How to Use An Employer of Record in
Iraq

Iraq's Labour Law No. 37 of 2015 requires all foreign companies employing Iraqi nationals to register with the Ministry of Labour and Social Affairs, maintain contracts in Arabic, and comply with sector-specific minimum wages set by ministerial orders that vary dramatically across industries. An Employer of Record in Iraq becomes your legal employer on paper, handling all statutory registrations, payroll withholding, and social security filings while you control day-to-day work. This eliminates the need to establish a local limited liability company or branch office, and removes the risk of violating Iraqi employment regulations that carry penalties including immediate deportation of foreign managers and suspension of operations.

What Is an Employer of Record in Iraq?

An Employer of Record in Iraq is a third-party organisation that becomes the legal employer of your staff under Iraqi law, handling all statutory obligations, payroll processing, and regulatory compliance while you retain full operational control over the employee's work, performance, and day-to-day responsibilities. The EOR issues the employment contract, registers the employee with government authorities, and assumes liability for all employment-related legal and tax obligations.

Under Iraq's Labour Law No. 37 of 2015, employment contracts must be written in Arabic, include mandatory clauses on job description and wage breakdown, and comply with any applicable collective agreements negotiated by trade unions. The Ministry of Labour and Social Affairs oversees contract registration and workplace inspections, while the General Retirement and Social Security Fund for Iraqi Workers administers the mandatory social security system. Fixed-term contracts are permitted but cannot exceed three years without converting to indefinite contracts, and probationary periods are capped at three months for most roles.

The division of responsibility is clear. You control hiring decisions, daily management, performance reviews, task assignment, and strategic direction. The EOR owns the employment contract, salary disbursement in Iraqi Dinar, income tax withholding and remittance to the General Commission for Taxes, social security contributions, statutory leave administration, and all termination procedures including notice and severance calculations.

How Does an Employer of Record Work in Iraq?

Using an Employer of Record in Iraq follows a structured process that takes you from initial job offer to compliant employment in under two weeks. The EOR manages every statutory requirement, from Ministry registrations to monthly payroll filings, while you focus on integrating the employee into your operations. Here's how the process works in practice.

Step 1: Define Role and Terms

You provide the job description, proposed salary, location, and any benefits beyond statutory minimums. The EOR reviews your terms against Iraq's Labour Law No. 37 of 2015 and checks whether the role falls under a collective agreement or sector-specific minimum wage set by ministerial order. Many sectors, including construction, oil and gas, and telecommunications, have negotiated minimums that exceed the general private-sector floor. The EOR flags any gaps and recommends compliant adjustments before drafting the contract.

Step 2: Compliance Check

The EOR verifies that your proposed salary meets or exceeds the applicable minimum wage, which varies by sector and is set by the Ministry of Labour and Social Affairs through ministerial orders updated periodically. As of 2026, the general private-sector minimum wage is 350,000 Iraqi Dinars per month for full-time employees, but higher rates apply in oil, banking, and government-adjacent sectors. The EOR also confirms that your working time proposal complies with the maximum 48 hours per week, with Friday as the mandatory rest day and exceptions requiring Ministry approval. Job classification must align with the Iraqi Standard Classification of Occupations to ensure correct social security contribution bands.

Step 3: Employment Contract

The EOR prepares a written employment contract in Arabic, as required under Article 9 of Labour Law No. 37 of 2015. The contract must include the employee's full name and nationality, job title and detailed description, place of work, start date, salary breakdown showing basic wage and any allowances separately, working hours and rest days, probationary period if applicable (maximum three months), and the applicable collective agreement if any. Fixed-term contracts are permitted but cannot exceed three years in total duration, including renewals, after which the contract automatically converts to indefinite. The probationary period cannot exceed three months for standard roles, or six months for technical and managerial positions, and the employee may be dismissed during probation without notice or severance.

Step 4: Government Registrations

The EOR registers the employee with the Ministry of Labour and Social Affairs and the General Retirement and Social Security Fund for Iraqi Workers within 15 days of the employment start date, as mandated by Social Security Law No. 39 of 1971 as amended. Registration requires submission of the signed employment contract, a copy of the employee's civil identification card or passport, and a completed social security registration form. Late registration results in retroactive contribution penalties calculated from the start date, and repeated violations can trigger Ministry of Labour inspections and fines. The EOR also registers your company as a contributing employer if this is your first hire in Iraq, which adds approximately three to five business days to the timeline.

Step 5: Payroll in Local Currency

The EOR processes payroll in Iraqi Dinars on a monthly cycle, as required under Article 48 of Labour Law No. 37 of 2015, which mandates that wages be paid at least once per month. The EOR withholds income tax under the Income Tax Law No. 113 of 1982 as amended, applying the progressive rates set by the General Commission for Taxes, and remits these amounts to the Commission by the 15th of the following month. The EOR also deducts the employee's 5% social security contribution and remits it alongside the employer's 12% contribution to the General Retirement and Social Security Fund. Payslips are issued in Arabic, showing gross salary, all deductions itemised, and net pay.

Step 6: Ongoing Compliance

The EOR manages all recurring obligations throughout the employment relationship. This includes filing monthly social security contribution reports with the General Retirement and Social Security Fund, remitting monthly income tax withheld to the General Commission for Taxes, administering statutory annual leave of 30 calendar days per year under Article 71 of Labour Law No. 37 of 2015, tracking and paying public holidays (14 official holidays in 2026), and processing sick leave supported by medical certificates issued by a licensed Iraqi physician. The EOR also monitors changes to labour law, ministerial orders adjusting minimum wages, and updates to social security contribution rates, implementing these changes automatically in your payroll. If the Ministry of Labour conducts a workplace inspection, the EOR provides all required documentation and coordinates your response.

Step 7: Termination

Termination in Iraq follows strict procedures under Articles 35 to 42 of Labour Law No. 37 of 2015. Termination without cause requires advance written notice: 30 days for employees with up to five years of service, 60 days for five to ten years, and 90 days for over ten years of service, though collective agreements may extend these periods. Severance pay is mandatory for terminations without cause and is calculated as one month's basic salary for each year of service, with the first five years qualifying for full severance and subsequent years calculated proportionally. The EOR verifies that just cause exists if you terminate for performance or misconduct, ensuring that written warnings and a formal investigation process have been documented as required under Iraqi case law. The EOR prepares the termination letter in Arabic, calculates final pay including accrued leave and severance, deregisters the employee from social security, and issues the Certificate of Service required for the employee to claim unemployment benefits if eligible.

Employment Laws and Compliance an Employer of Record Handles in Iraq

When you hire through an Employer of Record in Iraq, they assume full responsibility for compliance with Iraqi employment law so you don't need to build an in-country HR team or legal function. The EOR stays current with all statutory obligations and protects you from penalties that can include fines, operational suspension, and deportation of foreign personnel.

• Employment Contracts and Registration: Iraq's Labour Law No. 37 of 2015 requires all employment contracts to be in writing, executed in Arabic, and registered with the Ministry of Labour and Social Affairs within 15 days of the employee's start date. Contracts must specify job title, salary breakdown, working hours, and probationary period. Failure to register or maintain compliant contracts can result in fines of up to 5,000,000 Iraqi Dinars and suspension of the employer's operations pending rectification.
• Payroll Tax and Income Tax Withholding: Under Income Tax Law No. 113 of 1982 as amended, employers must withhold income tax from employee salaries using the progressive rates set by the General Commission for Taxes and remit these amounts by the 15th of the following month. The 2026 rates range from 3% on the first 250,000 Iraqi Dinars per month to 15% on amounts exceeding 1,000,000 Iraqi Dinars. Failure to withhold or remit on time results in penalties of 5% per month on the outstanding amount plus potential criminal prosecution of company directors.
• Social Security and Retirement Contributions: The General Retirement and Social Security Fund for Iraqi Workers, established under Social Security Law No. 39 of 1971, requires employers to contribute 12% of gross salary and employees to contribute 5%, remitted monthly by the 15th of the following month. Contributions cover old-age pension, disability, death benefits, and unemployment insurance. Non-compliance results in retroactive contributions calculated with interest, penalties up to 10,000,000 Iraqi Dinars, and exclusion from government tenders.
• Statutory Leave Entitlements: Article 71 of Labour Law No. 37 of 2015 grants employees 30 calendar days of paid annual leave after one year of service, increasing to 45 days after ten years with the same employer. Employees are entitled to 14 paid public holidays annually, including religious observances that vary by lunar calendar. Female employees receive 72 days of maternity leave at full pay, and sick leave is granted at full pay for up to 30 days per year with a medical certificate. Denying statutory leave or failing to pay leave wages is a criminal offence under Article 282 of the Iraqi Penal Code.
• Termination Procedures and Severance: Termination without cause requires written notice of 30 to 90 days depending on length of service, as set out in Article 36 of Labour Law No. 37 of 2015. Severance pay is mandatory for terminations without cause and is calculated as one month's basic salary for each year of service. Termination for cause requires documented warnings and a formal investigation process, and summary dismissal is permitted only for offences listed in Article 42, including theft, assault, and prolonged absence. Wrongful termination exposes employers to reinstatement orders and compensation awards of up to two years' salary, enforced by Labour Courts.
• Working Time and Overtime: Standard working time is capped at 48 hours per week over six days under Article 65 of Labour Law No. 37 of 2015, with Friday as the mandatory rest day. Daily working hours cannot exceed nine hours in most sectors. Overtime is permitted up to two hours per day and is compensated at 150% of the hourly rate for daytime overtime and 200% for night work (9pm to 6am). Violations result in fines and back payment orders issued by Ministry of Labour inspectors.
• Workplace Health and Safety: The Ministry of Labour and Social Affairs enforces occupational health and safety standards under the Occupational Safety and Health Regulations issued under Labour Law No. 37 of 2015. Employers must provide a safe working environment, conduct regular risk assessments, supply personal protective equipment where required, and maintain accident registers. Workplace accidents resulting in death or serious injury must be reported to the Ministry within 24 hours. Non-compliance results in fines, operational shutdowns, and criminal liability for company directors in cases of gross negligence.
• Data Protection and Employee Privacy: While Iraq does not have a comprehensive data protection law equivalent to GDPR, the Constitution of Iraq (2005) guarantees privacy rights, and employers must handle employee data in compliance with ministerial guidance issued by the Ministry of Labour and Social Affairs. Personal data must be stored securely, used only for employment purposes, and disclosed only with employee consent or under court order. Unauthorised disclosure can result in civil liability and disciplinary action by regulatory bodies.
• Collective Agreements and Trade Unions: The Trade Unions Law No. 52 of 1987 as amended grants employees the right to form and join trade unions, and collective agreements negotiated by recognised unions are binding on all employers in the relevant sector. Collective agreements often set higher minimum wages, longer notice periods, and enhanced benefits than statutory minimums. Employers must recognise and negotiate with registered trade unions and cannot dismiss employees for union activity. Violations can result in Labour Court orders for reinstatement and compensation.
• Residency and Work Permits for Foreign Employees: If you hire foreign nationals in Iraq, the Employer of Record sponsors their residency and work permits through the Directorate of Residency within the Ministry of Interior. The process requires a labour market test demonstrating that no qualified Iraqi national is available for the role, approval from the Ministry of Labour and Social Affairs, and submission of the employment contract, passport copies, medical certificates, and security clearances. Work permits are typically valid for one year and renewable. Employing foreign nationals without valid permits results in fines of up to 10,000,000 Iraqi Dinars per individual, deportation of the employee, and potential criminal prosecution of company managers.

How Much Does It Cost to Use an Employer of Record in Iraq?

The total cost of hiring through an Employer of Record in Iraq comprises two components: the EOR's service fee and the statutory employer costs mandated by Iraqi law. Statutory costs are fixed percentages and amounts set by legislation and apply whether you use an EOR or establish your own entity. Playroll's service fee starts from $399 per employee per month and is billed separately from payroll, giving you full transparency over what you pay for the service versus what you pay to the Iraqi government.

Let's look at an example that includes a base salary and the EOR service fee.

Playroll's service fee covers all contract drafting in Arabic, Ministry of Labour and Social Affairs registrations, General Retirement and Social Security Fund filings, monthly payroll processing and income tax withholding, ongoing compliance monitoring including updates to ministerial orders and contribution rates, statutory leave administration, and all termination procedures including severance calculation and employee deregistration. The fee remains fixed regardless of how often Iraqi employment law changes, so you never face surprise compliance costs.

Employer of Record vs Setting Up an Entity in Iraq

The choice between using an Employer of Record and establishing your own legal entity in Iraq depends on your hiring scale, timeline, and operational plans. Foreign companies typically incorporate a limited liability company or register a branch office under the Companies Law No. 21 of 1997 as amended. Entity registration requires Ministry of Trade approval, security clearances from multiple agencies, minimum paid-up capital of 1,000,000 Iraqi Dinars for an LLC, and appointment of an Iraqi agent or partner in many sectors. Realistic timelines run four to six months from application to operational status, with setup costs ranging from $15,000 to $40,000 including legal fees, notarisation, and registration charges.

For companies hiring fewer than 15 employees in Iraq, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries, so you can transition from EOR to your own compliant entity in Iraq when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in Iraq Through an Employer of Record?

You can hire an employee in Iraq through an Employer of Record in 10 to 15 business days from signed offer to first day of work.

• Stage 1: Contract preparation and signing (2 to 3 business days): The EOR prepares the employment contract in Arabic with all mandatory clauses required under Article 9 of Labour Law No. 37 of 2015, including job description, salary breakdown, working hours, and probationary period if applicable. You review and approve the terms, and the contract is sent to the employee for signature. Timing depends on how quickly the employee reviews and returns the signed document.
• Stage 2: Government registrations (5 to 8 business days): The EOR registers the employee with the Ministry of Labour and Social Affairs and the General Retirement and Social Security Fund for Iraqi Workers within the legally required 15-day window. Registration requires submission of the signed contract, the employee's civil identification documents, and completed social security forms. Processing times vary by governorate, with Baghdad typically faster than regional offices. Missing the 15-day deadline triggers retroactive contribution penalties and potential Ministry inspections.
• Stage 3: Payroll configuration and first cycle (2 to 3 business days): The EOR configures the employee in the payroll system, sets up income tax withholding under the rates published by the General Commission for Taxes, and schedules the first monthly salary payment. Iraq requires monthly payroll cycles with wages paid at the end of each month. The first payslip is issued within three business days of payroll close, showing gross salary, all deductions itemised in Iraqi Dinars, and net pay.
• Stage 4: Iraq-specific requirements (concurrent with Stage 2): If the role requires Ministry of Labour approval due to sector restrictions, security clearances, or if the employee is a foreign national requiring a work permit, the EOR initiates these applications immediately upon contract signing. Work permit processing typically adds 15 to 25 business days but runs in parallel with social security registration for Iraqi nationals. Most professional roles for Iraqi citizens do not require Ministry pre-approval.

The timeline can extend if the employee's civil identification documents are incomplete, if the role falls under a collective agreement requiring union notification, or if the Ministry of Labour's regional office experiences processing delays during peak periods such as the end of the fiscal year. Foreign national hires add significant time due to security clearance and work permit requirements, often extending total onboarding to 25 to 35 business days.

Compare this to establishing your own limited liability company in Iraq, which takes four to six months for Ministry of Trade registration, paid-up capital deposit, security clearances, and operational approvals before you can even begin the hiring process.

How Playroll's Employer of Record Process Works in Iraq

Playroll makes hiring in Iraq straightforward, even if you've never employed anyone in the country before.

1. You Define the Role

You provide the job title, responsibilities, proposed salary, location, and any benefits you want to offer beyond statutory minimums. Playroll reviews your terms against Iraq's Labour Law No. 37 of 2015 and flags any required adjustments to meet minimum wage requirements or sector-specific collective agreements.

2. Playroll Prepares the Contract

Playroll drafts a compliant employment contract in Arabic, including all mandatory clauses such as detailed job description, salary breakdown showing basic wage and allowances separately, working hours and rest days, and probationary period up to three months as permitted under Iraqi law. You approve the contract, and Playroll sends it to the employee for signature.

3. Employee Onboarded and Payroll Goes Live

Once the contract is signed, Playroll registers the employee with the Ministry of Labour and Social Affairs and the General Retirement and Social Security Fund for Iraqi Workers, typically completing all registrations within 10 to 12 business days. Payroll is configured, and the employee receives their first monthly salary on schedule with a payslip in Arabic showing all deductions.

4. Playroll Manages Ongoing Compliance

Playroll handles all recurring filings, including monthly social security contributions and income tax remittances to the General Commission for Taxes, statutory leave administration, and updates to labour law changes and ministerial orders adjusting minimum wages. If your team in Iraq grows to the point where establishing your own entity makes sense, Playroll can handle that too through its global entity setup service, so you transition without switching providers or rebuilding your payroll and HR systems.