For foreign companies employing staff in Iraq, social security is one of the most important and most frequently overlooked compliance areas. The Workers’ Retirement and Social Security Law No. 18 of 2023 replaced the long-standing Law No. 39 of 1971. It expanded coverage and introduced a more modern framework for protecting private sector workers. Companies that fail to register their employees or pay contributions face penalties, and they can run into practical obstacles when closing contracts or winding up their business in Iraq.
Legal Framework
Law No. 18 of 2023 governs retirement and social security for workers outside the public sector, including employees of private, mixed and cooperative companies. It is administered by the Department of Workers’ Retirement and Social Security under the Ministry of Labour and Social Affairs.
The new law aims to close the gap between public and private sector employment by giving private sector workers comparable retirement and social protection. This makes private sector jobs more attractive and brings more workers into the formal system.
Key Points for Foreign Companies
Who Is Covered?
The law applies broadly to workers employed under an employment relationship in Iraq, whatever the size of the employer. It also opens the door for self-employed persons and workers in the informal sector to join the system. Foreign companies, including branches of foreign companies, should assume their employees in Iraq fall within its scope and check the position of foreign staff specifically.
Employer Registration
Employers must register themselves and their employees with the social security department. New employees must be registered within the required period after they start work. Registration is the starting point for all other obligations, and unregistered employees are a common source of liability during inspections and audits.
Contributions
Contributions are calculated as a percentage of each employee’s wage and are shared between the employer and the employee. The employer deducts the employee’s share from salary and pays both shares to the department each month. The law sets a higher contribution rate for certain sectors, notably companies working in the oil sector. Late payment attracts additional amounts and penalties.
Benefits Provided
The law provides protection against the main risks of working life, including:
- Retirement pensions, once age and service conditions are met
- Disability benefits
- Compensation and care for work injuries and occupational diseases
- Benefits for the families of deceased workers
- Maternity benefits for female workers
For employers, these benefits mean that properly registered employees are protected without the company bearing the full cost of these risks directly.
Inspections and Penalties
The social security department has inspection powers and can examine employer records, payroll and registration. Failing to register employees, under-declaring wages or failing to pay contributions can lead to fines and back-payment demands. Accurate payroll records are therefore essential.
Clearances for Contracts and Closure
In practice, a social security clearance is often required before a company can receive final payments on government contracts, obtain a tax clearance, or liquidate a company or close a branch. Outstanding social security liabilities can delay these steps significantly. Keeping contributions up to date avoids last-minute problems at the end of a project.
Contractors and Subcontractors
Companies working through contractors and subcontractors should make sure that every party in the chain complies with the law. Main contractors may face exposure if their subcontractors’ workers are not registered. Contracts should include clear compliance obligations and the right to request proof of registration and payment.
Practical Recommendations
- Register the company and every employee as soon as operations begin.
- Build social security deductions and employer contributions into payroll and project budgets.
- Keep complete payroll and registration records ready for inspection.
- Obtain clearances early when a contract or project is nearing completion.
- Include social security compliance clauses in contracts with subcontractors.
Conclusion
Law No. 18 of 2023 marks a significant shift in how Iraq protects private sector workers, and it raises the compliance stakes for employers. For foreign companies, timely registration, accurate contributions and early clearances are essential, both to avoid penalties and to keep projects and exits on schedule.
This article provides general information only and does not constitute legal advice. For advice on social security obligations for your business in Iraq, contact Etihad Law team.