The New Iraqi Pension and Social Security Law No. 18 of 2023
Corporate Structuring / Iraq
Haydar JawadSenior Counsel,Corporate Commercial
Samaa Al LamiAssociate,Corporate Structuring
Zainab Hassan Associate, Corporate Structuring
Recently, the Republic of Iraq (herein referred to as “Iraq”) has introduced a new Social Security and Pension Law No. 18 of 2023 (the “New Social Security Law”) replacing the former social security and pensions law. The New Social Security Law was officially published in Gazette No. 4734 on 28 August 2023, and has been in effect since 1 December 2023.
This article aims to provide an overview of employee registration in Iraq under this new legal framework. It will cover the major changes and features of the new law, including contribution requirements, penalties for non-compliance, updates to the retirement age, and specific fees for foreign employees.
The New Social Security Law introduces key changes to the previous social security framework.
These include broadening the coverage to encompass more categories under insurance, facilitating the transfer of workers between public, private, cooperative, and mixed sectors while protecting their rights during such transitions, adjusting retirement benefits, modifying contribution requirements, and implementing additional fees for foreign employees.
Below we have set out brief summaries of the key changes in the New Social Security Law:
1. The Contribution DynamicsEmployers in Iraq are obligated to remit Social Security contributions for both Iraqi and non-Iraqi employees to the Ministry of Labour and Social Affairs. These contributions are calculated as a percentage of wages and allowances, with the base wage for calculation not falling below the general minimum wage.
The contribution rate is set at seventeen (17) % of wages, divided as twelve (12) % from employers and five (5) % from employees. In the private and mixed sectors, particularly for businesses involved in the oil and hydrocarbon industry, the employer contribution is twenty-five (25) % of the wages.
These contributions must be paid monthly. Non-compliance can result in a delay fines (calculated at a specific percentage of the deliquent amount), effective one-hundred twenty (120) days after the contribution due date, in addition to other penalties. This underscores the importance of timely compliance with the social security contribution requirements in Iraq.
2. Non-Compliance PenaltiesCompliance with the New Social Security Law is important not just for avoiding potential penalties or fines due to non-compliance, but also for safeguarding businesses against potential claims from employees against the employer for social security amounts owed to them.
The New Social Security Law stipulates penalties for non-compliance, such as failing to register employees or registering fewer than the actual number. Under the law, fines for these violations range from one-million (1,000,000) IQD to (5,000,000) IQD. Additionally, employers may be required to pay five (5) times the amount of the due contributions for non-compliance, as well as be subject to delay fines as mentioned earlier.
3. The Retirement Age and SalaryThe retirement age marks a significant milestone in any worker's career, and it is key for employers to understand their responsibilities regarding retirement benefits, such as pensions or end-of-service gratuities.
Under the New Social Security Law, the minimum retirement age for private sector employees in Iraq is set at sixty-three (63) years for men and fifty-eight (58) years for women. However, the law also outlines provisions for early retirement under specific conditions, including a requisite number of years of service.
Moreover, the retirement pensions for workers are set at a lump sum of five-hundred thousand (500,000) Iraqi Dinars. Retired workers are entitled to request the department to calculate their retirement salary according to the stipulations of this law.
4. The Fees Imposed on Foreign EmployeesIraq's expanding economy and development projects have led to an increase in foreign employees. In line with this, the new social security law imposes specific fees on foreign employees working in the country.
Foreign employees in Iraq are required to register with the Ministry of Labor, a measure designed to oversee foreign labor and ensure adherence to social security rules. Under the New Social Security Law, a fee of two million (2,000,000) Iraqi Dinars is levied for each foreign employee entering Iraq, payable to the Social Security Department.
Additionally, employers are responsible for a one-time fee of seven-hundred fifty (750,000) IQD for each foreign worker upon legal status adjustment. This fee must be paid within the year of the status adjustment.
It is essential that employers in Iraq comply with the rules set out in the New Social Security Law. Recently, the Ministry of Labour and its departments have heightened enforcement of social security legislation in Iraq. For assistance with compliance with the New Social Security Law and handling employment-related matters, our team at Al-Tamimi & Company stands ready on-the-ground in Iraq to provide your business with any support and expert guidance it may need.
For further information,please contact Haydar Jawad, or Samaa Al Lami or Zainab Hassan.
Published in March 2024
