An employment contract can lead to a lot of disputes between the parties. This information is vital for both employees and employers. These agreements will safeguard your position; hence, here is a brief overview of the issues that need to be included in the contract.
The comprehensive Labour Law covers all labour relations and employment contracts in Iran, including hiring local and foreign staff. The Labor Law provides an extensive and inclusive definition of the individuals it covers, and written, oral, temporary and indefinite employment contracts are recognised. It is challenging to lay off any Iranian employee, including staff, since Iran’s labour law is very employee-friendly.
Employing personnel on consecutive six-month contracts is illegal since dismissing staff without proof of a severe offence. Labour disputes are settled by a special labour council, which usually rules in favour of the employee. The Labor Law specifies the minimum standards that an employer must adhere to when forming an employment relationship. To have a valid contract concluded under the labour law of Iran, the following conditions must be included:
- Type of work, vocation or duty that the worker must undertake;
- Basic compensation and supplements to it;
- Working hours, holidays and leaves;
- Place of performance of duties;
- Probationary period, if any;
- Date of conclusion of the contract;
- Duration of employment; and
- Any other terms and conditions required according to the nature of employment.
The employer may require the employee to be subject to a probationary period. An unskilled worker might only serve a probationary period of one month, while a skilled or professional worker might serve a three-month probationary period. During the probation period, either party may immediately terminate the employment relationship without cause or payment of severance pay. The only caveat is that if the employer releases the relationship, they must pay the employee for the entire duration of the probation period.
Suspension of Employment Contract
An employee under certain conditions can suspend the employment contract presents yet another challenge to employers. The following conditions are necessary to break the employment contract:
- For the period of military service (active, contingency and reserve) and voluntary enlistment during conflicts. This period shall be considered part of the employee’s service record at the place of employment;
- The closure of a workshop;
- Educational leave for up to four years; and
- The period of detention that does not lead to conviction;
Once the conditions giving rise to the suspension of the contract are removed, the employer must allow for the employee’s return to work. If the position is filled or eliminated, the employer is obligated to provide a similar role for the employee. Failure to do the above is considered wrongful discharge and subject to legal action.
Termination of Employment Contract
Employment contracts can only be terminated in the following circumstances:
- Death of employee;
- Retirement of the employee;
- Total disability of employee;
- Expiration of the duration of the employment contract;
- Conclusion of work in task-specific contracts; and
- Resignation of the employee.
The employer is bound to pay benefits under all of the above scenarios according to the employee’s years of service.
Dismissal of an Employee
An employee may only be dismissed upon the approval of the Islamic Labor Council or the Labor Discretionary Board. Grounds for dismissal include an employee’s neglect to carry out their duties or violate the employer’s disciplinary by-laws. The employer must have provided written prior notice of the employee’s violations. If the board is not convinced that the employee’s dismissal is justified, the employer must reinstate the employee. Once an employee is dismissed, the employer is obligated to provide the legal severance package.
Severance & Termination Benefits
The Law mandates the following compensation for suspended, terminated and disabled employee:
- Suspended Employee – Where an employee is suspended without cause, the employer must reinstate the employee and pay for all damages and compensation resulted from the wrongful suspension;
- Terminated Employee – An employer is under a legal obligation to provide thirty (30) days salary for every year of service for employees made redundant or retired;
- Disabled Employee – The employer must pay 30 days salary for every year of service. Moreover, if the disability of an employee is due to working conditions, the employer must pay 60 days salary for every year of the employee’s service period.
Working Hours & Overtime
The workweek in Iran is based on a forty-four hour week. The typical work week consists of working from Saturday to Wednesday (8 hours a day) and half a day on Thursday (4 hours). Any hours worked beyond these will entitle the employee to overtime. According to the law, overtime pay must be paid at 40% above the hourly wage. In addition, the employee must consent to overtime work.
Holidays & Leave
Employees are entitled to leave on all official state holidays (approximately 22 days a year) and Fridays. Any employee working during these holidays will be entitled to overtime pay. Additionally, employees are entitled to a one-month holiday per annum. The annual leave for those employees engaged in complex and hazardous employment shall be five weeks per annum. Employees are entitled to save up to 9 days of their annual leave. In case of termination, disability or redundancies, employees must be compensated for any accrued leave.
Finally, employees are entitled to 3 days of paid vacation for marriage or death of a spouse, father, mother or child.
Female employees are entitled to 90 days of maternity leave. The employee’s salary during maternity leave will be paid according to the provisions of the Social Security Act. Maternity leave must be considered part of an employee’s service record. The employer must offer the same position to returning employees.
What about the Employment Contract for Foreign Nationals?
Employment contracts for foreigners without a valid work permit is prohibited by law. The requirement does not apply to diplomats, United Nations employees, or foreign press reporters.
A work permit to a foreign national will be issued if the following conditions are met:
- Lack of expertise among Iranian nationals;
- The foreign national being qualified for the position;
- The expertise of the foreign national will be used for training of, and later replacement by, Iranian individuals.
Work permits will be issued, renewed or extended for a maximum period of one year. Moreover, no exit permission will be granted to the foreign national unless the nation has paid all due taxes, duties, etc.
What can be concluded?
As mentioned earlier, employment contracts legally set out the primary working frameworks and establish the working relationship between the parties. A well-drafted agreement can avoid other risks and problems for both employers and employees. So one should keep in mind that drafting the provisions and clauses of such contracts needs trained legal specialist’s opinions.