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With the deepening of globalization, when enterprises expand their business in multiple countries, cross-border labor compliance has become one of the most complex and severe challenges. To help enterprises systematically address this issue, we have collaborated with top labor lawyers from over 50 major jurisdictions worldwide (all recommended by Chambers, The Legal 500, or equivalent institutions) to jointly compile a Chinese-English labor & employment compliance guide exceeding 1 million words, and we will continuously update relevant key points.

This article publishes the key points of labor & employment compliance by September 2025 in Iran. 

01 Overview of the Labor Law System

1.Legal System

Iran has a civil law system, and recognises three sources of law, ranked hierarchically as legislation, custom, and judicial precedent.

2.Resources and Agencies

The main statutes and regulations are the Labour Law 1990 (Labour Law), the Social Security Law 1975 (SSC), Directives of the Ministry of Cooperative Labour and Social Welfare (Ministry) and the ACJ Law 2011 (ACJ Law).

02 Employment Qualifications and Classification

1.Employment Age

Under Labour Law, the employment of individuals under the age of fifteen (15) full years is strictly prohibited. Persons who are between fifteen (15) and eighteen (18) full years of age are classified as “juvenile workers” and are subject to special legal protections.

In occupations or activities which, by their nature or by the conditions under which they are performed, may be harmful to the health or moral well-being of apprentices or juvenile workers, the minimum legal working age is set at eighteen (18) full years. The determination of such occupations is the responsibility of the Ministry.

2.Qualifications for Foreign Employers

There is no explicit provision under Iranian laws and regulations that directly addresses the permissibility of hiring local employees in Iran without establishing a legal presence, such as a representative office, branch office, wholly foreign-owned enterprise (WFOE), or other subsidiary or affiliate.

3.Classification of Employment

Direct employment is the most commonly used structure, under which the employer (typically the ultimate beneficiary of the employee’s services) enters into a direct employment agreement with the employee.

Despite the fact that Labour Law does not deal with the issue of outsourced workforce arrangements (indirect employment), this scheme known commonly as “EoR” is also a widespread practice in Iran, among both local companies and multinational companies conducting operations in Iran through their affiliates, branches and the like.

4.Foreign Workers

Pursuant to Article 120 of Labour Law, foreign nationals may not work in Iran unless they have obtained:

? A visa with the right to work; and

? A work permit, in accordance with the applicable laws and regulations.

As a general rule, Iranian laws and regulations do not prescribe a fixed ratio between domestic and foreign workers.

03 Recruitment and Employment Contracts

1.Background Examination

Labour Law does not explicitly impose restrictions or prohibitions on conducting background checks on job applicants. However, according to general legal principles, any investigation or disclosure of personal, professional, criminal, or reputational records without legal authorisation is prohibited.

2.Contract Types

? Apprenticeship contract;

? Permanent employment contract;

? Temporary employment contract;

? Specific-assignment employment contract;

? Full-time and part-time contracts.

3.Probationary Period

According to Article 11 of Labour Law, the parties may, by mutual agreement, designate a period as a probationary period. During this period, either party may terminate the employment relationship without prior notice and without being obliged to pay compensation. If termination of the employment relationship is initiated by the employer, the employer is required to pay the employee’s wages for the entire probationary period. If the employee terminates the employment relationship, the employee is only entitled to receive wages for the period actually worked.

04 Working Standards

1.Remuneration

Remuneration consists of a base salary, certain statutory benefits and any additional payment the employer has agreed to pay. The optional additional payments may include, for instance, transportation allowances, benefits in kind, production-increase bonuses and shares in annual profit. The remuneration is normally paid on a monthly basis.

2.Statutory Benefits and Social Security

Statutory benefits include primarily housing allowance, workers supplement and a per-child allowance.

Employers are required to insure their employees through the Social Security Organisation (SSO) with basic health, unemployment, retirement, disability and life coverage; the premium is 30% of each insured employee’s salary, of which 7% is deducted by the employer from the employee’s salary and 23% is the employer’s contribution.

3.Working Hours

Working hours can be set by the employer, provided that it complies with the requirements set forth under Labour Law which provides that working hours must not exceed 8 hours per day. Nevertheless, an employer and an employee may agree to exceed this limit for a limited number of days in a week, provided that the overall working hours in that week do not exceed 44 hours for regular jobs and 36 hours for hardship or hazardous jobs.

4.Rest and Leave

? Annual leave;

? Special paid leave;

? Educational leave;

? Paid sick leave;

? Maternity and paternity leave;

? Pilgrimage (Haj ceremony) leave;

? Unpaid leave;

? Absence without leave.

05 Occupational Health and Special Protection

1.Occupational Health and Security

Articles 85 to 106 of Labour Law set out general rules on workplace safety and occupational health.

2.Special Protection

Articles 75 to 78 of Labour Law contain special rules on women’s working conditions; Article 75 prohibits women from performing dangerous, hard or harmful work and carrying loads above the permitted limit by hand without using mechanical aids.

At the time of initial employment, juvenile workers must undergo mandatory medical examinations conducted by SSO.

06 Personal Information and Privacy

1.General Rules

Labour Law and the relevant employment regulations do not provide a dedicated or sector-specific framework for the protection of employees’ privacy or personnel data. Nevertheless, the general rules governing personal data protection, which apply to all individuals within the jurisdiction of Iran, extend equally to employees.

2.Transnational Transfer

At present, Iranian laws do not impose any legally binding requirements or restrictions specifically governing the transnational transfer of personal data, including employees’ personal information.

07 Anti-Discrimination and Anti-Harassment

1.General Rules

Labour Law does not provide a specific definition or an independent regulatory framework for workplace harassment. Instead, harassment is addressed indirectly through general legal norms. Claims relating to harassment are handled either under labour dispute councils or, where the conduct amounts to a criminal offense, under the Penal Code before the general criminal courts.

08 Internal Policies

1.Applicability

It is legally permissible to manage employees through internal workplace policies in Iran; however, their enforceability is subject to specific statutory requirements under Labour Law.

2.Validity

As mentioned above, any internal workplace policies or regulations that an employer intends to enforce must be approved by the General Directorate. Without such approval, internal policies do not have full legal effect. In practice, even if internal policies have not been approved, an employer may still require employees to observe them on an operational basis.

3.Whistleblowing

The Law on the Protection of Whistleblowers 2023 is the only statute in Iran that specifically and directly addresses the protection of whistleblowers. The scope of “corruption” under this law is limited to corruption occurring within governmental and public entities.

09 Transactions

1.Employment Relationship

As a general rule, employment contracts are subject to continuity following a change of ownership or transfer of assets. In transactions such as mergers, where the legal personality of an entity may be dissolved, the employment contracts continue with the successor entity that assumes the legal personality of the dissolved entity. Such transactions do not, in and of themselves, render employment contracts invalid or terminated.

2.Compensation

Employees are not statutorily entitled to compensation solely as a result of an M&A transaction or an equity or asset transfer. However, the employer may, at its discretion, elect to grant incentive-based or ex gratia compensation or benefits to affected employees for motivational or retention purposes.

10 Termination of Employment

1.Termination Grounds

According to Article 21 of Labour Law, an employment contract will terminate in case of:

? Death;

? Retirement;

? Total or partial disability;

? Expiry of the term in case of temporary employment without explicit or implicit renewal;

? Completion of work in case of specific assignment;

? Employee’s resignation;

? Termination of the contract in the manner stipulated in the contract in accordance with Labour Law.

2.Termination Procedure

Pursuant to Article 27, where an employee fails to perform assigned duties or violates workplace disciplinary regulations after having received written warnings, the employer may terminate the employment contract only upon obtaining the positive opinion of the Islamic Labor Council.

Labor Law does not impose a statutory obligation on employers to provide prior notice of termination, nor does it specify a mandatory notice period.

3.Termination Protection

According to Labor Law, employees enjoy strong protection against dismissal.

Dismissal outside these narrowly defined circumstances is considered unlawful. In such cases, employees are entitled to challenge the termination before the labor dispute councils and may seek reinstatement with the high likelihood of favourable judgements for employees.

4.Severance and Compensation

Pursuant to Article 24 of Labour Law, upon termination of an employment contract, whether for a specific assignment or for a fixed term, the employer is obliged to pay severance benefits to any employee who, in accordance with the contract, has been employed for one year or more. Such payment shall be made for each year of service, whether continuous or intermittent, and shall be equal to one month’s salary based on the employee’s last salary.

5.Wrongful Termination

Pursuant to Article 165 of Labor Law, if the Appellate Labor Dispute Council upholds that the dismissal of an employee was unjustified, it shall issue an order for the employee’s reinstatement and payment of all accrued salaries or wages and benefits from the date of dismissal.

6.Mass termination and Layoffs

There is currently no effective statutory framework within the Labour Law that permits mass termination or layoffs prior to the expiry of employment contracts.

11 Confidentiality, Non-Compete, and Non-Solicitation

1.Confidentiality

There is no mandatory legal requirement, nor an established or common practice, to include a confidentiality clause in employment contracts. Notwithstanding, under the sample disciplinary by-laws issued by the Ministry, which employers may adopt as part of their internal policies.

2.Non-Compete and Non-Solicitation

There is no explicit statutory prohibition against the inclusion of non-compete or non-solicitation clauses in employment contracts. However, the use of such clauses is not common practice, and their enforceability before civil courts remain uncertain and has not yet been clearly settled by consistent case law.

12 Work Representation and Trade Unions

1.Work Representation

In the implementation of Principle 26, in units employing more than thirty-five employees, the Islamic Labour Councils shall be established to ensure Islamic justice and foster cooperation in the preparation of programs and the creation of coordination for the advancement of affairs in production, industrial, agricultural, and service units.

Finally, pursuant to the Directive on the Manner of Establishment, the Scope of Duties and Powers, and the Mode of Operation of the Workers’ Representative in the Workshops, in cases where no Islamic Labour Council or guild association exists, the workers may, in accordance with the provisions of the Directive, proceed to elect a workers’ representative.

2.Trade Unions

In the current Iranian legal system, Islamic Labour Councils, guild associations, and workers’ representatives constitute the three models prescribed under Labour Law, all of which are formed by workers and other employees at the form of sector-level.

A collective negotiation to reach a collective agreement is a relatively new phenomenon in Iran. Article 140 of Labour Law provided provisions for collective bargaining.

13 Dispute Resolution

1.Procedures & Enforcement

Iran’s judiciary system in terms of labour dispute comprises three essential tiers of proceedings through (a) First Instance Labour Dispute Council, (b) Appellate Labour Dispute Council, and (c) ACJ.

Any individual dispute between an employer and a worker or apprentice arising from the implementation of this Law and other labour regulations, an apprenticeship contract, workshop agreements, or collective labour agreements shall, in the first stage, be settled through direct conciliation between the employer and the worker or apprentice, or their representatives in the Islamic Labour Council. Where there is no such Council in a unit, settlement shall be sought through the workers’ trade association or the legal representative of workers and employers. In the event that conciliation is not achieved, the dispute shall be examined and resolved by the First Instance Labour Dispute Council, Appellate Labour Dispute Council and ACJ in the order set forth below.

2.Waiver & Enforcement

Under Iranian law, an employee may not waive statutory rights granted by Labour Law.

14 Others

1.Latest Development & Trends

Iran is considering alignment with additional ILO conventions, which may increase compliance expectations for foreign investors.

2.Cultural and Religious Considerations

There are no particular cultural or religious restrictions that would specifically affect international investors, including those from China. General respect for religious ceremonies, local customs and business etiquette, as is common in most jurisdictions, is sufficient.

* To avoid ambiguity, this article should not be regarded as legal advice.

Authors

Behnam Khatami is the Founder and Managing Partner of Nami Associates, with over 18 years of distinguished legal experience. Throughout his career, Behnam has advised numerous international corporate clients (including appliances, petrochemical companies, airlines, cargo transport, FMCG, electronics, automobile, healthcare, food & beverage, oil & gas, power, steel and engineering companies) on a broad range of labour and employment matters, including employment contracts, workforce restructuring, redundancies, terminations, and employment-related disputes. 

Golsa Daghighi is a Partner at Nami Associates, with over 16 years of distinguished experience in the legal field. She has successfully represented clients including foreign airlines, automobile, and oil & gas companies in labour diputes and advised on employment-related matters.

Nima Shojaei is an Associate at Nami Associates. Nima has provided strategic legal advice to clients across a diverse range of industries, including appliances, automotive, banking, food & beverage, healthcare, and renewable energy.

Translator

Jin Dongjie, Master of Laws, associate at Anli Partners. Area of expertise: Labor Law, ESG Compliance, Dispute Resolution.