Iran Labor Law Guide（Part A）

The Author： Dr. Ali Hatami

The Translator： Nengna Li

As a strategic hub in China's Belt and Road Initiative, Iran connects Eurasia with its vast energy resources, critical location linking the Persian Gulf and Central Asia, and growing industrial potential. These advantages make it a key destination for Chinese companies expanding into energy, infrastructure, and manufacturing sectors. Yet enforcing Iran’s labor laws poses unique challenges. Rooted in Islamic Sharia principles but blended with modern labor protections, the system enforces distinct rules on employment contracts, foreign worker quotas, termination procedures, and anti-discrimination practices. For businesses, understanding these regulations is essential to operate smoothly and comply with local requirements.

In Iran Labor Law Overview,Ali Hatami—a lawyer with 18 years of practical experience—grounded in Iran’s judicial practices, systematically outlines the core framework and enforcement details of the labor laws. By focusing on the legislative logic behind the laws and key priorities in workforce management, he breaks down rigid legal constraints and hidden risks across all dimensions of employment practices. This approach helps Chinese investors bridge cultural and regulatory divides, enabling them to establish stable and sustainable labor management systems in the Iranian market.

(The following content is excerpted from Iran Labor Law Overview - Part A. For the full version, refer to the Iran Chapter in Invitation to Contribute to The Labor Law Environment Report of the " Belt and Road" Countries.)

• Due to economic changes and rising retirement costs, proposals to increase the retirement age to 62–65 years have been introduced in some government reform plans.

• The Social Security Organization has tightened the approval process for such retirements (regarding hazardous and arduous jobs), requiring specialized committees to confirm the nature of these jobs, and some groups have been excluded from this benefit..

• Recent reforms have limited individuals to increase their retirement pensions by paying lump-sum premiums in their final years of employment, and pensions are now calculated based on the average salary over a longer period (e.g., the last 10 years instead of the last 2 years).

• The Social Security Organization has introduced special insurance schemes for informal workers, including insurance for self-employed individuals, voluntary insurance, and home-based work insurance. These schemes allow informal workers to benefit from retirement pensions, health insurance, and disability insurance by paying their own premiums.

• Remote workers must receive the same wages and benefits as other employees, and employers are required to provide the necessary equipment for working from home.  

According to the Labour Law, a worker is defined as any individual who performs work for an employer in exchange for wages. In Iran’s labour law system, workers are classified based on the type of employment relationship into several main categories：permanent workers, contractual workers, contracted workers and temporary workers. 

• Employment Contracts

The employment contract is one of the most important documents in the relationship between a worker and an employer. According to the Labour Law, employment contracts are divided into four main types: permanent contract, temporary contract, project-based contract and probationary contract, and every employment contract must include Mandatory Terms.

• Working Hours

According to the Labour Law, the maximum legal working hours in Iran are 44 hours per week. Workers typically work 8 hours a day, five days a week. Meanwhile,overtime work must be agreed upon by the worker, and the employer is required to pay at least 40% above the regular wage for each hour of overtime. Except in exceptional cases agreed upon by both parties, overtime hours should not exceed 4 hours per day. 

• Wages

One of the most important aspects of labour law in Iran is the wage payment system, which is governed by the Labour Law and social security regulations, and issues include:

• The minimum wage is the lowest amount that an employer is legally required to pay a worker;

• Employers are required to pay wages on the specified due date;

• Wages must be paid in cash or deposited into the worker’s bank account;

• Employers are required to provide workers with pay slips detailing wages, benefits, insurance deductions, and taxes;

• Workers and employers may enter into collective agreements for additional payments.

•  Leave and Holidays

One of the most important rights of workers in Iran’s labour law system is the right to leave and holidays, which is emphasized as a principle of worker protection in the labour laws of many countries.

• Annual Leave: Workers are entitled to annual leave with pay, including official holidays, amounting to four weeks (26 working days) per year. For workers in hazardous and arduous jobs, this increases to five weeks. Annual leave should, if possible, be taken in two instalments, with each instalment taken after every six months of work. 

• Sick Leave:Workers can take sick leave if they fall ill. Sick leave is paid if approved by a physician certified by the Social Security Organization. Payment during sick leave is the responsibility of the Social Security Organization, and the employer is not required to pay directly. 

• Maternity Leave: According to the Labour Law, pregnant women are entitled to maternity leave. Recent amendments to the law have increased maternity leave from 6 months to 9 months. During maternity leave, the worker’s wages are paid by the Social Security Organization. 

• Family and Marriage Leave: According to the Labour Law, workers are entitled to three days of paid leave for marriage or the death of close relatives (parents, spouse, or children).This leave cannot be accumulated and is forfeited if not used within the specified period.