Employer of Record in Iraq

Expanding your team into Iraq requires careful navigation of the country's employment regulations and local compliance requirements. Businesses looking to tap into Iraq's talent pool need a clear strategy to ensure legal and operational adherence from the outset. Understanding the available hiring mechanisms is the first step towards successfully onboarding employees in this dynamic market.

Companies typically have a few pathways when considering hiring in Iraq for 2025:

• Establishing a local entity: This involves incorporating a legal presence in Iraq, which can be a time-consuming and resource-intensive process, requiring significant investment in legal, financial, and administrative setup.
• Utilizing an Employer of Record (EOR): Partnering with an EOR like Rivermate allows companies to hire employees in Iraq without needing to establish their own local entity, effectively outsourcing the complexities of local employment.
• Hiring independent contractors: While offering flexibility, this option requires careful consideration to avoid misclassification risks, as local labor laws in Iraq differentiate significantly between employees and contractors.

How an EOR Works in Iraq

An Employer of Record (EOR) acts as the legal employer for your workforce in Iraq, handling all local compliance while you retain full control over day-to-day management and assignments. This partnership streamlines global expansion by mitigating risks and administrative burdens. In Iraq, an EOR typically takes care of:

• Legal employment compliance: Ensuring all employment contracts, policies, and practices adhere to Iraqi labor laws.
• Payroll processing and tax filings: Managing local payroll, withholding, and remitting all necessary income taxes, social security contributions, and other mandatory levies in Iraq.
• Benefits administration: Providing compliant benefits packages, including health insurance, leave entitlements, and other statutory requirements as per Iraqi regulations.
• HR administration: Handling onboarding, offboarding, and other HR-related documentation and processes in accordance with local standards.
• Visa and work permit sponsorship: Assisting with the necessary permits and visas for foreign employees where applicable.

Benefits of Using an EOR in Iraq

For businesses aiming to hire in Iraq without the commitment and complexity of establishing a local entity, an EOR offers several strategic advantages:

• Rapid market entry: Expedite your hiring process and onboard employees in Iraq quickly, bypassing lengthy entity registration procedures.
• Reduced compliance risk: Mitigate the risks associated with navigating complex and evolving Iraqi labor laws, tax regulations, and social security obligations.
• Cost efficiency: Avoid the significant upfront costs and ongoing expenses of setting up and maintaining a legal entity in Iraq.
• Focus on core business: Free up internal resources from administrative and compliance tasks, allowing your team to concentrate on strategic growth and employee management.
• Access to talent: Recruit top talent across Iraq without geographic or legal limitations, ensuring your team is diverse and skilled.

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.

Employers in Iraq must contribute to social security, payroll taxes, and withhold income tax from employees' salaries. Social security contributions are based on a percentage of gross wages, funding benefits like pensions and healthcare. Employers are also responsible for deducting income tax according to progressive rates, with brackets as follows:

Employees can claim deductions such as pension contributions and medical expenses, which reduce taxable income. Employers must submit monthly reports on withheld taxes and social security contributions and file annual returns, adhering to deadlines set by tax authorities to avoid penalties.

Foreign workers and companies face additional regulations, including residency-based taxation, double taxation treaties, and corporate income tax obligations. Residency status influences whether income is taxed domestically or worldwide, and foreign companies may be taxed on profits generated within Iraq.

Iraq's salary landscape is heavily influenced by its oil-dependent economy, with salaries varying significantly across industries and roles. The oil and gas sector offers the highest monthly wages, ranging from $2,000 to $5,000 for engineers, while roles like drivers earn between $400 and $800. Major cities like Baghdad tend to have higher pay levels than rural areas. The minimum wage as of 2025 is set at 400,000 IQD (approximately $300 USD) per month, enforced by Iraqi labor laws, with employers required to comply and ensure fair compensation.

Compensation packages often include bonuses and allowances such as Ramadan and Eid bonuses, housing, transportation, food allowances, hazard pay, and performance bonuses, with their prevalence depending on industry and company size. Salaries are typically paid monthly via bank transfers, with cash and cheque options available. Salary trends are affected by oil prices, economic growth, inflation, and government policies, with gradual increases expected through 2025 amidst economic and political uncertainties.

In Iraq, labor law mandates paid annual leave based on years of service: 18 days for employees with less than five years, and 30 days for those with over five years. Employees are generally eligible after completing one year of continuous employment. Public holidays, including New Year’s, Army Day, Eid festivals, Labor Day, and others, provide additional paid time off, with some dates varying annually based on the Islamic calendar.

Employees are entitled to up to 30 days of paid sick leave annually, with full pay for the first 15 days and approximately 75% for the remaining days, contingent on medical certification. Maternity leave spans 14 weeks with full pay, while paternity leave typically offers 3 days of paid leave. Adoption leave policies are encouraged but vary by employer. Other leave types include bereavement, study, religious, and occasionally sabbatical leave, often unpaid and at employer discretion.

Iraq's employee benefits are governed by legal mandates and market expectations. Employers must provide mandatory benefits such as social security contributions, paid leave (including public holidays), sick leave, maternity leave, and end-of-service gratuity. These ensure legal compliance and support employee welfare, with the social security system covering retirement, disability, and survivor benefits.

In addition to mandatory benefits, many companies offer optional perks like private health insurance, life insurance, transportation and meal allowances, training programs, performance bonuses, company cars, and education assistance to attract and retain talent. Health insurance is particularly valued due to variable public healthcare quality, and supplementary pension plans are common among larger firms to enhance retirement savings.

Benefit package offerings vary by industry, company size, and employee level. Larger firms tend to provide more comprehensive benefits, including health insurance and pension plans, especially for senior roles. The following table summarizes typical benefit provisions:

Employment agreements in Iraq are essential for establishing clear legal employment relationships, with written contracts preferred for clarity and protection. These contracts must comply with Iraqi Labor Law No. 37 of 2015 and typically include key clauses such as parties involved, job description, start date, working hours (up to 8 hours/day and 48 hours/week), compensation, work location, termination conditions, and applicable law. While verbal agreements may be recognized, written contracts are strongly recommended.

There are two main types of contracts: fixed-term, which specify a start and end date and may be renewed, and indefinite-term, which continue until legally terminated, offering greater job security. Probation periods are limited to three months, during which employment can be terminated without notice or severance. Confidentiality and non-compete clauses are common but enforceability depends on reasonableness and scope. Contract modifications require mutual written agreement, and termination procedures depend on the contract type, with employees entitled to notice and severance pay if applicable.

Employers must adhere to legal notice periods and severance requirements for lawful termination, with modifications requiring mutual written consent.

Remote work in Iraq is gradually expanding, driven by the need for business continuity and access to broader talent pools. While Iraq's labor law does not explicitly regulate remote work, employers must ensure remote employees receive fair wages, reasonable hours, and a safe environment, with employment contracts clearly outlining expectations. Key legal considerations include equal treatment, social security benefits, and adherence to termination rules.

Flexible arrangements such as full-time remote work, hybrid models, flextime, and compressed workweeks are increasingly adopted, requiring clear policies, management training, and suitable technology. Data security and privacy are critical, necessitating strong cybersecurity measures, encryption, and compliance with local data laws. Employers should also establish equipment and expense reimbursement policies, covering devices, internet costs, and other expenses, supported by transparent procedures.

A robust technological infrastructure is essential, including reliable internet, communication tools, security software, and VPNs to ensure connectivity and data protection. Implementing these strategies enables Iraqi companies to foster productive remote work environments, enhancing employee satisfaction and business growth.

In Iraq, employment termination must comply with labor laws detailing notice periods, severance pay, and grounds for dismissal. Notice periods vary by employee category and tenure, with monthly employees requiring 30 to 90 days and daily/weekly workers 15 days. Severance pay is mandatory for dismissals without cause, calculated at one month’s salary per year of service, pro-rated for partial years.

Key grounds for termination include misconduct, breach of contract, redundancy, restructuring, or company closure. Employers must follow procedural steps such as issuing written notices, adhering to notice periods, settling dues, providing a service certificate, and maintaining documentation. Employees are protected against wrongful dismissal, with rights to challenge unjust terminations, seek compensation, or reinstatement through labor courts.

The work environment in Iraq is shifting towards freelancing and independent contracting, driven by the need for specialized skills and project-based flexibility. For businesses, this means access to a diverse talent pool without long-term commitments, but it also necessitates careful adherence to local labor laws to avoid misclassification penalties. Key distinctions between employees and independent contractors include control over work, integration into business operations, financial dependency, provision of tools, relationship duration, and payment methods. Misclassification can lead to liabilities such as back wages and penalties.

Contracts with independent contractors in Iraq should clearly define the scope of work, deliverables, payment terms, and relationship nature to prevent misclassification. Intellectual property rights must be explicitly assigned to the engaging entity through contract clauses. Independent contractors handle their own tax obligations, including income tax and social security, and may need to secure professional liability insurance depending on their services. Common sectors employing independent contractors include oil and gas, construction, telecommunications, technology, media, consulting, education, and healthcare, reflecting a growing demand for flexible and specialized talent.

Foreign nationals wishing to work in Iraq must secure appropriate visas and work permits, with the process requiring employer sponsorship and adherence to specific documentation and approval procedures. The main visa types include Entry, Work, Business, and Investment visas, each serving different purposes and durations. For employment, a Work Visa (valid for 1-2 years) is mandatory, and obtaining a work permit involves submitting documents such as passport copies, educational certificates, medical reports, security clearance, and a labor contract, with processing times typically ranging from 2 to 4 months.

Employers are responsible for sponsoring and renewing work permits, ensuring employee compliance, and reporting changes to authorities. Employees must maintain valid documentation, adhere to work restrictions, and comply with Iraqi laws to avoid penalties like fines or deportation. Pathways to permanent residency exist for long-term workers, investors, spouses of Iraqi citizens, or individuals with exceptional skills, involving additional applications and supporting documents.