---
title: "Iraq EOR vs Entity 2026 | Crossover + When to Switch"
description: "Iraq EOR vs own entity. Employer social security 12% (no separate pension). Setup typically USD 8,000 to 25,000 illustrative. Full decision guide."
canonical: https://www.teamed.global/country-hiring-guides/iraq/eor-vs-entity
---

Iraq · EOR vs entity child

Served by Teamed vetted partner-entity network in Iraq

# When do you graduate from an *EOR to your own Iraq entity*?

Iraq's Companies Law and Investment Law No. 13 of 2006 make foreign entity setup one of the most involved in the Middle East. Typical formation takes 3 to 6 months and requires Ministry of Trade registration plus Central Bank approval before you can open a business account. Meanwhile your employer social security bill is 12% under Law No. 18 of 2023, and Iraq has no separate mandatory pension contribution on top of that. Here is how the maths works out, and the factors that shift the decision beyond headcount.

Last reviewed 13 June 2026 · Iraq guide

![A view across the Tigris River toward the Baghdad skyline at dusk.](/images/country-guides/iraq-eor-vs-entity.webp)

Illustration · Baghdad, Iraq

Answer.cite this

For Iraq, an EOR is faster and cheaper at low headcount. Setting up your own Iraqi entity typically takes 3 to 6 months. Formation typically costs USD 8,000 to 25,000 in professional fees and government charges. Running it costs roughly USD 2,500 to 5,000 per month.

Those are typical ranges, not law figures. Entity costs vary by ownership structure, the Investment Law route you take, and how much you outsource. The crossover point typically lands around 8 to 15 employees given Iraq's higher formation cost.

Employer social security is 12% on both sides of the comparison under Law No. 18 of 2023. Iraq has no separate mandatory pension scheme. The 12% rate covers retirement, disability, and work injury together. The entity side also carries formation costs and ongoing compliance overhead.

![Hands reviewing employment documents at a desk in a Baghdad office.](/images/country-guides/iraq-eor-vs-entity-polaroid-1.webp)

Sign here

## The crossover maths

EOR cost scales with headcount. One fee per employee per month. Entity cost has a fixed overhead. That fixed line and the EOR line cross at around 8 to 15 employees for average Iraq-based tech salaries.

Teamed charges from $599 per employee per month. Your own Iraqi entity carries a typical fixed monthly overhead of USD 2,500 to 5,000 for payroll, bookkeeping, filings, and HR admin. Iraq's higher formation cost also means the one-off investment takes longer to amortise.

The calculation below uses USD as the illustrative basis. Teamed charges from $599 USD per employee per month with zero FX mark-up. Iraqi dinar costs are approximated in USD for comparability; actual costs depend on prevailing exchange rates and local market conditions.

All entity cost figures in this table are typical ranges. They cover outsourced payroll, bookkeeping, statutory filings, and HR admin for a small Iraqi private company (WLL or single-person LLC). They are illustrative, not law figures. Actual costs vary with your ownership structure, the number of foreign nationals employed, and the complexity of your Investment Law licence.

Iraq has no separate mandatory pension contribution. Employer social security of 12% under Law No. 18 of 2023 covers retirement, disability, and work injury together. It applies on both sides of the comparison. It does not shift the crossover, but it does mean the statutory on-cost structure is simpler here than in countries with separate pension line items.

The formation cost amortisation matters. At USD 8,000 to 25,000 one-off, an entity needs more employees and more months to recover than a UK Ltd or an Albanian ShPK. Salary bands in Iraq vary widely between Baghdad tech roles and entry-level positions. [Run the Crossover Calculator with your own headcount and salary band.](/tools/crossover-calculator/iraq)

1. Calculate the EOR cost Multiply the Teamed fee (from $599 USD) by your planned Iraq headcount. This is the fixed variable cost. It grows linearly as you hire.
2. Estimate the entity fixed overhead Typically USD 2,500 to 5,000 per month for a small Iraqi WLL. This covers payroll bureau, bookkeeping, filings, social security admin, and first-point HR. This cost does not grow much until headcount exceeds 15.
3. Find the crossover headcount The crossover is where EOR monthly cost equals entity monthly overhead. For most Iraq salary bands this is around 8 to 15 employees. Use the Crossover Calculator for your own numbers.
4. Factor in non-financial triggers The maths gives you a headcount threshold. Government contracting, Investment Law benefits, and market-validation reversibility are separate questions that may move the decision date in either direction.
5. Plan the graduation date Allow 3 to 6 months for entity formation before the first payroll on your own entity. Start banking applications at the same time as legal formation. Start the GEMO process while EOR continues running.

## Iraq entity setup: what it actually costs

Forming an Iraqi private company typically costs between USD 8,000 and USD 25,000 all-in. Government fees are a fraction of this. The rest is legal work, Investment Commission registration, Ministry of Trade filings, and banking.

Allow roughly 3 to 6 months from the incorporation decision to your first payroll run. Banking is almost always the gating step for foreign-owned entities.

These are typical ranges. They are not law figures. There is no law that sets what an Iraqi entity costs to form. The range reflects real market rates for professional services and reflects the multi-agency registration process that foreign investors must navigate. Costs vary significantly with ownership structure and the Investment Law route chosen.

| Cost item | Typical range | One-off or recurring |
| --- | --- | --- |
| Ministry of Trade registration and company certificate | USD 500 to 1,500 | One-off |
| National Investment Commission (NIC) licence (if Investment Law route) | USD 1,000 to 5,000 | One-off plus annual renewal |
| Legal drafting of Memorandum and Articles of Association | USD 1,500 to 4,000 | One-off |
| Notarisation and legalisation of founding documents | USD 500 to 2,000 | One-off |
| Iraqi business bank account opening | USD 500 to 2,000 (initial deposit varies) | One-off plus monthly fees |
| Tax registration with General Commission of Taxes | USD 0 direct (admin time) | One-off |
| Social security registration with Workers Retirement Authority | USD 0 direct (admin time) | One-off |
| Employment contracts and HR policies drafting | USD 1,000 to 3,500 | One-off |
| Local legal agent or sponsor fees (where required) | USD 2,000 to 7,000 | Recurring annually or one-off depending on structure |
| **Realistic total setup cost** | **USD 8,000 to 25,000** | **Mostly one-off** |

### Why banking is the critical bottleneck in Iraq

Iraqi state banks and private banks apply significant due diligence requirements to foreign-owned or foreign-parented companies. Foreign parent documentation, director identification, and source-of-funds verification can take 6 to 12 weeks after application. Some entities wait months. Without a functioning business bank account, local payroll cannot run. This regularly turns a notional 6-week incorporation process into a 4 to 6 month wait before the first payroll. Plan for this before you set any target start date.

## Iraq entity ongoing cost: typically USD 2,500 to 5,000 per month

Running a small Iraqi private company typically costs USD 2,500 to 5,000 per month. That covers outsourced payroll, bookkeeping, statutory filings, social security administration, and HR advisory.

Below 7 employees, this fixed overhead dominates the per-head cost. Above 15 employees the overhead amortises and the entity starts to look clearly cheaper.

These figures are typical market ranges for a small Iraqi private company (WLL) with 1 to 15 employees. They are illustrative. They are not law figures. Actual costs depend on whether you outsource or hire in-house, the number of foreign nationals on the payroll, and whether you hold an Investment Commission licence that requires periodic compliance reporting.

| Monthly cost item | Typical range | What it covers |
| --- | --- | --- |
| Outsourced bookkeeping and monthly accounts | USD 600 to 1,200 | Cash reconciliation, accruals, monthly P&L |
| Payroll service (1 to 15 employees) | USD 300 to 700 | Monthly salary processing, social security filings, payslips |
| Annual accounts and tax return (amortised) | USD 150 to 400 | Around USD 1,800 to 4,800 per year divided by 12 |
| Social security administration (Workers Retirement Authority) | USD 100 to 300 | Monthly contribution filings, employee records |
| HR and employment law advisory | USD 200 to 600 | Contract reviews, Labour Law No. 37/2015 compliance |
| Iraq People Ops and first-point HR | USD 400 to 900 | Onboarding, queries, leave admin |
| NIC licence annual renewal and reporting (amortised) | USD 100 to 400 | Required if operating under Investment Law |
| Software subscriptions and banking fees | USD 100 to 300 | Accounting software, bank monthly fees |
| **Total ongoing monthly** | **USD 2,500 to 5,000** | **1 to 15 employee Iraqi WLL** |

Above 15 employees, dedicated in-country HR and a finance function typically become necessary. The cost band widens at that point. Foreign nationals on the payroll add immigration administration costs that are not included in these figures.

## The cost nobody quotes: director liability

Iraqi company directors carry personal duties under Companies Law No. 21 of 1997 and the Labour Law No. 37 of 2015. These duties cannot be delegated to advisors. Directors who authorise incorrect social security filings or late tax remittances face personal penalties.

EOR clients do not carry these duties. Teamed holds them as the legal employer.

Most cost comparisons skip the director-liability dimension because it is hard to put a number on. It is worth naming explicitly before you decide to register an entity in Iraq.

### Personal director duties under Iraqi law

Under [Companies Law No. 21 of 1997](https://www.ilo.org/dyn/natlex/natlex4.detail?p_lang=en&p_isn=96652) and its amendments, every director of an Iraqi private company (WLL) must act in the best interests of the company, exercise reasonable management duties, and avoid transactions that conflict with the company's interests. Failures in this duty are personal, not just corporate. Foreign directors based outside Iraq carry the same duties and cannot transfer them to a local agent.

### The compliance treadmill

- **Monthly social security payments**: contributions under Law No. 18 of 2023 are due monthly to the Workers Retirement and Social Security Authority. Late payment attracts penalties and interest. The director is personally accountable.
- **Income tax withholding**: the employer must remit withheld income tax within the first 15 days of the following month. Directors who miss this deadline face personal liability for the shortfall.
- **Annual accounts and tax return**: due to the General Commission of Taxes annually. Iraqi tax administration is paper-intensive and requires in-person filings in some cases.
- **Investment Commission reporting**: entities operating under Investment Law No. 13 of 2006 must file periodic activity reports with the National Investment Commission. Failure risks licence suspension.
- **Labour Law compliance**: Labour Law No. 37 of 2015 requires written employment contracts, notice period compliance, and end-of-service gratuity tracking. Directors are personally responsible for ensuring these obligations are met.

Each filing is individually manageable. Stacked across a year in a market with less digitised government infrastructure than Western Europe, they consume significant management attention. An EOR carries all of these on its own partner entity.

## When you should stay on EOR

Below 8 employees, with project-based hires, or while you are still testing the Iraq market, the EOR is the right answer. The crossover is a maths threshold. It is not a strategic verdict.

Reversibility matters. Entity setup in Iraq is sticky. Winding down an Iraqi WLL requires Ministry of Trade approval, tax clearance, and social security settlement. It can take 6 to 12 months. EOR is not like that.

- **Under 8 Iraq employees on average salaries**: EOR is cheaper every month. Iraq's entity overhead is higher than most emerging markets and has nothing to amortise against at low headcount.
- **Market validation phase**: you are hiring 1 or 2 people to test commercial fit in Baghdad, Erbil, or Basra. Entity setup commits USD 8,000 to 25,000 and 3 to 6 months of management attention before you know whether the Iraq market will deliver.
- **Project-based hires**: 6 to 18 month engagements where the formation cost will not amortise before the project ends and the entity must then be wound down.
- **Security and operational uncertainty**: if your Iraq market entry plan depends on conditions stabilising, the EOR lets you maintain a compliant workforce without committing to the irreversibility of entity formation.
- **Foreign ownership complexity**: sectors with foreign ownership restrictions in Iraq require an Investment Law licence or a local partner arrangement. EOR removes that structural question entirely until you are confident the market warrants the commitment.

## When you should switch to your own entity

Above 12 to 15 employees consistently, with a multi-year Iraq plan, or with local contracting requirements, your own entity beats EOR on cost. It also unlocks capabilities the EOR structure cannot provide.

The single biggest structural pull in Iraq is local contracting substance. Government contracts and large enterprise deals in Iraq typically require a registered Iraqi entity.

- **Sustained headcount above 12 to 15 Iraq employees** at average salaries: the entity overhead amortises across enough people that per-head cost falls below the EOR fee. Iraq's higher entity overhead pushes the crossover point higher than most comparable markets.
- **Government and public-sector contracting**: Iraqi government tenders and Ministry contracts typically require a locally registered company. EOR employment does not provide that contracting vehicle.
- **Investment Law benefits**: entities registered under Investment Law No. 13 of 2006 gain tax exemptions and import duty reliefs not available to EOR arrangements. For capital-intensive operations these benefits can outweigh the setup cost well before the headcount crossover.
- **Local banking and treasury**: operating an Iraqi entity gives direct access to the Iraqi banking system and the Central Bank's foreign currency allocation mechanism. EOR payroll runs through the EOR entity's account, not yours.
- **Multi-year operational commitment**: if you are building a permanent Iraq team with no exit horizon, the annual entity overhead amortises strongly and the maths clearly favours incorporation.

## How Teamed's Graduation Model handles the transition

Teamed graduates customers from EOR to their own entity on the same platform. Same Iraq specialist. Same employment contracts, novated to the new entity. No break in employee tenure or benefits.

Most providers treat graduation as a re-onboarding event. Employees re-sign, sometimes lose continuous service, and lose accrued leave. Teamed treats it as a stage of the employment lifecycle.

The technical mechanic is **contract novation**: the employment contract transfers from Teamed's partner entity to your new Iraqi company on a specified date. All terms carry across. Salary, accrued end-of-service entitlements, and continuous service date all remain unchanged. The employee sees a different employer name on their contract. Nothing else changes.

What we do operationally:

- Stand up your Iraqi entity through [GEMO](/entity-management), typically 3 to 6 months including Ministry of Trade registration and banking, while EOR continues running in parallel.
- Register the new entity with the General Commission of Taxes and the Workers Retirement and Social Security Authority.
- Novate every active employment contract on a single effective date.
- Migrate ongoing benefits without any lapse, including accrued end-of-service gratuity continuity.
- Close out EOR-period social security filings and open new declarations on the entity from the novation date.
- Provide the same People Ops specialist as the post-graduation primary contact.

Iraq's banking timeline is the variable that determines the graduation date. Teamed starts the banking process at the same time as the legal formation steps, not after. That parallel track prevents the situation where legal formation completes but payroll cannot run for another two months while the bank processes the account application.

## How does Teamed handle Iraq employment for you?

Teamed becomes your legal [employer of record](/lp/employer-of-record) in Iraq for [**from $599 per employee per month**](/pricing), with **zero FX mark-up** in any currency.

Payroll, benefits, and the full Iraq Labour Law stack run on **one platform**.

Your Iraq hires are handled by **real HR and legal experts** from the first offer letter through every monthly social security filing. You get **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 at 12% and the annual leave accrual for 21 days working days. Nothing is hidden inside the management fee.

Iraq has no separate mandatory pension contribution. The 12% social security rate under Law No. 18 of 2023 covers retirement, disability, and work injury together. That is the full statutory on-cost. EOR payroll, contractor onboarding, and entity setup all live on **one platform**. Run the [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator) to see the month the model flips. Start from the Iraq hiring overview. Key sources: [PwC Iraq Tax Summaries](https://taxsummaries.pwc.com/iraq/individual/other-taxes) and [Deloitte Middle East on Social Security Law No. 18/2023](https://www.deloitte.com/middle-east/en/services/tax/perspectives/social-security-law-no18-of-2023.html).

## Frequently asked questions

At what headcount does an EOR stop being cheaper than an Iraqi entity?

The crossover typically lands at 8 to 15 Iraq employees at average tech salaries. Below that, the EOR fee (from $599 per employee per month) is cheaper than the typical entity overhead of USD 2,500 to 5,000 per month. Above it, the entity overhead amortises and per-employee cost falls below the EOR fee. Iraq's higher formation cost also pushes the breakeven horizon further out. Use the Crossover Calculator to run your own salary band.

How much does it cost to set up an Iraqi private company?

Typically USD 8,000 to 25,000 all-in. Government registration fees are a fraction of this. The rest is legal drafting of founding documents, Investment Commission registration if needed, notarisation and legalisation costs, bank account setup, employment contracts, and HR policies. The range varies with whether you take the standard Companies Law route or the Investment Law No. 13 of 2006 route, and whether directors are Iraq-resident or based abroad.

How long does it take to set up an Iraqi entity and run the first payroll?

Around 3 to 6 months from the incorporation decision to first payroll. Ministry of Trade registration, Investment Commission licensing where required, and Central Bank banking approval all run in sequence or overlap awkwardly. Banking is typically the gating step. Foreign-owned entities should allow significant buffer before setting the first payroll target date.

Does Iraq have a separate pension contribution on top of social security?

No. Iraq has no separate mandatory occupational pension scheme. The employer social security rate of 12% under Workers Retirement and Social Security Law No. 18 of 2023 covers old-age retirement, disability insurance, and work injury insurance together. This is the full statutory on-cost. There is no additional pension line item on either side of the EOR vs entity comparison.

What is Teamed's Graduation Model for Iraq?

Teamed graduates customers from EOR to their own Iraqi entity on the same platform. Employment contracts are novated to the new entity on a single date. Salary, accrued end-of-service entitlements, and continuous service date all carry over unchanged. Teamed handles the entity formation through GEMO, registers the new entity with the Iraqi tax and social security authorities, and migrates benefits without any lapse.

What employer social security rate applies to both sides of the Iraq comparison?

Employer social security is 12% of gross salary under Law No. 18 of 2023. This covers retirement, disability, and work injury insurance. It applies whether you employ via EOR or your own entity. Iraq has no separate mandatory pension contribution. The 12% rate is the full statutory employer on-cost on both sides.

Teamed Legal Operations

Iraq's formation timeline is not compressible. The Ministry of Trade process, the investment licence, and the Central Bank banking approval each run at their own pace. By the time the cost crossover arrives, you want the entity already registered and the bank account already open. Decisions made at the crossover point in Iraq are decisions made two quarters too late.

A note from Tom Price-Daniel

In Baghdad, the EOR holds its advantage longer than almost anywhere. Iraq entity setup costs USD 8,000 to 25,000 and takes 3 to 6 months.  
The crossover typically sits at 8 to 15 employees. Start formation well before the maths tips.  
When the numbers flip, we tell you and move you across. That is the only honest version of this.

Tom Price-Daniel · Co-founder, Teamed

## Related Iraq guides

- Hiring in Iraq, overviewparent
- [Iraq employer cost breakdown](/country-hiring-guides/iraq/cost-breakdown)sibling
- [Iraq tax and payroll guide](/country-hiring-guides/iraq/tax-and-payroll)sibling
- [Iraq termination and severance](/country-hiring-guides/iraq/termination-and-severance)sibling
- [Employer of Record overview](/lp/employer-of-record)core
- The Graduation Modelcore
- [Entity Management (GEMO)](/entity-management)core
- [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator/iraq)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction. Verify current requirements with the Iraqi General Commission of Taxes, the Workers Retirement and Social Security Authority, and the Ministry of Trade before relying on any specific framework. Entity setup cost ranges and ongoing cost ranges in this guide are typical market figures based on professional services pricing. They are illustrative only and not law figures. Social security and annual leave figures are verified from PwC Iraq, Deloitte Middle East, and Mondaq (Hannouche Associates) sources as at June 2026.