Iran Employment Contract: Everything You Should Know

employment law of Iran

An employment contract can lead to a lot of disputes between the parties. This information is vital for both parties, 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 Labor Law covers all labor 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 recognized. It is challenging to lay off any Iranian employee, including staff, since Iran’s labor law is very employee-friendly.

If you’re interested in employment and labor law in other countries, feel free to visit the articles below:

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Hiring Employees

Employing personnel on consecutive six-month contracts is illegal since dismissing staff without proof of a severe offense. Labor disputes are settled by a special labor council, which usually rules in favor of the employee. The Labor Law specifies the minimum standards that an employer under section 10 must adhere to when forming an employment relationship. To have a valid contract concluded under the labor law of Iran, the following conditions must be included:

  1. Type of work, vocation or duty that the worker must undertake;
  2. Basic compensation and supplements to it;
  3. Working hours, holidays and leaves;
  4. Place of performance of duties;
  5. Probationary period, if any;
  6. Date of conclusion of the contract;
  7. Duration of employment; and
  8. 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.

Most Common Clause in an Employment Contract

Terms and clauses that include in an employment contract depends on the type of the work that employee is being hired to, but the common clauses that usually is being used, are:

  1. Type of the work or profession of the employee
  2. The governing labor law and the payment method
  3. Insurance
  4. Trial Period Conditions
  5. Working hours and vacations
  6. Parties Obligations
  7. Contracts Starting Date
  8. The Place of Employment
  9. Contract Duration
  10. Determination

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:

  1. 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;
  2. The closure of a workshop;
  3. Educational leave for up to four years;
  4. 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:

  1. Death of employee;
  2. Retirement of the employee;
  3. Total disability of employee;
  4. Expiration of the duration of the employment contract;
  5. Conclusion of work in task-specific contracts; and
  6. 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 employees:

  1. 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;
  2. Terminated Employee – An employer is under a legal obligation to provide 30 days salary for every year of service for employees made redundant or retired;
  3. 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.
employment contract

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 the marriage or death of a spouse, father, mother, or child.

Keep in mind that under section 67 of Iranian Labor code, it is stated about paid leaves:
Every worker shall be entitled to take one full month of his paid leave or one month of unpaid leave once during his working life in order to perform the pilgrimage to Mecca.

Sec. 67, Iranian Labor Code

Kinds of Paid Leaves in Iranian Labor Code

As mentioned above, the conditions of the paid leaves in declared in section 67 of Iranian Labor Code, but to be more specific, the tips on paid leaves according to Iranian Labor Code are:

  1. Section 62 which states:
    Friday shall be the workers’ day of weekly rest with pay.
  2. Section 63:
    In addition to the official holidays observed in the Islamic Republic of Iran, Labour Day (1st May) shall be considered an official holiday for workers.
  3. Section 69:
    The date on which leave is taken shall be fixed by agreement between each worker and his employer. In the event of disagreement between a worker and his employer, the matter shall be referred to the Office of Labour and Social Affairs for final decision.
  4. Section 71:
    In the event of the cancellation or termination of a worker’s employment contract or the retirement or total disability of a worker or the cessation of the operations of the workplace, the worker’s leave entitlement shall be paid to him or in the event of his death, to his heirs.

And if you want to study more about holidays and leaves of an employee in Iran, you could read more in Division III of the earlier mentioned code.

Maternity Leave

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.

Employment contract in Iran for Foreign Nationals

Employment contracts for foreigners without a valid work permit are 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:

  1. Lack of expertise among Iranian nationals;
  2. The foreign national being qualified for the position;
  3. 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 specialists’ opinions.

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