Employee transfers between group companies in Iraq are common in groups that operate through several entities, such as an operating company, a branch of the foreign parent and project-specific companies. Staff move between entities as projects start and finish. Commercially, the group sees one workforce; legally, each entity is a separate employer with its own social security registration, payroll and permits. When transfers are informal, social security records become inconsistent, creating gaps, duplications and disputes over service periods and liability.
A defensible record shows, for every employee and every month, which entity employed them, which entity declared and paid contributions, and on what wage.
Under the Social Security Law No. 18 of 2023, each employer must register its covered workers and pay contributions on their wages. Under the Labour Law No. 37 of 2015, employment relationships are between the worker and a specific employer, and service periods affect entitlements such as end-of-service payments. Work permits for foreign employees are tied to the sponsoring employer. A transfer therefore involves changes in all three systems.
Types of employee transfers between group companies in Iraq
Transfers can take several forms:
- Termination with one entity and new employment with another.
- Transfer with recognition of continuous service.
- Secondment, where the employee remains employed by one entity but works for another.
- Dual employment for part-time roles in two entities.
Each form has different consequences for social security, end-of-service and permits.
Social security steps
For a transfer of employment:
- The transferring entity should report the leaver and settle contributions to the transfer date.
- The receiving entity should register the employee from the transfer date.
- Both declarations should use consistent dates and wages.
For a secondment, the employing entity continues to declare and pay, and the arrangement should be documented to explain why the employee works at another entity’s site.
Continuity of service
Employees may lose service recognition if transfers are treated as terminations. Groups may agree to recognise prior service in the new contract. If so, the agreement should specify how end-of-service entitlements will be calculated and which entity bears the cost.
Foreign employees
Transfers of foreign employees require permit changes. Working for a new entity under the old entity’s permit can be treated as unauthorised work. Groups should plan permit transfers before the move.
Payroll and tax
The receiving entity must take over payroll tax withholding. Overlaps, where both entities pay part of the salary, should be avoided unless documented. See our tax services.
Documentation
A transfer pack should include:
- Transfer or secondment agreement signed by employee and both entities.
- Termination or release letter from the original entity.
- New contract or addendum.
- Social security leaver and joiner filings.
- Permit amendments.
- Internal approval.
Common mistakes
- Moving employees without changing social security registration.
- Inconsistent transfer dates across systems.
- Secondments without documentation.
- Foreign employees working under the wrong permit.
- Ignoring service continuity.
Practical checklist
- Choose the transfer form deliberately.
- Align dates across HR, payroll and social security.
- Document secondments.
- Update permits before the move.
- Agree service recognition and cost allocation.
Recognising service continuity in practice
When an employee moves within a group, the question of service continuity affects end-of-service entitlements, leave accrual and sometimes eligibility for benefits. There are broadly two approaches. Under the first, the transferring entity terminates the employment, pays end-of-service and other final entitlements, and the receiving entity starts a new employment relationship. Under the second, the receiving entity recognises the employee’s previous service, and the transferring entity does not pay end-of-service, with the receiving entity taking over the accrued liability. The second approach is often more attractive to employees but requires a clear written agreement between the two entities and the employee, setting out the recognised start date, the treatment of accrued leave and which entity bears the cost of past service on eventual termination.
Intercompany recharges
Where an employee works for one group entity but is employed by another, the costs are usually recharged. Recharges should be documented in an intercompany agreement and invoiced regularly. Without documentation, tax authorities may question the deductibility of recharged costs, and the social security department may question whether the paying entity is the true employer. The recharge should cover salary, allowances, social security contributions and other employment costs, and the agreement should reflect the actual working arrangement.
Transfers involving Kurdistan Region
Moves between an entity operating in Federal Iraq and one operating in Kurdistan Region may involve two social security systems and two immigration regimes. Groups should check whether the employee’s registration needs to move between systems and whether foreign employees need new permits or residence for the Region. Treating a move to Erbil as a simple internal reassignment can leave the employee uncovered or working without the correct documentation.
Communicating with employees
Employees often do not understand that a group transfer changes their legal employer. They may later claim that their service was interrupted or that contributions were not paid. A clear transfer letter explaining the new employer, the effective date, the treatment of service and the continuity of social security coverage reduces misunderstandings. Employees should be able to check that their records reflect the transfer correctly.
Audit-ready transfer records
Auditors frequently pick up group transfers because they show up as unexplained leavers in one entity and joiners in another. A transfer register for the group, listing each move with the dates, entities and documents, allows the employer to answer these questions quickly. The register is also useful in transactions, when buyers want to understand how the workforce has moved between entities.
Illustrative example. A group transfers 35 engineers from its operating company to a new project company but keeps paying them through the operating company. The project company declares them for social security, while the operating company also continues declarations. An audit finds duplicate and inconsistent records. The group corrects the filings, documents the transfer dates and adopts a transfer protocol.
Key takeaways
- Employee transfers between group companies in Iraq change the legal employer.
- Social security, payroll and permits must move together.
- Secondments require documentation.
- Service continuity should be agreed expressly.
How Etihad Law Firm Can Help?
Structured employee transfers between group companies in Iraq protect both the group and its employees.
Etihad Law Firm advises on transfer structures, documentation and compliance as part of our employment law services.