For a foreign company looking for registration of a branch in Iran, having the knowledge of Iran’s labor law topics including the parts related to employing workforce is truly essential. Indeed, by this knowledge and concluding a precise employment contract a company would be able to prevent further problems in the event of raising any disputes.
In this article you can find some instructions about the Iran Labor Code, along with the important points that need to be noticed regarding the employment contracts.

Employment of foreign nationals

When a foreign company registers a branch in Iran, it may have both Iranian and non-Iranian workforces. The Iran Labor Code in Articles 120 to 129 provides rules and regulations concerning the employment of foreign nationals. Such rules have created obstacles to recruitment of foreign labor. Hence, these obstacles need to be well identified.
According to the mentioned Articles, a foreign national cannot be employed unless he/she firstly holds an entry visa which will be issued by the Ministry of Labor and Social Affairs and secondly, he/she obtains a work permit that will be issued, extended or renewed for a maximum period of one year, in accordance with the relevant laws and regulations. It must be noted that in order to improve employment rate of Iranian job seekers, strict rules and regulations for acquiring visa and work permit for foreign nationals have been stipulated under the aforementioned Articles that made this procedure very challenging.
On the other hand, the Ministry of Labor and Social Affairs under Article 181 of the above-mentioned Code provides certain fines and punishments for employers who employ foreign citizens without a work permit or with an expired work permit.

Employment relationship

According to the above-mentioned points, since the employment relation with foreign citizens is not defined separately under the mentioned Code, it must be answered when does employment relationship happen according to the related Articles? Indeed, according to Article 2 of this Code “… worker means any person who works in any capacity at the request of an employer in return for remuneration...” And according to Article 3 “The term "employer" means any legal or natural person at whose request and for whom a worker performs work in return for remuneration…”. Hence, the employment relationship is ascertained through determination of two factors; remuneration and mandate. If these two factors are met a proficient relationship will be considered an employment relationship and all the aforementioned requirements (entry visa and work permit) will be required.

Insurance under the Labor Code of Iran

Any non-Iranian worker who achieved a work permit in Iran and is not subject to other employment regulations, as well as Iranian workforce, during the period of validity of this permit, is subject to the Labor Code of Iran and will enjoy from all the benefits provided for him/her under this Code of law, except those which are legally excluded for non-Iranians.

Consequently, according to the Article 148 of the Code “Employers whose workplaces are subject to this Code shall insure their workers (either Iranian or foreign workforce with an entry visa and work permit, either temporary or permanent employee) under the Social Security Act.”
Then, social security is compulsory under these regulations and heavy penalties have been stipulated under the Article 183 of the Code for an employer who violates this regulation.
According to this Article: “any employer who, notwithstanding the provisions of section 148 of this Code, fails to insure his workers shall, in addition to having to pay the employer's share of all workers' contributions, be subject to a fine of between two and ten times the applicable insurance premiums, with due regard to the situation and means of the offender and the degree of the offence.”

Dismissal of employee

The temporary employment contract or special task contract, which are the main form of this type of contract, are irrevocable. Neither the employer nor the employee can terminate this agreement without any mutual agreement.
Although this issue is often overlooked in drafting these types of contracts.

Therefore, the employer can only terminate the employment contract through dismissal of the employee. Although, it must be considered that, according to the Article 27 of the Code this dismissal will be acceptable only in one case “Where a worker is negligent in discharging his duties or if, after written warnings, he continues to violate the disciplinary rules of the workplace” even in this case the employer needs the Islamic Labor Council’s confirmation for such dismissal. After this confirmation, the employer must pay the employee a sum equal to his last monthly wage for each year of service as a length­of­service allowances, in addition to any delayed entitlements, to terminate his employment contract.
Nevertheless, even after all these legal procedures for dismissal of the employee, he will be entitled to appeal the decision to the relevant authorities.
It can be concluded that Iran's labor Code is regulated to protect employees' rights, and if the relationship between the parties is considered employee and employer relationship and consequently, if the contract between them is subject to the labor Code, employers should be aware of all the rules and regulations in this regard and they must be careful in drafting the employment contract.