Hire Employees in Iraq

Two routes exist. Registering an Iraqi entity gives you direct employment and permit sponsorship, but takes three to six months across company registration, tax registration and social security enrolment.

An Employer of Record compresses that to two to four weeks. Provider fees carry a frontier-market premium here, commonly quoted between USD 300 and USD 1,000 per employee per month on top of salary and contributions.

Iraq operates two administrative regimes. Federal Iraq and the semi-autonomous Kurdistan Region have separate practical compliance pathways: contracts in Kurdistan may be in Kurdish, some registration processes differ, and the minimum wage is higher. The social security rate is the same in both. Confirm which your provider actually covers.

Pension and Social Security Law No. 18 of 2023 replaced the 1971 regime, published in the Official Gazette on 28 August 2023 and in force ninety days later. It raised contribution rates, extended coverage toward informal and self-employed workers, and introduced registration fees for foreign nationals where none existed before.

Article 3 expressly extends the law to Iraqi workers employed by diplomatic missions, organisations and companies operating in Iraq, so international NGOs and embassies sit inside the regime rather than outside it — a point that has caught a number of organisations out.

Break-even rule of thumb: EOR fees begin to exceed the running cost of an Iraqi entity somewhere between 15 and 25 employees, though the frontier premium on provider fees and the slowness of registration both push in different directions. Model both — see EOR vs Entity.

The employer rate turns on the employee’s nationality, which is unusual. Outside oil and gas the base split is 12% employer and 5% employee. Law No. 18 added a further 8%, taking the combined rate to 25% — but the government funds that 8% for Iraqi nationals, while the employer funds it for foreign nationals.

So the same role outside oil and gas costs 12% for an Iraqi employee and 20% for an expatriate. In oil and gas, and for employers categorised as prime, the rate is 25% throughout with the employee still at 5%, and the additional 8% does not apply.

The contribution base is disputed and the difference is large. Law No. 18 redefines the base as basic salary, whether paid in cash or in kind, plus all allowances. Yet PwC and other advisers describe contributions as calculated after deducting allowances, with one specifying a flat 30% of base salary. A 30% swing in the base is material — confirm the applicable treatment before running payroll.

Floors and ceilings apply. Article 15.1 sets the minimum contributory salary at no less than the minimum wage, and the maximum at five times it — IQD 1,750,000 a month. Advisers note continuing ambiguity in how these interact, pending further clarification.

A one-time registration fee applies to every foreign national. IQD 2,000,000 per non-Iraqi employee, reduced to IQD 750,000 for those already registered as of 1 December 2023. There was no such fee before.

Gross monthly salaries in Iraqi dinars. The contribution base is capped at five times the minimum wage, so employer cost is flat in absolute terms above IQD 1,750,000 a month.

Benchmarks below are gross monthly salaries in Iraqi dinars. Employer cost depends on the employee’s nationality and your sector, and the contribution base is capped at five times the minimum wage.

Payroll is monthly. Salary tax is withheld at progressive rates rising to 15% and remitted to the General Commission for Taxes within fifteen days of month end, alongside social security to the Pension and Social Security Department.

Wage payment timing is regulated. Employees hired by the day or week must be paid weekly and others monthly, and the maximum permitted delay in paying wages is five days.

Expatriate contributions are legally due but practically uncertain. The obligation applies to expatriates as well as Iraqi nationals, yet advisers report that the labour ministry has at times refused to accept contributions for foreign nationals. Foreign employers generally register expatriates even where actively paying may not be possible. Document your attempts either way.

Iraq has no bilateral social security treaties. Contributions may therefore fall due both in Iraq and in an expatriate’s home country where that country operates an extra-territorial system.

Salary tax is progressive with rates rising to 15%, administered by the General Commission for Taxes. Confirm current bands and allowances before configuring payroll.

Labour Law No. 37 of 2015 is the primary statute, applying to all workers in Iraq with limited exceptions. The minimum employment age is 15.

The federal minimum wage is IQD 350,000 a month, effective since 1 January 2018 and not formally amended at federal level since. The Kurdistan Regional Government set a separate minimum of IQD 450,000 a month from August 2025, with IQD 15,000 a day for daily workers, applying to KRG-administered tenders and private sector employment in the Region.

Standard hours are eight a day and 48 a week. Written contracts are mandatory. Probation is capped at three months, with seven days’ notice to end employment during that period.

One provision is unusual enough to plan around: an employer may not close, stop or liquidate the enterprise before obtaining the Minister’s approval. Exit from the market is not purely a commercial decision.

Written contracts are mandatory and should record pay, hours, leave, notice and termination terms.

Register the employee with the Social Security Directorate at the correct wage. Courts treat both non-registration and registration at understated wages as exposing the employer to penalties measured against the whole contribution history, not against a fixed fine.

For a foreign national, notify the residency officer within 48 hours of employment, and budget the IQD 2,000,000 registration fee alongside salary.

Standard working hours are eight a day and 48 a week under the Labour Law.

Wages must be paid weekly for daily and weekly hires and monthly for others, with a maximum permitted delay of five days.

Because the contribution base is capped at five times the minimum wage, overtime and allowances increase tax exposure but stop increasing social security cost above IQD 1,750,000 a month.

Iraq observes national and Islamic public holidays, with Nowruz also marked. Islamic dates follow the lunar calendar and are confirmed close to the time.

Iraq observes national and Islamic public holidays, with Nowruz also marked. Islamic dates follow the lunar calendar and are confirmed close to the time. Dates and any substitution rules are set out below; entitlement is separate from annual leave.

Social security covers retirement and disability. There is no separate mandatory pension contribution on top.

Law No. 18 reshaped retirement eligibility. A pension may still be claimed at 60 for men or 55 for women with twenty years of insured employment. New routes allow 63 and 58 respectively with fifteen years, or 50 for both with thirty years for men and twenty-five for women. The old rule permitting a pension at any age with thirty years for men or twenty for women has been eliminated.

Statutory leave is 21 days of paid annual leave after one year, sick pay at full rate for 30 days a year accumulating to a maximum of 180 days, and 14 weeks of paid maternity leave.

The law also extends coverage toward informal workers and the self-employed, who may register voluntarily by paying the relevant contributions.

End-of-service gratuity is two weeks of pay for every completed year of service, owed after one full year. It uses a weekly-salary base rather than the monthly base familiar from Gulf jurisdictions, so a direct comparison with UAE gratuity understates it.

It is payable on resignation as well as dismissal. An employee who resigns after qualifying receives the full entitlement, so treat it as a monthly reserve rather than a contingent terminal cost.

Statutory minimum notice is 30 days for employees with up to five years of service, scaling upward with tenure. During the three-month probation, seven days suffices for either party.

For a foreign worker, the employer must provide a ticket back to the country of recruitment at the employer’s expense, unless the worker stopped working before contract expiry for improper reasons. Losing a job does not by itself withdraw residence or work permit rights.

A work permit requires proof the position cannot be filled by an Iraqi worker. It is granted for one year and is renewable, and the employee may work only for the employer named on it — a change requires a fresh application. Security clearance is required in some cases.

Two obligations have short deadlines. The residency officer must be notified within 48 hours of a foreign national’s employment or departure, and anyone bringing a foreign national into the country for employment must deposit financial guarantees or a valid return ticket.

The cost differential for expatriates is real. Beyond the IQD 2,000,000 registration fee, the employer funds the additional 8% social security contribution that the government funds for Iraqi nationals — so an expatriate hire outside oil and gas carries a 20% employer rate against 12% for a local.

Unregistered employees are the dominant risk, and the exposure is not a fine. Under Article 92 of Law No. 18, courts direct penalties measured against the contribution history. Practitioners estimate total exposure for a long-unregistered workforce at roughly seven times what timely compliance would have cost, and this is being actively litigated in Iraqi Labour Courts. Registering at understated wages carries the same exposure.

Missing the additional 8% on foreign nationals understates cost by eight points. The government funds it for Iraqis; the employer funds it for expatriates.

The contribution base is genuinely disputed. Law No. 18 includes all allowances; several advisers describe a deduction of allowances, one specifying 30% of base salary. Confirm before running payroll.

Note also that NGOs and diplomatic missions are expressly covered for their Iraqi staff; that gratuity is payable on resignation; and that closing or liquidating an enterprise requires ministerial approval.

Work backwards from the start date. An EOR hire takes two to four weeks; entity formation runs three to six months.

Establish nationality and sector before quoting, since the employer rate moves between 12%, 20% and 25% on those two facts alone.

Register every employee at their actual wage, budget the IQD 2,000,000 fee for each foreign national, confirm whether federal or Kurdistan rules apply, provision gratuity monthly, and diarise salary tax within fifteen days of month end.