Employer of Record and Payroll Services in Iraq 
Mercans-owned legal entity
We have our own legal entity to protect your business from risk and provide you and your employees with a distinctive experience.
We have our own legal entity to protect your business from risk and provide you and your employees with a distinctive experience.
Services available
- Employer of record
- Contractor management
- Global payroll
- In-country payroll
Mercans offers complete payroll, PEO and HR services in Iraq
Iraq occupies a pivotal position in the Middle East region and has hundreds of green and brownfield opportunities across multiple sectors such as agriculture, tourism, housing, telecommunications and healthcare. Its domestic market of 36 million people also offers significant opportunities to produce and sell goods and services. As stability and security continue to improve, displaced professionals are returning and re-entering the workforce. Further, Iraq boasts one of the world’s youngest populations with 83% under 40 and wage rates which are dramatically below those in the US and Europe.
Doing Business in Iraq
Highly dependent on oil, Iraq (which includes the Iraq Kurdistan Region) is open for business. Despite the high risk and challenging market, there is opportunity for potentially high returns for businesses. The NIC (National Investment Commission) highlights opportunities to the investor community, providing growth and significant returns to the country. Iraq has a number of FTA (free trade agreements) in place. Opportunities that foreign businesses can explore include energy, infrastructure, defense and security, healthcare and financial and professional services. An investment license from the relevant investment commission offers tax exemptions but this is not required in order to do business in Iraq.
Entity Registration and Incorporation Requirements
Setting up a new business or expanding an existing one in Iraq is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.
Banking
Banking Hours: 8:00 am to 12:30 pm from Saturday to Thursday
Working Week
The standard working week is from Sunday to Thursday from 8:00 am - 5:00 pm
Labor Law
Iraq labor law applies to all employees working in Iraq regardless of nationality. For companies who operate multi-country payroll, take note that Iraqi labor law does not apply extraterritorially. Iraqi Labor Law No. 37 of 2015 applies to both foreign and national employees working in Iraq. This is the case regardless of the law chosen in their individual employment contracts.
Main Industries
Petroleum, chemicals, textiles, leather, construction materials, food processing, fertilizer, metal fabrication/processing
GDP Growth
-10.90%
Dates & Numbers
dd/mm/yyyy
Official State Name
Republic of Iraq
Population
40.22 million
Capital
Baghdad
Major Languages
Arabic
Currency
Iraqi dinar
Internet Domain
.iq
International Dialing Code
+964
25°C
Payroll
All employees should be properly documented and the full scope of work should be considered for each employee given the difficult nature of terminating an employment contract. A wage and overtime register shall be maintained which includes details on wages, wage deductions and net wages. All employees shall be paid in Iraqi currency unless otherwise stated. There is a minimum wage in place which can be changed by the Ministry of Labor depending on changes in the local market. Employers are also required to pay an employee for any unused annual leave.
It is acceptable to provide employees with online payslips
Payslip
Monthly
Reports
Employees are entitled to 21 days of paid annual leave
Annual Leave
The employee is entitled to 30 days of paid sick leave
Sick Leave
There are 14 weeks of paid maternity leave available but there are no provisions for paternity leave
Maternity & Paternity Leave
30 days’ notice is required for terminating an employee
Employee Termination
A 13th month salary is not mandated by law
13th month salary
IQD 350,000 per month
Minimum Wage
Employees must be compensated for overtime with an additional 50% of their regular salary
Overtime
This is set at two weeks’ salary for each year of service provided.
Severance Pay
Tax and Social Security
The concept of tax residence is not recognized in Iraq. All income generated in Iraq is taxed in Iraq, whether the employee is based in Iraq or not. All employees must be registered with the Department of Social Security.
Tax
The range of personal income tax is between 3% and 15% of the employee’s salary. However, there may be tax exemptions which can be applied depending on the employee’s status.
Corporate Income Tax
Personal Income Tax
Sales Tax
VAT
Social Security
Social security tax is imposed on salaries and benefits of both local and expatriate employees, after deducting allowances.
Social Security Rate
Social Security Rate for Employers
Social Security Rate for Employees
Employment Law
Iraq is heavily unionized, guaranteeing employees the right to form and join trade unions. Further, collective bargaining is recognized.
Employment Agreement
Employment agreements may be oral or in writing. There are no terms implied in employment agreements. Any changes made to the agreement have to be mutually agreed as unilateral amendments cannot be made.
Working condition
For work performed during the day, the overtime pay rate is 50%. However, where the work is done at night, this rate is doubled. Employees may, in exceptional cases, agree with their employer to exceed the overtime limits for a certain period, provided that the average number of hours worked during this time does not exceed 48 hours.
Leaves
Employees are entitled to full pay for feast days and official holidays that do not fall on a Saturday. After one year’s service, employees are entitled to 21 days fully paid annual leave which increases incrementally, according to labor law.
Employment termination
Termination, when permitted, requires 30 days’ notice. The law also requires employees to give employers 30 days’ notice on resignation. As for redundancy, these are generally not permitted under Iraqi labor law. The most common method of ending an employment contract is through mutual agreement. If an employee believes he has not been dismissed properly or there is cause for redress, the employee can approach the End of Service Committee or the labor courts.
30 days
Minimum notice period for terminating an employee
13 days
Total number of public holidays
40
Working hours per week
5 days
Total number of days for Compassionate and Bereavement Leave
Immigration
Foreign entities are able to set up branches in Iraq and do business even if fully foreign owned. There are some sector specific rules which require full or partial national ownership to obtain certain licenses and approvals in order to operate. These include pharmaceutical companies.
Residency permits
A foreign employee must obtain a work permit and residency permit in order to work. Although time consuming, these are necessary for the employee’s legal right to work. All companies that hire a foreign employee must obtain a work permit for the employee. Once the employee obtains a visa and enters the country, the company must attend the Ministry of Labor and Social Affairs to apply for the work permit within 30 days of the employee’s arrival. The permit is usually issued within 45 days of the application. From January 2021, a new fee of IQD 1.5 million is collected by the Residency Department in the Ministry of Interior for each expatriate foreign employee in Iraq.
Work Permit validity
One year
Required Documents
completed visa application form
two color passport photographs
copy of the applicant’s valid passport
official letter of employment.
Build the best team and hire top talent compliantly in Iraq. Get in touch with Iraq payroll outsourcing & PEO specialists for a free consultation!