Employer of Record in Iraq

An Employer of Record (EOR) in Iraq legally hires employees on your behalf. This allows you to build a team in Iraq without setting up a local legal entity. The EOR handles all the legal and administrative tasks of employment. They manage payroll, taxes, benefits, and ensure you comply with Iraqi labor laws. You maintain control over your employee's daily work, while the EOR takes care of the HR responsibilities. For companies looking to hire in Iraq, an EOR like Rivermate simplifies the process.

How an Employer of Record (EOR) Works in Iraq

An EOR simplifies your expansion into Iraq. The process is straightforward. Here is how it works:

• You Find the Talent: You identify the candidate you want to hire in Iraq.
• The EOR Hires Them: The EOR legally employs the worker on your behalf under a compliant local employment contract.
• Onboarding: The EOR manages the onboarding process. This includes any necessary registrations with local authorities.
• Payroll and Benefits: The EOR processes payroll, withholds taxes, and manages social security contributions as required by Iraqi law.
• Compliance: The EOR ensures all parts of the employment relationship follow the Iraqi Labor Law.

Why use an Employer of Record in Iraq

Using an EOR in Iraq is a practical solution for companies that want to hire talent without the burden of establishing a legal entity in the country. An EOR provides a fast and simple way to bring on talent without the cost and complexity of setting up a local company.

Here are some key benefits:

• Ensures Compliance: An EOR makes sure your employment contracts and benefits packages meet all of Iraq's labor laws. This includes everything from working hours to leave entitlements. The primary law governing employment is the Iraqi Labor Law No. 37 of 2015.
• Manages Administration: An EOR handles the paperwork and administration for mandatory benefits like social security. In Iraq, employers contribute about 12% in payroll taxes for social security and other benefits.
• Reduces Risk: Misclassifying an employee as an independent contractor can lead to fines and back taxes. An EOR mitigates this risk by correctly classifying employees and managing all HR functions.
• Saves Time and Money: Setting up a legal entity in a new country is a long and expensive process. An EOR allows you to bypass this, saving you significant time and resources.
• Handles Work Permits: If you are hiring foreign employees, an EOR provider can obtain the necessary work permits for them.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Iraq 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 Iraq.

Hiring in Iraq presents a unique landscape of opportunities and challenges. The country is rebuilding and diversifying its economy, with key sectors in oil and gas, construction, and telecommunications. A young and growing workforce is ready to be tapped into. However, navigating the local labor laws and cultural nuances is key to your success. Understanding the legal framework is not just about compliance; it's about building a strong and sustainable local team.

Employment contracts & must-have clauses

In Iraq, you should formalize your employment relationship with a contract. While oral agreements can be recognized, a written contract is the standard and provides clarity for both you and your employee. Contracts can be for a fixed term, typically not exceeding one year, or for an indefinite period.

Your employment contracts must be in Arabic, though in the Kurdistan region, they can be in Kurdish.

Here are the essential clauses to include:

• Parties' Information: Full names and addresses of both the employer and employee.
• Job Details: A clear description of the role, duties, and responsibilities.
• Start Date: The official commencement date of employment.
• Contract Duration: State whether it's a fixed-term or indefinite contract.
• Compensation: Detail the salary and any other remuneration.
• Working Hours: Specify the expected working hours.

Probation periods

You can include a probationary period in your employment contracts. This gives you time to assess a new hire's suitability for the role.

• The maximum duration for a probation period is typically three months.
• An employee cannot be subject to more than one probation period with the same employer.
• During this period, either you or the employee can terminate the contract with a shorter notice period, usually seven days.

Working hours & overtime

The standard workweek in Iraq is 48 hours, spread over six days. This usually means an eight-hour workday from Sunday to Thursday.

Here's a breakdown of working hours and overtime:

Public & regional holidays

Your employees are entitled to paid leave on public holidays. Iraq observes a mix of national and religious holidays. Some of the main public holidays include:

• New Year's Day
• Army Day
• Eid al-Fitr
• Republic Day
• Eid al-Adha
• Islamic New Year
• Ashura
• Prophet's Birthday
• National Day

Keep in mind that some holidays are based on the lunar calendar, so their dates change each year. There are also regional holidays observed in areas like Kurdistan.

Hiring contractors in Iraq

Engaging independent contractors can be a flexible way to access specialized skills without the commitments of full-time employment. Contractors are not typically covered by the same labor laws as employees, meaning they are not entitled to benefits like paid leave or severance pay. Their work relationship is governed by the terms of their service agreement.

However, it's crucial to classify your workers correctly. Misclassifying an employee as an independent contractor can lead to significant legal and financial risks, including fines and back taxes. The nature of the working relationship, not just the contract's title, determines a worker's status.

An Employer of Record (EOR) can help you mitigate this risk. An EOR acts as the legal employer for your workers in Iraq, ensuring compliance with local labor laws. This includes correctly classifying employees and managing all payroll and HR functions. Using an EOR allows you to hire in Iraq without setting up a local entity, simplifying the process and reducing your compliance burden.

In Iraq, your approach to compensation and payroll needs to be straightforward and compliant with local laws. The system has its own set of rules for pay cycles, taxes, and contributions that you need to follow. Salaries can vary widely based on the industry, location, and a worker's experience. For example, professionals in the oil and gas sector may earn significantly more than those in other industries.

Payroll cycles & wage structure

In Iraq, you pay your employees monthly. This is the standard payroll cycle. Payments are usually made near the end of the month. You can pay your employees through a bank transfer or in cash, although bank transfers are becoming more common, especially for larger companies.

Your wage structure should account for various allowances. It is common to offer allowances for transportation and housing. These are often expected by employees and are a key part of a competitive compensation package.

Overtime & minimums

The standard work week in Iraq is 48 hours, with a daily limit of eight hours over six days. Any work done beyond these hours is overtime. You must pay employees 150% of their regular wage for any overtime hours worked.

Iraq has a national minimum wage, which is 350,000 Iraqi Dinars (IQD) per month. However, in the Kurdistan Region of Iraq, the minimum wage is different. It's important to note that market rates for many jobs are much higher than the minimum wage.

Employer taxes and contributions

As an employer in Iraq, you are responsible for making social security contributions for your employees. These contributions fund the pension system.

Employee taxes and deductions

Your employees also contribute to social security from their salaries. In addition to this, they pay a progressive income tax. The tax rate depends on how much they earn annually.

In Iraq, your employee benefits package and leave policies are a mix of legal requirements and cultural expectations. The law sets the minimum standards for things like annual vacation and sick days. Many companies, especially in competitive industries like oil and gas, offer more than the basics to attract and keep good people. Think of the legal requirements as your starting point.

Statutory leave

Here are the legally required leave benefits you must provide in Iraq.

• Annual Leave: Your employees get at least 20 paid vacation days each year after their first year of work. This amount increases by two days for every five years they work for you. If the job is hazardous, the employee is entitled to 30 days of annual leave.
• Sick Leave: You must provide 30 days of paid sick leave per year. Employees can carry over unused sick days, up to a maximum of 180 days.
• Maternity Leave: Female employees receive 14 weeks of fully paid maternity leave. This can be extended up to nine months for difficult births or other medical complications.
• Pilgrimage Leave: Employees have the right to take unpaid leave for a religious pilgrimage once during their employment.

Public holidays & regional holidays

Your team in Iraq is entitled to paid time off for the following national holidays. Some holidays are based on the lunar calendar, so dates may vary slightly.

Typical supplemental benefits

To be a competitive employer, you should consider offering more than the legally required benefits. Here’s a look at what's legally required versus what's commonly offered as an extra perk.

How an EOR can help with setting up benefits

Setting up and managing employee benefits in a new country can be complicated. An Employer of Record (EOR) simplifies this for you.

An EOR acts as the legal employer for your team in Iraq. This means they handle all the HR tasks required by law.

Here’s how an EOR helps:

• Ensures Compliance: An EOR makes sure your employment contracts and benefits packages meet all of Iraq's labor laws. This includes everything from working hours to leave entitlements.
• Manages Administration: They take care of the paperwork and administration for mandatory benefits like social security.
• Provides Competitive Packages: An EOR can give you access to attractive benefits packages, like private health insurance, that might be difficult to secure on your own. This helps you compete for top talent.
• Handles Payroll: The EOR manages payroll and ensures your employees are paid correctly and on time, with the right deductions for taxes and social security.

Using an EOR allows you to hire in Iraq quickly and correctly without needing to set up your own legal entity in the country.

Letting an employee go in Iraq requires careful planning. You need to follow specific rules to stay compliant with the country's labor laws. The process involves set notice periods, severance pay calculations, and clear grounds for dismissal. Getting any of these steps wrong can lead to disputes and legal issues. It is important to understand these regulations to manage your workforce changes correctly and ethically.

Notice periods

When you terminate an employment contract in Iraq, you must provide a written notice period. The law requires a minimum of 30 days' notice. If you don't provide notice, you will have to pay the employee 30 days' compensation. During the notice period, the employment relationship continues, and the employee receives their regular pay and benefits.

For employees on probation, the notice period is shorter. You can terminate the contract with at least 7 days' notice if the employee is not performing well.

Severance pay

Employees in Iraq are generally entitled to severance pay when their contract is terminated. The standard severance payment is two weeks' salary for each year of service. In cases of unjustified termination, you may be required to pay one month's salary.

However, there are situations where you do not have to pay severance. These include:

• If the employee is imprisoned for more than a year.
• If the employee commits a serious violation of the contract.
• If the employee is found to be unqualified for the job during the probationary period.

How Rivermate handles compliant exits

Navigating employee exits in a different country can be complex. We make sure the process is smooth and compliant. Here’s how we handle it:

• Legal Expertise: We stay up-to-date with Iraqi labor laws, so you don't have to. We ensure every termination follows the correct legal procedures.
• Clear Communication: We provide clear, written notices of termination to employees, stating the reason and effective date.
• Accurate Calculations: We calculate notice periods and severance pay based on the employee's length of service and local regulations.
• Documentation: We handle all the necessary paperwork, ensuring a complete and compliant offboarding process.

We manage the details so you can focus on your business. We help you handle terminations lawfully and ethically, protecting your company's reputation.

Getting the right visas and work permits for Iraq can seem complex. You need to follow a specific process to legally work in the country. A work visa allows you to enter Iraq for a job, while a work permit lets you legally perform that job once you are there. Think of the visa as the key to the front door and the permit as the permission to work inside the house. Your employer handles much of this process, starting with getting approval from the Ministry of Labor and Social Affairs. Once you arrive, you have a short window to finalize your work permit.

Employment visas & sponsorship realities

An Employer of Record (EOR) can simplify hiring in Iraq, but there are limits. An EOR can typically sponsor work permits for skilled professionals, but it depends on the specific role and local regulations.

Here is what you need to know:

• Sponsorship is key. You must have a locally licensed Iraqi entity to sponsor your work permit. An EOR provides this sponsorship.
• Approval comes first. The employer must get approval from the Ministry of Labor and Social Affairs before you can even apply for a visa.
• It's a two-step process. First, you get a work visa from an Iraqi embassy in your home country to enter Iraq. Then, after you arrive, your employer has seven days to secure your official work permit.

The most practical route for employment involves your employer, or their EOR partner, managing the application process. They will guide you through collecting the necessary documents and ensure everything is submitted correctly.

Required Documents for a Work Permit:

Business travel compliance

If you are visiting Iraq for short-term business, like meetings or technical consultations, the rules are different. You do not always need a full work permit for very short trips.

For visits under 30 days for specific expert tasks, you may be exempt from needing a work permit. However, you still need the correct entry visa. It is crucial to check the exact requirements for your nationality and the purpose of your visit before you travel. Always confirm with the nearest Iraqi embassy or consulate to ensure you have the right documents for your trip. This avoids any legal issues when you arrive.