expectations, which can be invaluable when creating a benefits plan.

In Iran, ending an employment relationship involves specific legal steps. The country's Labor Law protects both you and your employees, so it's important to follow the rules to avoid disagreements and legal problems. The process changes depending on the type of contract and why the termination is happening. You need to give the right amount of notice and pay any money owed according to the law.

Notice periods

How much notice you need to give an employee depends on their contract.

• Indefinite Contracts: For employees without a set end date, you usually need to give them notice. A one-month notice is common, but you should check if your contract or company policies say something different.
• Fixed-Term Contracts: These contracts end on a specific date. You don't usually need to give notice unless you agreed to it in the contract.
• Probationary Period: During a trial period, either you or the employee can end the contract without notice. However, if you end the contract, you have to pay the employee for the full probation period.

Severance pay

When an employee leaves, you need to pay them what they're owed. This includes their final salary, any unused vacation time, and severance pay.

For employees who are let go or retire, you must pay them 30 days of their salary for each year they worked for you. If an employee becomes disabled because of their job, you have to pay them 60 days of salary for every year of service.

How Rivermate handles compliant exits

Rivermate helps you manage employee terminations in Iran correctly. We make sure you follow all the legal steps to avoid problems.

Here is how we help:

• Documentation: We help you gather the right paperwork, like records of warnings if you're firing someone for a specific reason.
• Formal Notice: We help you write a clear termination letter that states the final day of employment.
• Final Payments: We calculate and handle the final payments, including salary, vacation pay, and severance.
• Employment Certificate: We provide the employee with a certificate of employment.
• Labor Council: We prepare you for any discussions with the Labor Council, which might review the termination.

Navigating the visa and work permit process in Iran requires careful planning. To work in Iran as a foreigner, you need an Iranian employer to sponsor you. This sponsor starts the process by applying for your work visa before you arrive in the country. Once you have the visa, you can then apply for a work permit. The work permit is typically issued for one year and can be renewed.

Employment visas & sponsorship realities

An Employer of Record (EOR) can be your legal employer in Iran, taking on the responsibilities of visa sponsorship. This is a practical route if your company doesn't have a legal entity in the country. The EOR manages the entire process, from ensuring your qualifications meet the requirements to handling all the paperwork and applications.

Here's what an EOR typically handles:

• Visa Sponsorship: The EOR acts as your official sponsor, a key requirement for obtaining a work visa in Iran.
• Compliance: They ensure your employment meets all of Iran's labor and immigration laws.
• Documentation: An EOR will manage the collection and submission of all necessary documents for your work permit application.

To get a work permit, you generally need:

• A job offer from an Iranian employer.
• Skills and qualifications that are not readily available in the local Iranian workforce.
• A clean criminal record.

Business travel compliance (short-term visits)

For short-term business trips, you will need a business visa. This visa is for activities like meetings, negotiations, or attending conferences. It is not a permit to work in Iran.

To get a business visa, you will typically need:

• A valid passport with at least six months of validity remaining.
• A letter of invitation from a registered Iranian company.
• A completed and signed visa application form.
• Proof of accommodation and confirmed flight bookings.

The duration of a business visa is usually 14 days for a single entry. It's important to note that you can conduct business in certain free trade zones, like Kish Island, without a business visa for up to 14 days. The application process for a business visa requires a reference number, which your Iranian business partner must obtain from the Iranian Ministry of Foreign Affairs. Without this reference number, you cannot apply for a business visa.