Employment Compliance In Iraq and Kurdistan - Executive guidelines 2026

Employment compliance in Iraq and the Kurdistan Region is no longer a back-office legal task for international enterprises, NGOs, and energy firms. It has become a frontline operational priority in a market where opportunity is high and regulatory enforcement is higher.
As we move through 2026, the enforcement of Social Security Law No. 18 of 2023 and strict Iraqization quotas is at its peak. Authorities across Federal Iraq and the Kurdistan Region are actively auditing employers, reviewing contracts, and verifying registrations with unprecedented scrutiny.
Employment Compliance in Iraq today is not only about avoiding penalties. It is a strategic requirement for business continuity, uninterrupted operations, and the ability to hire, mobilize, and retain staff without regulatory friction.
This guide outlines the essential legal pillars for navigating employment compliance across both Federal Iraq and the Kurdistan Region (KRI), helping organizations operate with confidence in an increasingly regulated environment.

The Seven Essential Legal Pillars You Must Know to Ensure Full Employment Compliance in Iraq

1. The Jurisdictional Divide: One Country, Two Systems

Achieving total employment compliance in Iraq requires a dual-strategy approach. While the national goal of “Local Content” is universal, the administrative execution varies significantly between Federal Iraq and the KRI.

Federal Iraq (Baghdad & The South)

  • Regulatory Body: Ministry of Labour and Social Affairs (MOLSA).
  • The 80/20 Rule: Under current cabinet directives, 80% of a company’s workforce must be Iraqi nationals.
  • Legal Language: Arabic is mandatory for all employment contracts. While bilingual versions are standard, the Arabic text is the only version recognized by Iraqi Labor Courts.

Kurdistan Region (KRI)

  • Regulatory Body: KRG Ministry of Labor and Social Affairs.
  • The 75/25 Rule: The KRI maintains a 75% local content requirement.
  • Digitalization: The KRI has moved toward an e-Work Visa system, streamlining the process for foreign staff, though physical residency cards remain mandatory.

2. Social Security Law No. 18: The New Financial Reality

The Social Security and Pension Law No. 18 of 2023 has fundamentally shifted the “Total Cost of Employment.” Contributions are no longer calculated only on basic salary but on Total Remuneration (Basic + All Allowances).

Contribution Structure for 2026:

  • Standard Private Sector: Employer (12%) + Employee (5%) = 17% Total.
  • Oil & Gas Sector: Employers face a premium contribution rate of 25%, totaling 30% with the employee portion.
  • The Expat Registration Fee: Every new foreign worker registered must pay a one-time fee of 2,000,000 IQD (~$1,530). For workers already in-country before December 2023, the fee is adjusted to 750,000 IQD.

Risk Note: For foreign employees, the employer must fund the increased contribution portion unless the employee provides authenticated proof of coverage in their home country’s social security system.

3. Payroll and Personal Income Tax (PIT)

Managing a cross-border workforce requires precision in tax withholding to avoid the “Deemed Tax” penalties from the General Commission for Taxes (GCT).

Federal Iraq PIT Brackets (Monthly):

Net Income (IQD)

Tax Rate

0 – 250,000

3%

250,001 – 500,000

5%

500,001 – 1,000,000

10%

Above 1,000,000

15%

KRI PIT Rules:

The KRI utilizes a flat 5% tax rate on net income exceeding 1,000,000 IQD per month.

4. The NGO and Development Sector: Special Considerations

International NGOs (INGOs) are often caught between their tax-exempt status and their employment obligations.

  • Tax Exemption: While the INGO entity may be exempt from Corporate Tax, their employees are not exempt from PIT.
  • Social Security Liability: INGOs are strictly required to register all local and international staff with the Social Security Department. Failure to do so can lead to the freezing of NGO registration renewals.

5. Expat Mobilization: The 2026 Residency Workflow

Mobilizing a foreign expert involves more than just a visa. In 2026, the process follows a strict sequence:

  1. Entry Visa: Obtain a 30-day Business or Work Visa.
  2. Blood Test: Conducted within 10 days of arrival to screen for transmissible diseases (mandatory for residency).
  3. Security Clearance: In the KRI, this involves the Asayish; in Federal Iraq, it involves the National Security clearance.
  4. Health Insurance: (KRI Requirement) An annual fee of 375,000 IQD is now mandatory for all residency applicants.
  5. Work Permit & Residency Card: Issued by the Ministry of Labor and Ministry of Interior, respectively.

6. Termination, Severance, and "Arbitrary Dismissal"

Iraqi Labor Law is notoriously protective. “At-will” termination is non-existent.

  • Probation: Maximum 3 months. Either party can terminate with 7 days’ notice.
  • Termination for Cause: Requires a documented “30-day improvement notice.”
  • Severance Pay: Upon completion of service, employees are entitled to two weeks’ salary for every year worked.
  • Arbitrary Dismissal: If a court finds a termination was not legally justified, the company may be ordered to pay up to 12 months of salary as compensation.

7. Employment Compliance in Iraq Checklist

Ensure your project is audit-ready:

  • [ ] 80/20 Ratio: Is your local-to-expat ratio compliant with the latest Ministry directives?
  • [ ] Social Security Fees: Have you paid the 2,000,000 IQD registration fee for your foreign staff?
  • [ ] Contract Registry: Are your contracts registered and stamped by the Ministry of Labor?
  • [ ] Nursing Breaks: (Federal Iraq) Are you providing the mandatory one-hour paid nursing break for mothers with children under one year?
  • [ ] Accrued Severance: Are you budgeting for end-of-service gratuities on a monthly basis?

Employment Compliance in Iraq is Hard? No problem

Navigating the complexities of employment compliance in Iraq requires a partner who understands the local regulatory pulse, from the 80/20 Iraqization quotas to the nuances of Social Security Law No. 18. As your local “Compliance Engine” and Employer of Record (EOR), Shull Solutions assumes the legal and administrative liabilities of your workforce, ensuring your operations remain 100% compliant from Basra to Erbil. If you have any questions regarding current labor regulations or wish to secure your operations with a Full Compliance Audit, contact our team today. You can also visit our website to explore our comprehensive range of HR management services designed to let you focus on your core mission while we handle the bureaucracy.