A few Specific points regarding Iranian Employment Law
Employment in the majority of Iranian private sector is regulated by the Iranian Labor Code (1990) and its relevant by-laws, executive orders, and judicial and administrative interpretations. The ratification of this code and its subsequent evolutions has been the product of influences by different stakeholders including representatives of both employees and employers; therefore the protection it provides is not uniform.
It is essential for the investors to receive sound legal advice on this employment law system in order to avoid finding themselves on unsettled or uncertain situations. Due to its specific history, the Iranian employment law, has some specific features which may sound new for foreign investors. Below, we summarize just a handful of these fine points for our readers, but you are always advised to seek a more detailed legal advice for your specific situation:
- According to the Labor Code, employment agreements could be either written or verbal. However, employers are always advised to have written agreements with their employees. An oral agreement contains various risks for the employer. The employee can always prove the existence of employment relation through prevailing circumstances, witnesses, payroll, etc. However, it would be difficult for the employee to prove the specific terms of the employment once the existence of the employment relation is established.
- Under the Iranian Labor Code, it is difficult to fire an employee; the few options that the law provides are either too narrow or too cumbersome in terms of procedure. However, unfortunately for the employees, the law contains practically no obligations regarding the duration of employment agreements. The employees are not obliged to sign a permanent agreement and there are no rules regarding the minimum duration of time-bound agreements. Therefore, most employers prefer to sign consecutive short-term agreements with the employers so that once they do not need an employee, instead of firing her they can wait a little bit until the employment agreement expires. You are still strongly recommended to consult with legal advisors before doing so. There is no legally prescribed minimum duration for employment agreements. Usually, the duration of the agreement will depend on the qualifications of a specific employee, her skill levels, and the employers’ HR policies.
- Signing an employment agreement with foreign nationals is forbidden unless they have obtained a work visa and work permit. According to the prevailing practice in the Iranian Social Security Organization, There should be at least 3 Iranian employees for each foreign employee in a company/business.
- It is essential to write down the duration of the temporary employment agreements, otherwise they would be presumed to be permanent.
- At the beginning of each year, the Council of Minister prescribes the minimum percentage of wage increases for different wage levels. All employers are required to apply the minimum increase in their payments in the first month of the Iranian New Year regardless of the duration of their contracts with the employees and the start date of such contracts. The percentages of the increase shall apply to almost all constant and not incidental payments to the employees.
There are other fine points in the Iranian employment law which should be consulted with a legal adviser before conducting any agreement or taking any action.
Respectfully submitted by Dr.Mahnaz Mehrinfar & Dr.Shahin Fadakar