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Hiring in Iraq

Hiring employees compliantly in Iraq means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Iraq so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Iraq; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Need assistance hiring in Iraq? Contact us about our International EOR Service

Labor Laws in Iraq

Employee Probation Period

  • The Labor Law gives employers the right to hire employees on a probationary basis for a period of up to three months.

Annual Leave in Iraq

  • Employees are entitled to annual leave after a period of one full year of employment.
  • The annual holiday is 20 days per year and is increased by two days for every five years of employment.
  • According to Article 71 of the Labor Law any agreement to waive or abandon the annual holiday, in whole or in part, for compensation or other advantage, is null and void.
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Holidays in Iraq

New Year’s Day 1st January
Army Day 6th January
Nowruz 21st March
Labor Day 1st May
Eid al-Fitr  
Republic Day 14th July
Eid al-Adha  
Islamic New Year  
Ashura  
National Iraqi Day 3rd October
Prophet's Birthday  
Victory over Daesh 10th December
Christmas Day 25th December

 

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Maternity Leave Iraq

  • An employee is entitled to at least 14 weeks of paid maternity leave per year.
  • Up to eight weeks may be taken before the expected due date, subject to a medical certificate.
  • The employee is entitled to take the remaining days of maternity leave after the delivery; the period of maternity leave taken after the delivery should be at least six weeks.
  • The 14 weeks of maternity leave can be extended to up to nine months, subject to a decision of the competent medical authority, in the event of a difficult childbirth, a multiple birth or pre or post-natal complications.
  • With the employer's consent, an employee can take unpaid maternity leave for up to one year to provide care for her child, provided that the child is under one year of age.

Paternity Leave Iraq

  • The Labor Law does not grant fathers paternity leave.

Sick Leave in Iraq

  • Employees are entitled to fully paid sick leave of 30 days for every year of service, up to a total of 180 days.
  • If a sick employee exhausts this period of sick leave without recovering, he or she shall be subject to the Social Security Law.
  • The retirement and social security fund shall reimburse the employer for any wages paid to the insured employee for that period of sick leave exceeding 30 days per year of service.

Working Hours in Iraq

  • As a general rule, employees should not work longer than eight hours per day for six days per week.

Overtime in Iraq

  • The working hours may be increased in exceptional cases.
  • The increase is treated as overtime, for which the wage must be increased by 50% to 100%, depending on the type and nature of the work

Termination of Employment in Iraq

  • The Labor Law includes a comprehensive list of the authorized grounds for termination.
  • They are the following:
    • mutual written agreement
    • expiry of the term of the contract
    • the will of the employee, after following certain procedures
    • incapacity due to illness for more than six months
    • incapacity of the employee amounting to at least 75%;
    • decline in the establishment’s business provided that the Labor Minister has been informed.
  • Where termination notice is required, it must be served on the employee at least 30 days prior to the termination date.
  • Otherwise, the employer will be liable to pay the employee compensation equivalent to the wages that would have been due during the notice period.
  • In case of termination of the contract during the probation period, the employer must serve the employee with at least seven days' notice.
  • In principle, an employee whose service is ended is entitled to an end of service gratuity equivalent to two weeks' pay for each year of service, except in any of the following circumstances, in which case no severance pay will be due:
    • The employee is sentenced by a final court judgment to imprisonment for more than one year
    • The employee assumes a false identity or submits forged documents
    • The employee commits a breach of his or her obligations under the contract; or
    • The employee commits a serious error causing material damage to the work, workers or production.

Notice Period in Iraq

  • Where termination notice is required, it must be served on the employee at least 30 days prior to the termination date.
  • Otherwise, the employer will be liable to pay the employee compensation equivalent to the wages that would have been due during the notice period.
  • In case of termination of the contract during the probation period, the employer must serve the employee with at least seven days' notice.

Severance in Iraq

  • In principle, an employee whose service is ended is entitled to an end of service gratuity equivalent to two weeks' pay for each year of service, except in any of the following circumstances, in which case no severance pay will be due:
    • The employee is sentenced by a final court judgment to imprisonment for more than one year
    • The employee assumes a false identity or submits forged documents
    • The employee commits a breach of his or her obligations under the contract; or
    • The employee commits a serious error causing material damage to the work, workers or production.

Iraq Salary and Wages

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13th / 14th Month Salary in Iraq

  • No
  • There is no statutory requirement to pay the 13th or 14th month salary.
  • Government officials did have bonus benefits but the new prime minister is slashing the bonuses.
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Income Tax in Iraq

  • All income derived from Iraq is subject to tax in Iraq regardless of the residence of the recipient.
  • In addition, income that is realized outside Iraq by Iraqi and other residents, including interest, commissions, investment returns, and profits from trading in currencies, valuable metals, and securities, is taxable if such income arises from funds and deposits held in Iraq.
  • In the Kurdistan Region, a 5% tax is imposed on taxable income.
  • Taxable employment income comprises basic salary plus any allowances in excess of 30% of the basic salary.
  • Tax rates for individuals are levied according to the following scale:

Rates

Exceeding (IQD)

Not exceeding (IQD)

Excess (%)

Individual Income Tax Rates (Federal Iraq) 0 250,000 3
  250,000 500,000 5
  500,000 1,000,000 10
  1,000,000   15
Kurdistan Region     5% (employment income)
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Social Security in Iraq

  • Rates of social security contributions are applied to the basic salaries of Iraqi and foreign employees as of the date of hire, or the January salary, whichever is earlier.
  • Basic salary is equal to total salary less general allowances and overseas allowances.
  • General allowances of all types, whether cash or non-cash and whether received by Iraqis or foreigners, may not exceed 30% of basic salary.
  • Delegation or overseas allowances received by foreign employees (not applicable to Iraqi employees in Iraq nor to Iraqis and foreigners in the Kurdistan Region of Iraq) may not exceed 25% of basic salary.
  • The general rates of social security in Iraq (including the Kurdistan Region of Iraq) are 12% for employers and 5% for employees.
  • For oil and gas companies in Iraq, the rates for social security contributions are 25% for employers and 5% for employees.

Contribution

Group 1083

Social Security Contribution

Social Security (for oil and gas companies)

Employee Group 1083 5% 5%
Employer Group 1083 12% 25%

Immigration Iraq

  • All foreign nationals who intend to visit Iraq (including the Kurdistan Region of Iraq) must obtain an entry visa.
  • The most common form is a single-entry visit visa from the Iraqi Ministry of Interior.
  • The typical single-entry visit visa allows the visitor to enter Iraq within three months of the visa’s issuance.
  • A visa typically allows the person to remain in Iraq for 30 days.
  • Multiple entry visas are also available.
  • The procedures for entry into the Kurdistan Region of Iraq may vary
  • Work permits are required for foreigners to work in Iraq.
  • The Ministry of Labor and Social Affairs issues work permits in accordance with Article 30 of the Iraqi Labor Law No. 37 of 2015 and the procedures set forth in Labor Instructions No. 18 of 1987, which are still in force and provide specific rules for the employment of foreigners in Iraq.
  • For the employer to apply for work permits with respect to its foreign employees, it must ensure that its foreign employees have valid entry visas for Iraq (evidenced by a sticker affixed to each employee’s passport or any other valid alternative method acceptable to the Iraqi authorities) and that it meets Iraq’s minimum local employment threshold, among other requirements.
  • A work permit is valid for a period of one year, subject to renewal.
  • The renewal of the work permit must be initiated a month in advance of its expiration date.
  • The renewal process requires the employer to follow the same procedure as the procedure used for applying for the initial work permit with the Ministry of Labor and Social Affairs.
  • Noncompliance with the work permit requirement carries a risk of the employees and their employers being subject to monetary penalties and legal action.
  • The procedures for work permits in the Kurdistan Region of Iraq may vary.
Need assistance hiring in Iraq? Contact us about our International EOR Service

Type of Visa/Permit

Documentation

Validity

Eligibility

Tourist Visa
  • Valid Passport
  • Photos
  • Completed Application Form
  • Travel itinerary
  • Copy of birth certificate
30 days
  • Foreigners travelling to Iraq on a short term basis are eligible for a single entry tourist visa
Work Permit
  • Visa application form.
  • Two color photographs of the applicant.
  • Color copy of the passport with at least 6 months’ validity.
  • Official letter from the employer inviting the foreigner to work in Iraq.
1 year (can be renewed)
  • Work permits are required for foreigners to work in Iraq.
  • For the employer to apply for work permits with respect to its foreign employees, it must ensure that its foreign employees have valid entry visas for Iraq (evidenced by a sticker affixed to each employee’s passport or any other valid alternative method acceptable to the Iraqi authorities) and that it meets Iraq’s minimum local employment threshold, among other requirements. 
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Value Added Tax (VAT) in Iraq

  • A new sales tax law was issued in early 2015 whereby a sales tax of 300% will be imposed on alcohol and tobacco (cigarettes), 15% on travel tickets, 15% on cars, and 20% on mobile recharge cards and internet.
  • This is in addition to services rendered by deluxe and first class restaurants and hotels, which were already subject to a 10% sales tax.

Sales Tax

Alcohol and Tobacco

Group 1083

300%

Travel Tickets Group 1083 15%
Cars Group 1083 15%
Mobile Recharge Cards and Internet Group 1083 20%
First Class Restaurants and Hotels Group 1083 10%
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Mandatory Benefits in Iraq

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits
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Mandatory Benefits overview

  • Probationary period

  • Annual Leave

  • Public Holidays

  • Maternity Leave

  • Sick Leave

  • Overtime Pay

  • Notice period

  • Severance Pay

  • Social Security Benefits

Payments And Invoicing

  • The system in Iraq is similar to that of a pay-as-you-earn (PAYE) regime, whereby a monthly statement has to be filed at the Direct Deduction Division of the tax authorities.
  • The employer is responsible for deducting the staff income tax from their salaries, and forwarding that amount to the General Commission of Taxes/Direct Deduction Division within a period not exceeding the first 15 days of the next month in which the assessment was incurred.
  • At the end of the fiscal year, reconciliation takes place as to the annual staff personal income tax with the total monthly amounts paid during subsequent months.

Payroll Accrual in Iraq

Country Accruals Additional Information

Social Security 12.00%
Maternity leave 72 days
Vacations 5.48%
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Description

The system of welfare and benefits in Iraq is known for being complex and unclear, particular for foreign employers. Contributions are as follows:

12% of the employee’s salary is paid by the employer to cover health insurance, work injuries and pension collectively 5% is deducted directly from the employee’s salary For the oil and gas industries, the employer contributes 25%.

Payroll Accruals Additional Information

 

 

Employment Accruals

Annual Leave The annual holiday is 20 days per year and is increased by two days for every five years of employment. This equals 5.47% (20/365 days) of annual income
Maternity Leave An employee is entitled to at least 14 weeks of paid maternity leave per year. This equals 26.9% (14/52 weeks) of annual income
Sick Leave Employees are entitled to fully paid sick leave of 30 days for every year of service, up to a total of 180 days. This equals 8.22% (30/365 days) of annual income
Overtime The increase is treated as overtime, for which the wage must be increased by 50% to 100%, depending on the type and nature of the work Depends on the number of overtime hours worked
Severance In principle, an employee whose service is ended is entitled to an end of service gratuity equivalent to two weeks' pay for each year of service This equals 3.84% (2/52 weeks) fo annual income
Social Security The general rates of social security in Iraq (including the Kurdistan Region of Iraq) are 12% for employers. For oil and gas companies in Iraq, the rates for social security contributions are 25% This equals 12% of annual income

Accrued Benefits in Iraq

Christmas Bonus % 0%
Christmas Bonus Over Vacations % 0%
Severance per Year%

Employees are entitled to severance pay that equals two weeks of pay after one year of service (2.74% of annual salary)

2.74%
Vacations %

The annual holiday is 20 days per year and is increased by two days for every five years of employment (5.47% of annual salary)

5.47%
Of annual
salary
Notice %

Employees are entitled to 30 days of notice period for one year of service or more (8.24%)

8.24%
Christmas Bonus Over Notifications % 0%
Vacations Plus % 0%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per anum are equal to 16.74%

16.74%

Why use Global Expansion to hire in Iraq

Establishing a branch office or subsidiary in Iraq can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Iraq labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Iraq law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Iraq. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Iraq Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

 

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