Hiring employees in Iraq requires an employer to identify the employee’s actual work location and the employing entity’s registration location before setting up an employment contract, Iraq payroll or social security. Federal Iraq and the Kurdistan Region of Iraq (KRI) do not necessarily apply the same labor, tax, social-security or public-holiday rules, so a Baghdad setup should not be copied automatically to Erbil, Sulaymaniyah or Duhok.

This 2026 Iraq employment guide is designed for Chinese companies managing recruitment, payroll, employer cost, an Employer of Record (EOR) assessment or termination. It principally reflects Federal Iraq’s Labour Law No. 37 of 2015, the Workers’ Retirement and Social Security Law No. 18 of 2023 and information verifiable through August 31, 2026. Minimum-wage status, KRI rules, oil-and-gas classifications, tax parameters and foreign-worker authorization should still be confirmed in writing before implementation.

1. Iraq Employment Compliance at a Glance in 2026

2. Three Employment and Payroll Changes Requiring Action in 2026

Minimum wage remains a reference requiring confirmation. IQD 350,000 per month remains the verifiable general Federal Iraq reference. It should not be described as a newly announced 2026 rate because no new 2026 decision text was located. Employers should obtain current written confirmation from the competent authority, the Daman process or local payroll adviser before setting offer pay or the insured earnings base.

The new social-security system remains an implementation priority. The Workers’ Retirement and Social Security Law No. 18 of 2023 continues to affect registration, contribution and benefit operations. A standard Federal private-sector case generally uses 5% for the employee and 12% for the employer, while specified oil-and-gas activities may use 25% for the employer. For a covered foreign worker, the state’s ordinary 8% share may instead become an employer cost.

Religious holidays require final official announcements. The Official Holidays Law No. 12 of 2024 establishes the national framework, but Gregorian dates for Eid al-Fitr, Eid al-Adha, Eid al-Ghadir, Islamic New Year, Ashura and the Prophet’s Birthday remain subject to official confirmation. HR should maintain separate layers for nationwide fixed holidays, officially announced religious dates, community-specific holidays and provincial temporary closures.

3. Iraq’s Employment Law and Regulatory Framework

The Ministry of Labour and Social Affairs (MOLSA), the Workers’ Retirement and Social Security Department and the Daman Digital system administer Federal labor and social-security requirements. The General Commission for Taxes (GCT) administers Federal tax. A KRI-based entity or employee requires a separate KRI labor, social-security, tax and holiday review.

Iraq does not impose a universal 13th- or 14th-month salary on every private-sector employee. A bonus, profit share, housing or transport allowance, hardship allowance, flight entitlement or private medical plan becomes mandatory only where required by law, an applicable collective agreement, the employment contract, valid work rules or a clear and consistent employer policy.

4. Recruitment, Offers and Onboarding

Federal labor law contemplates notifying the local employment office of a vacancy so that candidates may be referred through the statutory process. If the office cannot meet the request, direct recruitment may follow. Because local administration can vary, employers should confirm the operational process and retain submission receipts. A private employment agency should not charge the job seeker a placement fee.

An offer should state the role, workplace, term, basic wage and allowances, working hours, probation, benefits and conditions of employment. Employment contracts are commonly prepared in three copies and submitted as required. In Federal Iraq, Arabic should be the controlling local text. An English or Chinese version should support understanding without reducing statutory rights or overriding the enforceable local-language version.

Employers should also verify age, identity, qualifications, right to work and any sector licensing without using discriminatory criteria. The legal employer should control hiring decisions even when a customer, affiliate or EOR client participates in interviews.

5. Employment Contracts, Contract Types and Probation

A fixed-term agreement renewed more than once may be treated as indefinite, and continued work after expiry increases conversion risk. A material change to pay, allowances, workplace, duties, working time or term should be documented with employee consent and reflected consistently in the contract, payroll, social-security and tax records.

Probation is not an unrestricted option for every employee. A written probation clause is principally relevant where the worker does not have a professional certificate demonstrating the necessary occupational skill. It may not exceed three months and should not be repeated by the same employer. The employer may terminate for inability to perform the agreed work, with at least seven days’ notice. Minimum wage, working time, overtime, leave, social security, safety and non-discrimination still apply during probation.

6. Wages, Minimum Wage and Gross-to-Net Payroll

Wages must not be lower than the highest applicable floor under a collective agreement, occupational minimum wage or statutory minimum wage. IQD 350,000 per month is the currently verifiable general reference, not a newly issued 2026 figure. Different requirements may apply in the KRI, oil-and-gas activities and specified occupations.

Weekly wages are generally paid at the end of the week and monthly wages at the end of the month, with a maximum statutory delay commonly limited to five days. Payment may be made directly or, with written agreement, into the employee’s bank account. The payslip should separately identify the pay period, basic wage, allowances, overtime, additions, deductions and net pay.

Minimum-wage testing should not rely on the headline total alone. For example, basic pay of IQD 300,000 plus an IQD 50,000 transport amount does not automatically satisfy an IQD 350,000 floor. The employer must confirm whether the amount is fixed cash remuneration included in wages or reimbursement of documented business expenses.

Illustrative Baghdad payroll calculation. Assume a local, non-oil administrative employee with IQD 1,000,000 of monthly wage and allowances included in the social-security base.

The illustration excludes salary tax, overtime, leave reserves, insurance, recruitment, EOR fees and termination cost. Personal income tax should be calculated after applying the employee’s current statutory allowances and the GCT progressive rates; a fixed guaranteed net salary should not be promised before family and tax data are known.

7. Working Time, Overtime and Records

Different overtime limits may apply to industrial shifts, preparatory or supplementary work, exceptional activity, non-industrial work and road transport. Oil and gas, construction, security, transportation, mining and high-temperature work also require a role-specific occupational health and safety assessment.

Illustrative overtime calculation. For monthly pay of IQD 1,000,000, using 30 days and eight hours per day, the base hourly rate is approximately IQD 4,166.67. Ordinary overtime at 150% is approximately IQD 6,250 per hour, while weekly-rest or official-holiday overtime at 200% is approximately IQD 8,333.33 per hour. The employer must use the locally accepted divisor and the correct wage components in production payroll.

8. Public Holidays, Annual Leave and Other Statutory Leave

Ordinary work attracts at least 21 days of annual leave per year, while arduous or harmful work attracts at least 30 days. Entitlement accrues proportionately during the first and incomplete years. After the first five years with the same employer, entitlement increases by two days; after the second five years it increases by another two days; each later five-year period adds three days. Leave may be divided, but one period is normally at least 14 consecutive days. Unused entitlement is settled at the employee’s last wage on termination.

2026 Federal Iraq holiday calendar. Dates marked with an asterisk are religious dates subject to final official confirmation. A public-sector suspension does not always resolve every private-sector payroll question, so employers should verify the applicable notice and Labour Law treatment.

Christian, Sabean-Mandaean and Yazidi employees have additional community-specific holidays. Certain holy-city governorates may add local holidays, and the Council of Ministers may declare temporary official holidays. KRI holidays require a separate calendar.

9. Employer Social Security, Mandatory Benefits and Tax

The ordinary employer’s 12% is commonly allocated across pension at 8%, work injury and related coverage at 1%, unemployment at 1%, and health and social services at approximately 2%. For a specified oil-and-gas activity, the 25% employer rate is commonly divided among pension at 15%, injury and occupational disease at 3%, unemployment at 3%, and health and social services at approximately 4%. The employee’s 5% is assigned to the pension branch.

The insured earnings base generally includes wages and allowances. It should not fall below the higher applicable occupational or general minimum wage and, in principle, is capped at five times the applicable minimum wage. If IQD 350,000 is confirmed as the operative floor, an indicative ceiling would be IQD 1,750,000. This is a derived figure and should be used only after confirming both the current wage floor and the Daman base rule.

The employer should remit employee and employer contributions in the following month. If it failed to deduct the employee’s 5%, it should not assume it may recover all historic employee shares later. Delinquency exceeding 120 days may attract a penalty of 1% per month, generally capped at 100% of the original liability.

Federal salary withholding applies progressive rates of 3%, 5%, 10% and 15% after current personal allowances. The bands commonly referenced are 3% up to IQD 250,000, 5% from IQD 250,001 to 500,000, 10% from IQD 500,001 to 1,000,000 and 15% above IQD 1,000,000. Employers must confirm whether the thresholds are applied monthly or annualized in their filing method and must not copy the Federal scale into KRI payroll, where a different direct-deduction approach may apply.

10. Local Employees and Foreign Employees

An offshore contract, overseas payroll or short remote assignment does not automatically remove Iraqi labor, tax or social-security obligations when work is performed in Iraq. Before making a binding offer, obtain written confirmation of the worker’s authorization path and the Daman treatment of the individual’s nationality and activity.

EOR feasibility and immigration sponsorship are separate questions. An EOR arrangement does not guarantee that a work permit will be available for the role, nationality, industry or workplace.

11. Remote Work, Data Privacy and Record Retention

A remote or hybrid-work agreement should identify the work location, hours, equipment, expenses, safety controls, cross-border data access, management arrangement and return-to-office requirements. Long-term work from another country, the KRI or a customer site may change the labor-law, payroll tax, social-security, permanent-establishment and occupational-safety analysis.

The employer should maintain an individual personnel file recording recruitment, wages, allowances, sanctions and changes affecting employment status, and keep it for at least two years after employment ends. Employers with at least 15 workers also face statutory annual performance-report requirements. Payroll, health, discipline and identity data should be accessible only on a need-to-know basis.

Before transferring employee data to China or another jurisdiction, record the purpose, data fields, recipient, security measure and retention period. Remote monitoring should be necessary and proportionate, disclosed to employees and limited to a legitimate workplace purpose. Contract, HR, payroll, tax, Daman and bank records should use consistent employee identifiers and compensation figures.

12. Termination, Severance and Final Settlement

General severance is two weeks’ wages for each year of service, subject to statutory exclusions such as specified serious breaches or lawful probation failure. A worker may challenge the termination within 30 days. If the employer cannot prove an Article 43 reason, reinstatement and back pay may be ordered; if reinstatement is not possible, compensation may reach twice the ordinary severance amount.

Illustrative termination calculation. Assume monthly wages of IQD 1,200,000, four complete years of service, a lawful ordinary employer termination and no severance exclusion. Payment in lieu of 30 days’ notice is IQD 1,200,000. Severance is 1,200,000 ÷ 30 × 14 × 4 = IQD 2,240,000. Ten unused annual-leave days equal IQD 400,000. The illustrative total is IQD 3,840,000, excluding current wages, overtime, taxes, social security and expense reimbursement.

Final settlement should reconcile salary through the last day, overtime, unused leave, notice, severance, contractual benefits, expenses, deductions and tax. The employer should issue the required employment certificate and complete Daman, tax, access, equipment and immigration offboarding.

13. Hiring Model: Entity, EOR or Payroll Outsourcing

An EOR assessment should confirm, in order, the actual workplace, worker nationality, industry and role, local employing entity’s authority, local-language contracting capability, day-to-day HR, Daman, tax and HSE processes, and whether customer control could create co-employment or site-safety exposure. The end of a customer project is not itself a lawful basis for immediate dismissal.

sailglobal can help assess the hiring model, estimate employment cost and coordinate local employment and payroll processes. Coverage should not be promised for every region, foreign-worker category or high-risk activity until the relevant facts and local entity capabilities have been verified.

14. Common Iraq Employment Risks for Chinese Companies