Iranian labor law describes the rules of employment in Iran. As a still developing country, Iran is considerably behind by international standards. It has failed to ratify the two basic Conventions of the International Labour Organization on freedom of association and collective bargaining, and one on abolition of child labor. Countries such as the US and India have also failed to ratify many of these Conventions and a mere 14 other Conventions, only 2 since the Islamic Revolution.
The basic sources of Iranian labor law are,
The first constitution of Iran, passed in 1906, granted basic rights to the people of Persia through articles eight to twenty five, establishing equality before the law for everyone, and the right to form and join societies (anjumans) and associations (ijtimá'át). The Parliament (Majlis) and the Senate waited 16 years to pass the Civic Servants Employment Act of 1922. It gave protection to laborers and Civic servants. In 1923, the governor of Sistan and Baluchestan ordered a decree in nine articles to protect carpet makers’ rights, including working hours, leaves, and minimum age. It was the first national document of labor rights. In 1928, Parliament passed the Civil Law (Ghanon-e Madanei) which addressed employment contracts. This law divides the employer and employee relations into two categories by benchmarking the French Law. Independent contractors (e.g. carpenters, doctors, lawyers, and plumbers) who control their own work are accountable for their profit and lost. Next, servants who are being paid by an employer to perform specific tasks, but do not have full control of their work and act upon the employer’s instructions and orders.
In 1936, the cabinet issued regulations on minimum hygiene conditions in factories, which was the first attempt to regulate employer-employee relationships. On May 18, 1946, the Council of Ministers  passed the labor bill. The first labor minister was appointed that same year  which improved the systematization of labor relations and personnel management. Yet, the working conditions, despite the legislation, were entirely at the whim of enterprise owners because the laws were not enforced and the Labor Ministry was weak. Employers could do virtually as they wished with no consequences and they barred formation of labor unions.
In 1951, a committee was appointed by the ministry of labor to translate various countries labor laws and the international ILO Conventions to Persian in order to do a comparative study and draft a labor law. This effort did not lead to proposal of labor law. Then, from 1952 to 1957, various committees established by the ministry of labor and foreign consultants including a Belgian consultant and general secretary of the Middle East labor institute were invited to finalize the draft of labor law, which finally in 1959 voted and passed by the Parliament "Majils". This law was practiced until 1990.
The next phase of labor legislation began with the Shah’s "White Revolution" "Enghlab Sefied" in 1962. It provided generous welfare and social improvements, such as profit sharing, employee stock ownership plans, company housing, minimum wage, and an improved Social Security Act. All were paid for with revenue from high oil prices. Nevertheless, many private sector owners opposed the new initiatives that infringed on their power. New personnel practices were introduced, including payroll administration with time management, job descriptions, job classifications and evaluations, and organizational hierarchies, mainly in large companies and government-run industries. In the 1960s, progressive private sector entrepreneurs, such as the Ladjevardi family in the Behshar Industrial group, introduced job classifications; personnel policies and procedures, and automated payroll systems following the recommendations of the Iranian National Oil Company’s foreign advisors.
Following the Islamic revolution and the new constitution, this enchanted many with idealistic promises. The new constitution addressed work and labor topics in eleven areas through various articles summarized as the following:
A new era of labor legislation, shaped after the new Islamic constitution, recognized progress had occurred following the establishment of the first Islamic Workers Council or (Shora-e Islami Karagaran). This provided workers rights similar to those of European workers, but under the umbrella of Islam.
During the first two decades of the revolution, the Workers Council influenced many of the personnel management tasks including recruitments, selection, promotion, job evaluation, salary structure, productivity bonus, health and safety and many more tasks (even providing employees with a daily milk and food ration). Added to these were establishing and operating factory grocery stores and housing cooperatives. Ironically, many of these tasks became official ink of the 1990 Islamic Republic of Iran Labor law.
The end of the Iran-Iraq war marked the start of economic liberation, as well as, a gain of the reformists in Parliament. In this period, a new private sector emerged, challenging the utopian labor laws and regulations. With this, the 1990 labor law was pro-labor and expensive to administer. Management had to seat labor representatives on the company’s board of directors, which was unprecedented in the traditional management style of Iranian private sector, in addition to enforcement many welfare and mandatory benefit.
The first dent in the labor law came about with the introduction of temporary employment contracts that allowed employers to hire employees under a one-year contract with the ability to be reissued year after year after a settlement of the annual "end of services" benefit. The Ministry of Labor issued a communiqué in March 1994 stating that employment under the "fixed terms" contracts was legal.
The government created an ambitious development plan aimed at liberalizing and boosting the economy overnight. The plan contributed in creating a passive labor law. Then, in 2004, the reformists in the Sixth Parliament and the conservatives in the Guardian Council succeeded in reaching an agreement to amend the Labor Law to exempt firms with five or fewer workers from some of its provisions. This provided small entrepreneurs with more freedom in their employment practices.
Finally, in 2006, in response to growing pressures from the private sector for labor law reform, the Ministry of Labor drafted an amendment to deconstruct the "free market". A new law is under consideration based on these amendments.
There is a minimum national wage applicable to each sector of activity fixed by the Supreme Labor Council which is revised annually. In 2010 the minimum wage, determined by the Supreme Labor Council, was about US$303 per month (US$3,636 per year). Membership in the social security system for all employees is compulsory. The national poverty line for Tehran in the year ending March 20, 2008 was $9,612 per year and the national average was $4,932.
Although Iranian workers have, in theory, a right to form labor unions, there is, in actuality, no union system in the country. Workers are represented ostensibly by the Workers' House, a state-sponsored institution that nevertheless attempts to challenge some state policies. Guild unions operate locally in most areas but are limited largely to issuing credentials and licenses. The right of workers to strike is generally not respected by the state, and since 1979 strikes have often been met by police action.
The comprehensive Labor Law covers all labor relations in Iran, including hiring of local and foreign staff. The Labor Law provides a very broad and inclusive definition of the individuals it covers, and written, oral, temporary and indefinite employment contracts are all recognized.
The Iranian Labor Law is very employee-friendly and makes it extremely difficult to lay off staff. Employing personnel on consecutive six-month contracts is illegal, as is dismissing staff without proof of a serious offense. Labor disputes are settled by a special labor council, which usually rules in favor of the employee.
The Labor Law provides the minimum standards an employer must adhere to when forming an employment relationship. The minimum age for workers in Iran is 15 years, but large sectors of the economy (including small businesses, agricultural concerns, and family-owned enterprises) are exempted.
To have a valid contract concluded under the Law, the following provisions must be included:
The employer may require the employee to be subject to a probationary period. However, the probation time may not exceed one month for unskilled workers and three months for skilled and professional workers. During the probation period, either party may immediately terminate the employment relationship without cause or payment of severance pay. The only caveat being that if the employer terminates the relationship, he must pay the employee for the entire duration of the probation period.
The fact that the employment contract can be suspended by an employee under certain conditions presents yet another challenge to employers. What this allows is suspension of the employment contract under the following conditions:
Once the conditions giving rise to the suspension of the contract are removed, the employer must allow for return of the employee to work. If the position is filled or eliminated, the employer is obligated to provide a similar position for the employee. Failure to do the above is considered wrongful discharge and subject to legal action.
The Law allows for termination of the employment contract only under the following instances:
The employer is bound to pay benefits under all of the above scenarios according to the years of service.
An employee may only be dismissed upon approval of the Islamic Labor Council or the Labor Discretionary Board. Grounds for dismissal include an employee's neglect in carrying out his/her duties or violation of disciplinary by-laws of the employer. The employer must have provided written prior notice of the employee's violations. If the board is not convinced that the employee's dismissal is justified, the employer must reinstate the employee. Once an employee is dismissed, the employer is obligated to provide the legal severance package.
The Law mandates the following compensation for terminated, disabled and suspended employee:
The workweek in Iran is based on a 44-hour week. Typically, employees work from Saturday to Wednesday (8 hours per day) and half a day on Thursday (4 hours). Any hours worked beyond these will entitle the employee to overtime. The Law mandates a payment of 40% above the hourly wage to employees for any accrued overtime. The employee must consent to overtime work.
Employees are entitled to leave on all official state holidays (approximately 22 days a year) and Fridays. Any employee working during these holidays will be entitled to overtime pay. Additionally, employees are entitled to one-month holiday per annum. The annual leave for those employees engaged in hard and hazardous employment shall be five weeks per annum. Employees are entitled to save up to 9 days of their annual leave.
In case of termination, disability or redundancies, employees must be compensated for any accrued leave. Finally, employees are entitled to 3 days of paid vacation for marriage or death of a spouse, father, mother or child.
Women employees are entitled to 90 days of maternity leave. The employee's salary during maternity leave will be paid according to the provisions of the Social Security Act. Maternity leave must be considered part of an employee's service record. Employers must provide returning employees with the same position.
The Law forbids employment of foreign nationals without a proper work permit. Diplomats, United Nations employees and foreign press reporters are exempt from this requirement. A work permit to a foreign national will be issued only if the following conditions are met:
Work permits will be issued, renewed or extended for a maximum period of one year. Moreover, no exit visa will be granted to the foreign national unless the national has paid all due taxes, duties, etc. (More info: Employment of Foreign Nationals in Iran)
A new law provides that workshops with less than five employees will not be subject to the labor laws.
The Iranian constitution entitles Iranians to basic health care, and most receive subsidized prescription drugs and vaccination programs. An extensive network of public clinics offers basic care at low cost, and general and specialty hospitals operated by the Ministry of Health provide higher levels of care. In most large cities, well-to-do persons use private clinics and hospitals that charge high fees. Specialized medical facilities are concentrated in urban areas, but rural communities have relatively good access to primary care physicians at clinics in villages, where the government-sponsored primary health care system has raised the level of health education and prenatal care since the late 1990s.
Iran has a comprehensive social protection system with some 28 social insurance, social assistance, and disaster relief programs benefiting large segments of the population. These programs include training and job-search assistance, health and unemployment insurance, disability, old-age and survivorship pensions, and in kind- or in-kind transfers including subsidies (e.g., housing, food, energy), rehabilitation and other social services (e.g. long-term care services for the elderly), and even marriage and burial assistance.
Despite significant achievements in human development and poverty reduction, serious challenges to growth call for reform. While labor-market pressures continue to increase because of demographic dynamics and increased participation of women in the labor force, Iran’s economy is still unable to generate enough needed jobs to absorb the new flows into the labor market and at the same time reduce unemployment extensively.
In addition to income tax, employers are required to contribute to the State Social Security Fund and the Employment Fund. For social security and unemployment insurance, the employee pays 7% of salary (between the ages of 18-65), employer (20 to 23%), the State (3%). Independent workers pay 12-18%, depending on the type of coverage sought. In 2003 the minimum standard pension was 50 percent of the worker’s earnings but not less than the amount of the minimum wage.
The social security makes it possible to ensure the employees against unemployment, the disease, old age (retirement pension), the occupational accidents. Iran did not legislate in favour of a universal social protection, but in 1996, the Center of the statistics of Iran estimates that more than 73% of the Iranian population is covered by a Social Security. The Organization of the social security, managed by the Ministry of social protection, delivers also family benefits and of maternity under certain conditions. Iran spent 22.5 percent of its 2003 national budget on social welfare programs. More than 50 percent of that amount covered pensions.
Welfare programs for the needy are managed by more than 30 individual public agencies and semi-state organizations called Bonyad, as well as by several private non-governmental organizations. In 2003 the government began to consolidate its welfare organizations in an effort to eliminate redundancy and inefficiency.
by Author, Teheran, Iran: Ketab Kaneh Kanj Danesh