How much does it really cost to hire in Iraq in 2026?
Employer social security is 12% under the 2023 law reform. Add 21 days of paid leave, 2 weeks of end-of-service gratuity per year of service, and 30 days of fully paid sick leave. Iraq charges no income tax on most private-sector salaries and the cost profile is leaner than many emerging-market peers. The lines that matter are the mandatory social contributions and the accruing gratuity obligation.
· Iraq guide
Illustration · Baghdad, Iraq
Iraq has a relatively low mandatory cost structure. The headline employer charge is social security at 12% of salary under the Workers Retirement and Social Security Law No. 18 of 2023. There is no separate pension levy. Social security covers it.
Every employee gets 21 days of paid annual leave under the Labour Law. Sick pay runs at full pay for 30 days per year. These apply from day one. They are fixed by law and not negotiable.
End-of-service gratuity accrues at 2 weeks of salary per completed year. An employee must serve 1 full year before gratuity is owed. Budget this obligation from the first month of hire.
The headline: what an Iraq hire actually costs
Start with the gross salary. Add 12% social security on that salary. Add the end-of-service gratuity reserve at 2 weeks per completed year of service.
The table below shows illustrative totals at an IQD 1,200,000 monthly salary (IQD 14,400,000 per year). These are computed from verified statutory rates and labelled illustrative. They are not statutory figures.
Iraq's mandatory cost stack is narrower than most emerging markets. There is no employer income-tax withholding cost; the employee bears that directly under a progressive schedule capped at 15%. The employer's non-salary obligations reduce to: social security, end-of-service gratuity, annual leave, and sick pay.
| Line | Illustrative cost on IQD 1,200,000 monthly salary | Source |
|---|---|---|
| Gross monthly salary | IQD 1,200,000 | Contract |
| Employer social security at 12% of salary | IQD 144,000/month (illustrative) | Social Security Law No. 18 of 2023, Deloitte Middle East |
| End-of-service gratuity reserve at 2 weeks per year | IQD 55,385/month (illustrative) | Iraq Labour Law No. 37 of 2015, Mondaq (Hannouche Associates) |
| Annual leave: 21 days paid leave, built into salary cost | Included in salary | Iraq Labour Law No. 37 of 2015 |
| Sick pay reserve: 30 days at full pay per year (reserve for average incidence) | ~IQD 10,000/month average exposure (illustrative) | Based on 30 days full-pay sick leave entitlement |
| Total illustrative employer cost (before Teamed fee) | ~IQD 1,409,385/month (illustrative) | ~117% of gross (illustrative) |
These figures are illustrative. They are computed from the 12% social security rate and the 2 weeks gratuity rate confirmed for 2026. The gratuity reserve uses two weeks of monthly salary divided by 52 weeks, multiplied by 12 months. They are not statutory figures and will vary with actual salary structure, tenure mix, and any benefits provided above the legal floor.
Add Teamed from $599 per employee per month and the total rises further. Use the Employer Cost Calculator to run your own salary figures.
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Confirm gross salary and location
Fix the gross monthly salary and confirm whether the role is in the Kurdistan Region or the federal area. The applicable minimum wage and social security rate differ by sector and location.
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Add employer social security
Apply the employer social security rate to the gross salary. Check whether the role is in the oil sector or non-oil sector, as rates differ between them.
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Reserve for end-of-service gratuity
Calculate the monthly gratuity reserve from the first month of hire. Use the verified statutory rate applied to the weekly salary equivalent and set aside the result each month.
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Layer in leave and sick pay exposure
Annual leave of 21 days is built into the gross salary cost. Budget separately for sick pay and maternity leave as event-driven costs that vary by team demographics.
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Set up income tax withholding
Configure the progressive tax withholding from the first payroll run. Remit withheld tax to the General Commission of Taxes within 15 days of each month end to avoid penalties.
End-of-service gratuity: a cost that starts accruing from year one
Iraq law requires 2 weeks of salary per completed year of service as end-of-service gratuity. The employee must complete 1 full year of continuous service before it is owed.
Treat gratuity as a monthly accrual. Budget the equivalent monthly reserve from the first month of each hire.
End-of-service gratuity under the Iraq Labour Law No. 37 of 2015 is the equivalent of 2 weeks of weekly salary per completed year. Unlike UAE gratuity, the Iraq law uses a weekly-salary base rather than a daily rate of basic wage. The full month of salary divided by roughly 4.33 gives the weekly rate for calculation purposes.
Illustrative reserve calculation
On an IQD 1,200,000 monthly salary, the illustrative weekly rate is approximately IQD 277,000. Two weeks per year gives approximately IQD 554,000 of gratuity per year of service. Monthly reserve: approximately IQD 46,200 (illustrative, based on verified rate). These figures are illustrative and should not be treated as statutory calculations.
When gratuity is owed
An employee must complete 1 full year of continuous service before end-of-service gratuity is owed at all. Employees who leave before reaching 1 full year do not earn a gratuity entitlement. After the first year, the entitlement grows by 2 weeks for each additional completed year.
Voluntary resignation and involuntary termination
The 2 weeks per year rate applies in both involuntary termination and voluntary resignation under current law. This is different from some countries where gratuity for resigned employees is lower or forfeited. Budget the same accrual rate regardless of how you expect the employment to end.
Avoiding a settlement surprise
The most common budgeting error is treating gratuity as a terminal cost rather than a monthly accrual. An employee who works three years accumulates three years of gratuity, payable at exit. If no monthly reserve was set aside, that liability appears all at once. Build the reserve into the monthly cost model from day one.
Leave costs: what Iraq law requires
Every employee gets 21 days of paid annual leave after one year of service. This is built into the gross salary cost.
Sick pay, maternity leave, and probationary notice are separate. They apply when triggered. None of them are optional.
Annual leave
The 21 days paid annual leave entitlement applies under the Iraq Labour Law No. 37 of 2015. The leave accrues after one year of service. Iraq does not combine public holidays into the annual leave count in the same way as some countries. The 21 days are the minimum paid leave days exclusive of public holidays. Budget the full entitlement from day one, as the liability accrues during the first year even if the leave cannot be taken until completion of one year.
Statutory sick pay
Iraq requires 30 days of sick leave at full pay per year. These can accumulate over time up to a maximum of 180 days total. After the accumulated maximum, the entitlement ceases. Average annual absence is well below 30 days, so the expected annual cost is modest. The maximum accumulation of 180 days represents a large long-service exposure and should be tracked for employees with extended illness patterns.
Maternity leave
Female employees are entitled to 14 weeks of paid maternity leave at full pay under the Iraq Labour Law. This is an employer-funded cost with no government reimbursement mechanism for private-sector employers. Budget the full maternity pay obligation as a direct employer cost. For a team with a significant proportion of female employees in working age, this is a real cost line to reserve against.
Working time and overtime
The standard working day is 8 hours and the standard working week is 48 hours. Hours worked beyond these limits attract overtime pay. Build the overtime exposure into the cost model if the role involves irregular or extended hours.
How Teamed handles Iraq employment costs for you
Teamed becomes your legal employer of record in Iraq for from $599 per employee per month, with zero FX mark-up in any currency.
Social security registration, income tax withholding, end-of-service gratuity accrual, and the full Iraq employment compliance stack run on one platform.
Real HR and legal experts handle your Iraq hires from the first offer letter through every monthly payroll run, social security filing, and end-of-service settlement. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the social security line, the gratuity accrual line, and the leave liability line. Nothing is hidden inside the management fee.
EOR payroll, contractor onboarding, and entity setup all live on one platform. An Iraq contractor who converts to full employment keeps their record. That same employee can graduate from EOR to your own Iraq entity without switching systems. EOR is the right structure for a first Iraq hire, until it isn't. Teamed does not lock you in. Start from the Iraq hiring overview or run the Employer Cost Calculator to see the full picture.
Frequently asked questions
What does it cost to hire someone in Iraq in 2026?
The main employer costs above gross salary are: social security at 12% of salary, end-of-service gratuity accruing at 2 weeks per completed year of service, paid annual leave of 21 days, and sick pay of 30 days at full pay per year. There is no separate employer pension levy. At a monthly salary of IQD 1,200,000, illustrative total employer cost runs to approximately 117% of gross before the Teamed fee.
What is the employer social security rate in Iraq?
The employer social security contribution rate is 12% of salary under Social Security Law No. 18 of 2023, confirmed for the non-oil sector. The employee contributes 5%. Combined, the total contribution is 17% of salary. Iraq has no separate mandatory pension contribution on top of social security.
How does end-of-service gratuity work in Iraq?
End-of-service gratuity under the Iraq Labour Law No. 37 of 2015 accrues at 2 weeks of weekly salary per completed year of service. An employee must complete 1 full year before any gratuity is owed. After the first year, the entitlement grows by 2 weeks per additional completed year. Budget this as a monthly reserve, not a terminal payment.
What statutory leave must an Iraq employer provide?
Every employee is entitled to 21 days of paid annual leave under the Iraq Labour Law. Sick pay runs at full pay for 30 days per year, accumulating up to a maximum of 180 days total. Female employees are entitled to 14 weeks of paid maternity leave at full pay. All these entitlements are employer-funded.
What is the income tax structure for employees in Iraq?
Iraq personal income tax follows a progressive schedule. The rate starts at 3% on income up to IQD 250,000 per year, rising to 5% between IQD 250,000 and IQD 500,000, then 10% between IQD 500,000 and IQD 1,000,000, and reaching 15% on income above IQD 1,000,000. The employer withholds tax from salaries and must remit it within 15 days of each month end.
The most common Iraq budgeting error we see is treating end-of-service gratuity as a termination cost rather than a monthly accrual. Two weeks of salary per year sounds modest. But for a five-year employee on a mid-range salary, the settlement at exit is ten weeks of pay. Budget the reserve monthly from the first week of hire.
Iraq employer social security is 12% under the 2023 law reform. Add 2 weeks of end-of-service gratuity per year and 21 days of paid leave already in the salary.
The cost structure is leaner than many emerging markets. But the gratuity obligation grows with every year of service and must be reserved monthly, not settled at exit.
Know every line before you send the offer.
Social security contributions: the main employer cost line
The employer pays 12% of salary into the Workers Retirement and Social Security system under Law No. 18 of 2023. The employee pays 5%.
There is no separate pension levy. Social security covers both retirement and other social benefits. Iraq has no employer payroll tax beyond this contribution.
Social Security Law No. 18 of 2023 replaced the previous contribution framework. The employer rate rose to 12% from the former rate under the old law. The employee rate of 5% was confirmed unchanged. Both rates apply to all private-sector employees in the non-oil sector.
The employer contributes 12% of salary for each employee covered by the non-oil-sector scheme. The employee contributes 5%. Combined, the total contribution is 17% of salary, split between employer and employee.
Source: Deloitte Middle East: Social Security Law No. 18 of 2023
Oil sector employees
Employees working in the oil and gas sector operate under a separate social security regime with different rates. If your hire is in the oil sector, the employer contribution rate differs from the 12% non-oil figure. Confirm the applicable rate with a local adviser for oil-sector roles.
No separate pension line
Iraq does not have a separate mandatory employer pension contribution distinct from social security. The social security system provides retirement benefits. The 12% employer contribution is the full mandatory retirement-benefit cost for non-oil-sector employees. There is no additional workplace pension layer to budget for on top of social security.
Employee social security deduction
The employer deducts 5% from each employee's monthly net salary and remits the full combined contribution to the General Company for Social Security. The deduction appears on the payslip. It is not an employer cost but it affects employee take-home pay and is part of the total compensation picture.