Unemployment Insurance, Dismissal and Resignation: The Employer's View

Ending an employment relationship is the most expensive administrative decision a small business makes, and it is usually made without advice. This piece separates three things employers routinely conflate: the worker's right to unemployment benefit, the conditions that make a dismissal justified, and the employer's own filing duty when the relationship ends.

How unemployment insurance works

Unemployment insurance is funded at three percent of the contributory wage, borne entirely by the employer — part of the twenty-three percent direct cost described in employer social security duties. Nothing is deducted from the worker.

Three conditions govern entitlement:

1. The unemployment must be involuntary.
2. The worker must hold the minimum contribution history set by law.
3. They must notify the local labour office within the statutory window and declare readiness to work.

The benefit is calculated on average wages over the final period of employment, with additions for dependants, subject to a statutory floor and ceiling. Duration depends on contribution history and marital status. Because these coefficients are adjusted by circular, confirm current figures with the branch rather than relying on last year's numbers.

Resignation, dismissal, expiry

Resignation has conditions

A resignation is not simply a worker leaving. They must give the employer one month's written notice, and during that period they may withdraw it. If a worker abandons the workplace without notice, the employer must document the absence: an absence record, a formal notice, or a return-to-work letter with proof of delivery. Without those, "he left on his own" does not survive at the primary board.

Justified dismissal: the burden sits with you

Iranian labour law recognises unilateral termination by the employer only within a narrow frame. Article 27 permits it where the worker fails to perform assigned duties or breaches the workplace disciplinary code, after a positive opinion from the Islamic labour council or, where none exists, the guild association or the workers' lawful representative.

In the cases I have handled, employers lose for one of two reasons: there was no approved disciplinary code, or there were no documented written warnings. Verbal assertions about misconduct carry no weight before the boards.

Seven steps before dismissing anyone

1. Have an approved disciplinary code, communicated, with proof of delivery on file.
2. Document the breach: supervisor report, incident record, objective evidence.
3. Issue a written warning and file the signed copy or delivery receipt.
4. Give an opportunity to correct and record the outcome in writing.
5. Refer the matter to the workplace labour body and obtain its opinion.
6. Communicate the final decision in writing and record the date.
7. Complete a full settlement per the settlement checklist and pay from the company account.

Article 165 and the reinstatement risk

If the dispute board finds the dismissal unjustified, the employer must reinstate the worker and pay their wages from the dismissal date. If the worker declines to return, severance is owed at one and a half months of final wage for each year of service.

Put the numbers together: a case that runs eight months through the boards can produce eight months of back pay, enhanced severance, and the contributions for that same period. In most files I have seen, a considered settlement on day one would have cost a fraction of that.

Your filing duty

Termination is not only a labour office matter. The exit date and status code must be recorded correctly on the final insurance list. Two errors recur:

• Not recording the exit, which leads to contributions being assessed for months after departure.
• Recording the wrong code, which blocks the worker's benefit claim and usually triggers a complaint.

When a former employee opens a benefit file, the branch queries the employer. Your answer must match the list, the employment contract and the personnel file. Any contradiction among the three turns the case against you on its own.

Key takeaways

• Unemployment insurance is 3 percent of wages, entirely an employer cost.
• Benefit follows involuntary job loss only; resignation is normally excluded.
• Justified dismissal is indefensible without a disciplinary code and written warnings.
• Article 165 can mean reinstatement, back pay and severance at one and a half months per year.
• Record the exit date and status code precisely; errors cost in both directions.