End-of-service gratuity in the Labour Law

In briefA worker whose service has been ended is entitled to an end-of-service gratuity of two weeks' wages for each year of service with the employer, under article 45 of Labour Law No. 37 of 2015, subject to the exceptions that article states by reference to cases in article 43. Where retirement age is reached, article 43 refers the entitlement to the Workers' Retirement and Social Security Law No. 18 of 2023. Neither path is the retirement of a public official.

The Law Office of Ali Barakat, from Baghdad, al-Yarmouk, sets out end-of-service entitlements in the private sector as drawn by Labour Law No. 37 of 2015, published in the Iraqi Official Gazette, issue 4386, of 9/11/2015. This reading stays with articles 43 to 47 of that Law, and with the referral those articles make to the Workers' Retirement and Social Security Law No. 18 of 2023. It is not the retirement gratuity of a public official before the National Retirement Authority.

The end-of-service gratuity in the Labour Law

Article 45 states that a worker whose service has been ended is entitled to an end-of-service gratuity of two weeks' wages for each year of service performed with the employer. That measure is a statutory formula built on the wage and on the years of service with that employer. The wage, under article 1 of the same Law, is everything the worker is owed in cash or in kind in return for the work, and it includes allowances and overtime pay.

Article 45 is not read in isolation from the reason the contract ended. The contract ends in the cases listed in article 43, including the worker's death, a final sentence of imprisonment for more than one year, the employer's death where the employer's personality was material to the contract, liquidation of the project, a written agreement to end it, expiry of a fixed term, completion of the agreed work, the worker's resignation on not less than thirty days' notice, and force majeure. The employer may end the contract in further cases in the second clause of the same article, including illness that incapacitates the worker for six months without recovery, established by an official medical certificate; disability reaching the proportion fixed in the text; completion of retirement age; a reduction in the size of the project with the consent of the Minister of Labour and Social Affairs; a breach of the duties under the employment contract; the assumption of a false identity or the production of forged documents; a failure to show acceptable competence during probation; and a serious fault giving rise to grave loss, established by a final court decision.

When one of the cases in the second clause arises, the employer must give the worker written notice of the ending of the contract, under article 44, and the notice period may not be less than thirty days. If notice is not given, a payment in lieu is due. That payment is distinct from the end-of-service gratuity, and each is taken from its own provision.

The causes of termination, the notice, and a challenge to the decision are explained on the page Ending an employment contract. This page follows the effect of the ending on the gratuity, and what article 45 excludes from it.

When the gratuity is not due, and when the Social Security Law applies

Article 45 expressly excepts the rules in paragraph (b) of the first clause of article 43, and paragraphs (e), (f) and (h) of the second clause of that article. The end-of-service gratuity under article 45 is therefore not payable in those cases: a final sentence of imprisonment of the worker for more than one year; ending the contract because the worker committed conduct in breach of the duties under the employment contract; because the worker assumed a false identity or produced forged documents; or because the worker committed a serious fault from which grave loss arose, as established by a final court decision. Outside those exceptions, the original rule remains that a worker whose service has been ended is entitled to the gratuity on the formula stated.

If the worker completes retirement age, article 43, Second, (c) allows the employer to end the contract, and it states that the worker is then entitled to the end-of-service gratuity in accordance with the Workers' Retirement and Social Security Law. The referral is express: in that situation the entitlement is read from Law No. 18 of 2023, not from the two-week formula in article 45 alone.

The worker may challenge a decision ending service before the Service-Termination Committee, which is formed under instructions issued by the Minister, or before the labour courts, within thirty days from the date of being notified of the ending of service, under article 46. Choosing one of those two paths extinguishes the right to the other, and letting the period expire is treated as a waiver of the challenge. The burden of proving that the ending of service rested on a cause in article 43 lies on the employer. If the Service-Termination Committee or the court finds that the ending did not rest on one of those causes, it must decide that the worker is to be returned to work and paid wages in full for the period of the ending, under article 47. If a return to work is not practicable, the contract ends from the date of the decision and compensation equal to twice the end-of-service gratuity in article 45 is paid. In projects that regularly employ fewer than five workers, the contract is treated as ended from the date it was in fact ended if the committee or the court so decides, provided the employer pays that same compensation.

Those rules show that the gratuity may be doubled as compensation when it is held that the ending did not rest on a lawful cause, and that it may be withheld at the outset in the exceptions the statute states. The reading is taken from the termination decision and from the text, not from a general description of the relationship.

How this differs from a pension for an insured worker

Enrolment of a worker in social security is a separate path before the Department of Pension and Social Security for Workers, under the Workers' Retirement and Social Security Law No. 18 of 2023, published in the Iraqi Official Gazette, issue 4734, of 28/8/2023. The detail of enrolment and of the employer's duties is set out on the page Workers' social security. What this page needs is the point at which the two paths meet.

An insured person is entitled to a pension in one of the cases in article 29 of the Social Security Law, which links age to the length of insured service in the manner the text sets out. If insured service ends without a pension being granted because the conditions of entitlement are not met, or because a full pension is due from a body other than that Department, article 46 of the Social Security Law provides for a single cash gratuity in conditions it specifies, including the reaching of a stated age, resignation by reason of marriage or childbirth, or a permanent departure from the country. The end-of-service gratuity due to entitled insured persons is to be paid within a period not exceeding thirty days from the completion of the documents, under article 47 of the same Law.

A full pension and an end-of-service gratuity may not be combined unless the law provides otherwise, under article 37, Second, of the Social Security Law. Three matters are therefore kept apart: the gratuity in article 45 of the Labour Law when service with the employer ends; a pension for an insured person if the conditions in article 29 of the Social Security Law are met; and the cash gratuity that the Social Security Law provides in cases where a pension is not granted. None of these is the retirement of a public official before the National Retirement Authority under the Unified Retirement Law.

When the contract ends, the employer must give the worker a certificate stating the dates work began and ended and the type of work performed, and must give a clearance document if the worker has fulfilled the obligations owed to the employer, under article 41 of the Labour Law. The legal standing of that document, and the limits on waiving statutory rights, are explained on the page Clearance between the worker and the employer. A signature on a release does not take the place of a right the Law confers, if the condition is one by which the worker waives that right, under article 14, Second.

The office follows these questions from Baghdad, al-Yarmouk.

Legal basis and sources

Frequently asked questions

How is the end-of-service gratuity calculated under the Labour Law?

At the rate of two weeks' wages for each year of service the worker performed with the employer, under article 45, unless the case falls within the exceptions that article makes by reference to article 43. The elements of the wage and the years of service are read from the file.

Is the gratuity payable in every case in which the contract ends?

No. Article 45 excepts a final sentence of imprisonment for more than one year, and ending the contract for conduct in breach of the duties under the employment contract, for the assumption of a false identity or the production of forged documents, or for a serious fault from which grave loss arose, as established by a final court decision.

If the contract is ended because retirement age is reached, from where is the entitlement read?

From the Workers' Retirement and Social Security Law, under the express referral in article 43, Second, (c) of the Labour Law. The conditions for an insured person's pension are in article 29 of the Social Security Law, and a cash gratuity may be granted under that Law where the conditions for a pension are not met.

Is the Labour Law gratuity the same as the retirement of a public official?

No. This page stays with the private sector and with what the Labour Law and the Workers' Social Security Law attach to it. The retirement of a public official is a different path before the National Retirement Authority.

Always check the text in force and its amendments in the official source.

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End-of-service entitlements under Labour Law No. 37 of 2015