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Termination and Severance Policies

Learn about the legal processes for employee termination and severance in Iran

Notice period

In Iran, the Labour Law of the Islamic Republic of Iran stipulates specific notice period requirements for employees during voluntary resignation, while employers have more flexibility depending on the situation.

Notice Period for Employees

According to the Labour Law, employees are required to provide a written notice to their employer if they intend to resign. The mandatory notice period for resigning employees is one month. During this period, the employee must continue working after submitting the written resignation notice.

It's important to note that there's no legal requirement for employers to provide a notice period in cases of employee termination. However, the Labour Law does outline situations where specific payments may be applicable.


There might be exceptions to the one-month notice period for employee resignation stipulated in individual employment contracts. However, these contractual terms cannot reduce the employee's notice period below the legal minimum.

Importance of Following Notice Periods

Adhering to the legal notice period requirements ensures a smooth handover of duties and minimizes disruption for both the employer and the employee. It also allows for proper fulfillment of contractual obligations.

Severance pay

Iranian labor law provides severance pay to employees under certain circumstances upon termination of employment. The Labour Law of the Islamic Republic of Iran is the primary legal source governing this.

Eligibility for Severance Pay

Employees in Iran are entitled to severance pay under the following conditions:

  • Termination by Employer: If the employer initiates the termination without a valid reason.
  • Completion of Fixed-Term Contract: Upon completion of a fixed-term contract, unless the contract is renewed.
  • Retirement: Employees are entitled to severance pay upon reaching retirement age.
  • Important Note: Employers are not obligated to provide severance pay in cases of employee resignation or termination due to employee misconduct.

Calculation of Severance Pay

The amount of severance pay an employee receives is determined by their length of service and their last salary.

  • Standard Severance: The Labour Law dictates a minimum severance pay of one month's salary for each year of service for employees laid off due to redundancy or retirement.
  • Disability: In cases of employee disability, the severance pay may be increased. If the disability is work-related, the employee is entitled to 60 days' salary for each year of service. Otherwise, the standard severance rate applies.

Important Considerations

Individual employment contracts may specify different severance pay terms, provided they are more favorable to the employee than the minimums mandated by law.

Termination process

Terminating an employee in Iran involves following specific procedures outlined by the Labour Law of the Islamic Republic of Iran. This law emphasizes employee protection and requires approval from a designated authority for termination in many cases.

General Termination Process

  1. Justification for Termination (if applicable): If the employer initiates the termination, a valid reason must be documented according to the Labour Law. Common justifications include redundancy, employee misconduct, or completion of a fixed-term contract.

  2. Approval from Islamic Labor Council or Labor Discretionary Board: In most cases of employer-initiated termination, approval from the Islamic Labor Council or the Labor Discretionary Board is mandatory. These government bodies assess the legitimacy of the termination reasons.

  3. Dispute Resolution: If the employee disputes the termination, they can file a complaint with the Labor Court.

  4. Final Settlement: Once the termination process is complete, all outstanding wages and benefits must be settled with the employee.

Important Considerations

  • Employment contracts may contain additional clauses regarding termination, provided they comply with, or offer benefits exceeding, the Labour Law.
  • The termination process can be complex, and seeking guidance from a qualified Iranian labor lawyer is advisable, especially for employers, to ensure compliance and navigate specific situations.
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