Since the withdrawal of international sanctions against Iran, the Iranian economy is on the upswing again. The problem is that Iran has become an unknown territory for many Multinational companies during the sanction years.

The first challenge for such companies is about recruitment and employment regulations.

Indeed, companies planning to establish significant operations in Iran should develop a sound understanding of the local HR market and related employment regulations.

We take a look at Iran’s employment labor law to extract the most important notes which would be essential to consider for employment in Iran.

Telling employees that they are going to be laid off is never an easy task. You may experience anxiety and guilt about having to take the action. Well, the good news is that Iran as a developing country has an employee-friendly labor employment law that sets extreme difficulties in laying off the staffs. Your laid off employees could sue you and in most of the cases, they will win!

Furthermore, social security is compulsory for all Iranian employees even for temporary employees. As there are heavy penalties on SSO in Iran, don’t try to skip or revolve the laws!

On the other hand, it should be mentioned that it is prohibited to hire employees under a one-year contract. Only the fixed term contracts are legal and the Ministry of Labor is sensitive about any related disputes. Be aware of the related terms and discuss it with a reliable local employment law advisor.

As an employer, you should calculate the accumulation of annual settlement as “End of Services Benefits”. However, this is not the only item you have to calculate but this is the most important one.

The last but not least, a valid employment contract in Iran should fulfill the criteria below:

  • The type of work or occupation in which the worker will be engaged or the duties that he must perform.
  • The basic salary or wage and any supplements thereto whereas should be calculated for 30 days.
  • Working hours are 44 hours a week including Sat to Wed (8 hours/day) and a half a day on Thursday (4 hours). Any overtime should be considered as overtime work with a calculation of at least 40% of the hourly wage of each employee. The employees could leave on official state holidays (22 days per year approximately) and Fridays. Moreover, employees have the right to leave a one month per year or two and half days (2.5) per month.
  • The workplace.
  • Signing date of the contract.
  • The duration of the contract, if it is for a fixed term.
  • Any other matters required by custom and common practice in relation to the job and the locality concerns. For instance, the employment contracts should be issued in four copies (labor office, the worker, the employer and the Labor Council or workers representative).

In summary, as Iran’s employment labor law covers all relations, it also provides great opportunities for foreign investors to support their business in Iran through clarified employment laws.

Welcome to Iran!

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Thank you very much, Mr Dehestani, for an insightful and a very useful article ( A practical Guide …) for potential foreign investors in Iran. I just wanted to request that you expand on the points you make a bit more and provide pertinent details. I read this article with interest but in certain areas I felt, as a reader, that I was not convinced about the ‘why’ and the ‘how’ of some of your content. I also want to use this opportunity and ask whether there is a comprehensive Employment Law book or booklet in English that you could… Read more »


Dear Mr. Dehestani…You don’t know how much your article meant to me at this time. Thank you for this great article and keep these good articles coming.