Employing foreign nationals is an important consideration for companies, investors and businesses operating in Iran or seeking to enter the Iranian market. Foreign nationals’ expertise and skills may be required across various economic, industrial, technical and service sectors. However, the employment of foreign nationals in Iran is subject to specific legal requirements that must be satisfied before the commencement of an employment relationship.

Contrary to a common misconception, entering into an employment contract with a foreign national does not, in itself, authorise that individual to work in Iran. Under the Labour Law of the Islamic Republic of Iran, the employment of foreign nationals is conditional upon compliance with the applicable entry requirements and obtaining a work permit. Accordingly, employers must verify not only the terms of the proposed employment contract but also the immigration status and work authorisation of the foreign national concerned.

This article examines the legal framework governing the employment of foreign nationals in Iran, the requirements for obtaining a work permit, the legal requirements for employment contracts, employers’ statutory obligations and the consequences of unauthorised employment. It is intended to provide practical guidance to Iranian and foreign employers, as well as foreign nationals seeking to enter into employment relationships in accordance with Iranian law.

 

1. Legal Framework Governing the Employment of Foreign Nationals in Iran

The principal provisions governing the employment of foreign nationals in Iran are set out in Chapter Five of the Iranian Labour Law, particularly Articles 120 to 129. In addition, the general rules governing employment contracts, the Social Security Law and relevant implementing regulations apply to these employment relationships.

Under Article 7 of the Labour Law, enacted in 1990, an employment contract is defined as a written or oral agreement under which a worker undertakes to perform work for an employer, temporarily or indefinitely, in return for remuneration.

This definition indicates that Iranian nationality is not a prerequisite for a person to qualify as a worker under the Labour Law. Nevertheless, in addition to the general requirements applicable to employment contracts, the employment of foreign nationals in Iran is subject to specific restrictions and procedures.

Article 120 of the Labour Law provides that foreign nationals may not be employed in Iran unless they:

  • Hold an entry visa expressly granting the right to work; and
  • Have obtained a work permit in accordance with the applicable laws and regulations.

These are two distinct legal requirements: holding an entry visa that expressly authorises employment and possessing a valid work permit. Neither requirement, on its own, replaces the other.

It is also important to distinguish between a foreign national’s immigration status and their authorisation to work. Holding a valid residence document does not necessarily confer the legal right to work in Iran.

 

2. Which Foreign Nationals May Be Employed in Iran?

2.1. General Requirements for the Issuance of a Work Permit

Under Article 121 of the Labour Law, the Ministry of Cooperatives, Labour and Social Welfare is responsible for taking the necessary steps concerning the issuance of entry visas granting the right to work and work permits for foreign nationals, subject to the statutory requirements.

Article 121 establishes three principal conditions for the issuance of a work permit:

  1. According to the information available to the Ministry of Cooperatives, Labour and Social Welfare, there must be no Iranian workers among those ready and willing to work who possess comparable education and qualifications for the position.
  2. The foreign national must have sufficient knowledge and expertise to perform the proposed work.
  3. The foreign national’s expertise must be utilised for the purpose of training Iranian personnel and facilitating their subsequent replacement of the foreign worker.

Pursuant to the note to Article 121, the Technical Employment Board is responsible for determining whether these conditions have been satisfied.

These requirements demonstrate that the issuance of a work permit does not depend solely on an agreement between the employer and the prospective employee. The need for foreign expertise and the circumstances of the domestic labour market are also taken into account during the assessment process. Accordingly, an employer intending to recruit a foreign specialist should be prepared to justify the necessity of the relevant expertise and its suitability for the proposed position as part of the work permit application process.

2.2. Special Categories under Article 122 of the Labour Law

Article 122 of the Labour Law provides for the issuance, renewal and reissuance of work permits for certain categories of foreign nationals. These categories include:

  • Foreign nationals who have resided continuously in Iran for at least ten years;
  • Foreign nationals who are married to Iranian nationals; and
  • Migrants from foreign countries, particularly Islamic countries, and political refugees, provided that they hold a valid migration or refugee card and have obtained the written approval of the Ministries of Interior and Foreign Affairs.

Accordingly, individuals falling within the categories specified in Article 122 must also comply with the applicable work permit requirements in order to be lawfully employed. This provision establishes special eligibility conditions for the issuance, renewal or reissuance of their work permits; it should not be interpreted as granting a general exemption from the requirement to obtain work authorisation.

2.3. Exceptions under Article 120 of the Labour Law

The note to Article 120 of the Labour Law exempts three categories of foreign nationals from the requirements set out in that article:

(a) Foreign nationals exclusively serving diplomatic and consular missions, subject to the approval of the Ministry of Foreign Affairs;

(b) Employees and experts of the United Nations and its affiliated organisations, subject to the approval of the Ministry of Foreign Affairs; and

(c) Correspondents of foreign news agencies and publications, subject to reciprocity and the approval of the Ministry of Culture and Islamic Guidance.

These exceptions must be interpreted within the scope of the relevant statutory provision and should not be treated as a general exemption for other foreign nationals from the rules governing employment in Iran.

 

3. Work Permits for Foreign Nationals: Issuance, Validity and Renewal

A work permit is one of the principal documents required for the lawful employment of foreign nationals in Iran. It is issued by the Ministry of Cooperatives, Labour and Social Welfare in accordance with the applicable regulations.

3.1. Validity Period of a Work Permit

Under Article 124 of the Labour Law, a work permit may be issued, renewed or reissued for a maximum period of one year, subject to the requirements of the Labour Law.

The validity of a work permit must therefore be monitored throughout the employment relationship. Employers should not consider the initial issuance of a permit sufficient. They must keep track of its expiry date and, where the employment relationship is to continue, take the necessary steps to renew it in a timely manner.

3.2. Employment Within the Scope of the Work Permit

Compliance with the scope of employment specified in the work permit is another important legal requirement. Under Article 181 of the Labour Law, employing a foreign national in a position other than the one specified in their work permit may expose the employer to criminal liability.

Accordingly, when changing a foreign employee’s job title, duties or employment arrangements, employers should determine whether the proposed changes are consistent with the existing work permit or whether a new permit or an amendment to the existing permit is required.

3.3. Temporary Work Permits in Exceptional Circumstances

Article 126 of the Labour Law provides for the possibility of issuing a temporary work permit where the immediate employment of a foreign national is exceptionally required in the interests of the country’s industries.

Under this provision, the relevant minister must notify the Ministry of Cooperatives, Labour and Social Welfare of the matter. The temporary work permit may then be issued with the approval of the Minister of Cooperatives, Labour and Social Welfare. Such a permit may be valid for a maximum period of three months, and its extension requires the approval of the Technical Employment Board for Foreign Nationals.

This mechanism is a statutory exception subject to specific procedures. It should not be regarded as a general alternative to the ordinary work permit application process.

 

4. Employment Contracts with Foreign Nationals

Once the legal eligibility requirements for employment have been examined and the necessary work authorisation procedures have been completed, the next important step is to prepare the employment contract.

Employment contracts with foreign nationals are subject to the general requirements and mandatory provisions of Iranian labour law. A worker’s foreign nationality does not entitle the parties to disregard the mandatory protections established under the Labour Law.

4.1. Essential Requirements for the Validity of an Employment Contract

Under Article 9 of the Labour Law, an employment contract must satisfy the following requirements to be valid:

  • The subject matter of the contract must be lawful;
  • The subject matter of the contract must be sufficiently specified; and
  • Neither party must be legally or religiously prohibited from disposing of property or performing the work in question.

The note to Article 9 further provides that employment contracts are presumed valid unless their invalidity is established before the competent authorities.

4.2. Mandatory Information and Contractual Terms

Under Article 10 of the Labour Law, an employment contract must identify the parties accurately and include the following particulars:

  1. The type of work, occupation or duties to be performed by the worker;
  2. The basic wage or salary and its supplements;
  3. Working hours, holidays and leave entitlements;
  4. The place of work;
  5. The date on which the contract is concluded;
  6. The duration of the contract, where the employment is for a fixed term; and
  7. Any other matters required by the customs and practices of the relevant occupation or workplace.

Article 10 also identifies the conditions and procedures for terminating a contract of indefinite duration as matters to be addressed in the contract.

Written employment contracts must be prepared in four copies: one for the local Labour Office, one for the worker, one for the employer and one for the Islamic Labour Council or, where no such council exists at the workplace, the workers’ representative.

4.3. Additional Contractual Considerations in the Employment of Foreign Nationals

In addition to the mandatory particulars required under Article 10, including certain supplementary provisions in employment contracts with foreign nationals can help prevent disputes and practical difficulties.

Depending on the nature of the position and the parties’ agreement, such provisions may address the following matters:

(a) Identification and Details of Legal Authorisations

The contract may record the employee’s passport details, residence information and work permit particulars, including the permit number, date of issuance and expiry date. This information facilitates the identification and monitoring of the employee’s legal employment status.

(b) Relationship Between the Employment Contract and the Validity of the Work Permit

The parties may specify their respective responsibilities for monitoring and renewing the work permit. The contract should also address the steps to be taken if the permit is not renewed, suspended or revoked.

However, no contractual provision can authorise the employer to continue employing a foreign national unlawfully after the expiry of the relevant work permit.

(c) Remuneration and Payment Arrangements

The amount of remuneration, benefits, payment dates and payment methods should be clearly specified. Where the parties agree to express remuneration in a foreign currency, the relevant currency, the method of conversion into Iranian rials and the payment mechanism should also be precisely defined, subject to compliance with mandatory legal requirements.

(d) Confidentiality and Intellectual Property

Where a foreign employee has access to the employer’s confidential information, commercial documents, software, designs, inventions or other intellectual property assets, appropriate confidentiality and intellectual property provisions are particularly important.

In particular, employment contracts involving technology, manufacturing and research companies should clearly address the ownership of rights in works and other developments created in the course of employment, the scope of permitted use and the parties’ obligations following the termination of the employment relationship.

(e) Termination of the Contract and Its Consequences

Subject to the Labour Law, the contract should address the circumstances and procedures for terminating the employment relationship, the settlement of outstanding entitlements, the return of property and documents, and any obligations that continue after termination.

When drafting these provisions, it is important to ensure that the parties’ agreement does not restrict or waive the worker’s mandatory statutory rights and benefits under the Labour Law.

 

5. Employers’ Legal Obligations Towards Foreign Workers

Lawfully employing a foreign national involves more than obtaining a work permit and signing an employment contract. Throughout the employment relationship, the employer must also comply with the obligations imposed by the Labour Law and the Social Security Law.

5.1. Payment of Wages and Statutory Benefits

Foreign workers lawfully employed in Iran are entitled to the rights and protections provided under the Labour Law.

These include the right to receive wages and statutory benefits, entitlement to prescribed holidays and leave, compliance with applicable working-hour requirements and other legal protections relevant to their employment.

Article 8 of the Labour Law further provides that the terms of an employment contract, or any subsequent amendments to it, must not grant the worker benefits that are less favourable than those prescribed by law.

Accordingly, a worker’s foreign nationality does not, in itself, provide a legal basis for agreeing to waive or reduce the mandatory rights and benefits established under the Labour Law.

5.2. Social Security Insurance

Social security coverage is one of the most important obligations employers must consider when employing foreign nationals.

Under Article 5 of the Social Security Law, foreign nationals employed in Iran in accordance with the applicable laws and regulations are, in principle, subject to the provisions of that law.

However, Article 5 also provides for two exceptions:

  • The existence of bilateral or multilateral social security agreements between the Government of Iran and the government of the foreign national’s country of nationality; and
  • The foreign national’s coverage under an insurance scheme in their home country or another country, as evidenced by certification from the competent authorities and within the scope of the exceptions recognised by law.

Furthermore, Article 148 of the Labour Law requires employers operating workplaces subject to that law to insure their workers with the Social Security Organisation.

Consequently, employers should verify the foreign employee’s insurance status and, where Iranian social security legislation applies, fulfil the relevant registration and contribution payment obligations.

5.3. Taxation and Other Legal Obligations

Income derived from employment in Iran may be subject to Iranian tax legislation. Accordingly, employers and foreign employees should, as applicable, consider the requirements of the Iranian Direct Taxes Act, including the provisions governing employment income and employers’ statutory obligations to withhold and remit tax.

The tax treatment of a foreign employee may depend on various factors, including the nature of the employment relationship, the place where the work is performed, the duration of the employee’s presence in Iran and their residence and tax status.

A separate assessment of the foreign employee’s tax position is therefore necessary, particularly in employment arrangements involving foreign-currency payments or benefits provided outside Iran.

 

6. Employment of Foreign Nationals Without a Work Permit and Its Legal Consequences

One of the principal legal risks associated with employing foreign nationals in Iran is engaging individuals who do not hold valid work permits or who perform work outside the scope of their authorisation.

Under Article 181 of the Labour Law, employers who employ foreign nationals without work permits, whose permits have expired, or who assign them to positions other than those specified in their permits may be subject to imprisonment for a term of 91 to 180 days.

Furthermore, failure to notify the Ministry of Cooperatives, Labour and Social Welfare of the termination of a foreign national’s employment, where such notification is required by law, may also give rise to the employer’s criminal liability.

In addition to these criminal penalties, paragraph (c) of Article 11 of the Law on Amending Part of the Government Financial Regulations provides for a separate financial penalty for employers who employ foreign nationals without work permits.

Under this provision, the Ministry of Cooperatives, Labour and Social Welfare is required to impose a fine equivalent to five times the minimum daily wage for each day of unauthorised employment of each foreign worker. In the event of a repeated violation, the fine is doubled.

Accordingly, the consequences of unauthorised employment are not limited to financial penalties and may also include criminal liability for the employer.

For companies and businesses that regularly employ foreign nationals, monitoring the validity of work permits and ensuring that employees’ actual duties remain consistent with the scope of their authorisations are essential components of an effective employment compliance programme.

 

7. Termination of Employment Contracts and Post-Termination Obligations

The termination of an employment relationship with a foreign national gives rise not only to the usual consequences under an employment contract but also to specific obligations under the Labour Law.

Under Article 125 of the Labour Law, where the employment relationship between a foreign national and their employer is terminated for any reason:

  • The employer must notify the Ministry of Cooperatives, Labour and Social Welfare within 15 days; and
  • The foreign national must surrender their work permit to the Ministry of Cooperatives, Labour and Social Welfare within 15 days, in exchange for a receipt.

Where necessary, the Ministry of Cooperatives, Labour and Social Welfare may also request the competent authorities to order the foreign national’s deportation.

In addition, the termination of the employment contract must comply with the general provisions of the Labour Law, including Articles 21 to 25 and other relevant provisions.

At the end of the employment relationship, the employer must calculate and settle the worker’s statutory entitlements, including unpaid wages and end-of-service benefits, in accordance with the applicable legal requirements.

It is important to distinguish between the termination of the employment relationship and the process of dealing with the work permit. Although these processes are connected, they are legally distinct. Compliance with the requirements applicable to one does not release either the employer or the worker from the obligations relating to the other.

 

8. Resolution of Disputes Arising from Employment Contracts with Foreign Nationals

Where an employment relationship between an employer and a foreign national has been established within the framework of the Labour Law, disputes arising from that relationship are generally subject to the dispute resolution mechanisms provided under Iranian labour legislation.

Under Article 157 of the Labour Law, individual disputes between employers and workers arising from the implementation of the Labour Law, other labour regulations, employment contracts or workplace agreements are referred to the labour dispute resolution authorities if they cannot be resolved through conciliation.

These authorities comprise the Board of Investigation and the Board of Dispute Settlement.

Accordingly, a foreign national lawfully employed in Iran may, within the scope of the applicable provisions, bring a claim before the competent labour dispute resolution authorities to pursue rights arising from the employment relationship.

In employment contracts involving international elements, it should also be noted that the mere inclusion of a governing law clause or a provision selecting a foreign dispute resolution forum does not necessarily displace the mandatory provisions of Iranian labour law or the jurisdiction of the relevant statutory authorities. The validity and effect of such clauses must be assessed in light of the nature of the legal relationship and the applicable mandatory rules.

 

9. Legal Checklist for Employers Before Hiring Foreign Nationals

To reduce legal and contractual risks, Iranian and foreign employers should consider the following matters before commencing an employment relationship.

Before Employment

  • Verify the foreign employee’s nationality and identity documents;
  • Check the validity of their residence status and entry visa;
  • Ensure that the employee holds a valid work permit;
  • Confirm that the proposed position falls within the scope of the work authorisation;
  • Review the statutory requirements for the issuance or renewal of the work permit; and
  • Obtain any necessary confirmations from the competent authorities.

When Drafting the Employment Contract

  • Include the full particulars of both parties;
  • Clearly define the job title and duties;
  • Specify remuneration, benefits and payment arrangements;
  • Set out working hours, holidays and leave entitlements;
  • Specify the place and duration of employment;
  • Include appropriate confidentiality and intellectual property provisions;
  • Allocate responsibility for renewing work authorisations; and
  • Ensure compliance with the mandatory rights and protections under the Labour Law.

Throughout the Employment Relationship

  • Monitor the validity of the work permit on an ongoing basis;
  • Ensure that the employee’s actual duties remain consistent with the issued permit;
  • Fulfil applicable social security and tax obligations;
  • Maintain employment records and payment documentation; and
  • Take timely steps to renew the relevant legal authorisations.

Upon Termination of Employment

  • Comply with the statutory requirements governing termination;
  • Calculate and settle the worker’s outstanding entitlements and statutory benefits;
  • Notify the Ministry of Cooperatives, Labour and Social Welfare of the termination within 15 days;
  • Follow up on the surrender of the work permit in accordance with Article 125; and
  • Determine the status of continuing obligations, including confidentiality, intellectual property and other post-termination commitments.

Conclusion

Employing foreign nationals in Iran requires compliance with immigration regulations, work permit requirements and the rules governing employment relationships under the Labour Law. Employers cannot disregard the statutory restrictions on the employment of foreign nationals merely by entering into an employment contract or agreeing on the terms of employment.

Verifying the employee’s residence status and work authorisation before commencing employment, preparing an employment contract that complies with Iranian labour law, fulfilling applicable social security and tax obligations, and monitoring the validity of the work permit throughout the employment relationship are among the key measures that can help reduce employers’ legal and operational risks.

Careful drafting of provisions concerning confidentiality, intellectual property, remuneration and the consequences of termination is also particularly important, especially in employment contracts involving foreign specialists and employees of international companies.

Given the range of applicable regulations and the different legal circumstances of foreign nationals, the position of each prospective employee and the proposed employment contract should be assessed individually before the employment relationship begins. Obtaining specialised legal advice can help employers and foreign nationals understand the applicable requirements and structure and manage their employment relationships in compliance with Iranian law.

The legal team at Rezvanian International provides legal services in the areas of contracts, commercial law and investment-related matters in Iran. The firm can advise companies and investors on the legal requirements for employing foreign nationals and assist with drafting employment contracts tailored to their business needs.