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The Ultimate Guide To
Employment in Azerbaijan

Employing in Azerbaijan: What You Need to Know

Employment law in Azerbaijan is complex and may sometimes appear confusing when looking from outside view. Further factors complicating matters are the differences between regions and an inconsistency in adhere to laws by different cities.

For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Azerbaijan.

Key Factors to Consider When Employing in Azerbaijan

There are several key areas to be aware of within Azerbaijan employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contracts

  2. Probation Periods

  3. Termination Procedures

    The Labor Code sets forth minimum standards for both employer and employee in order to terminate an employment contract, which they must follow strictly.

    Although it may sounds far from civil law principles, labor law in Azerbaijan fundamentally provides less freedom in determining the terms and conditions of the contract to the parties.

    As such, the term “agreement” is preferred for employment relations because the term “contract” is predominantly used in civil law context.

  4. Statutory Leave

    A minimum paid annual leave of 21 calendar days and more for certain groups of employees is mandatory by law.

    Employees must be entitled to the following types of leave:

    • vacation, consisting of base and additional vacation time;
    • social leave for maternity and child care;
    • educational and creative leave for continuing education and pursuing scientific research;
    • unpaid leave.

    Sick Leave: Includes compensation for the first 14 days of sick leave and is provided by the employer. The remaining days are covered by the State Social Protection Fund.

    Maternity Leave: Women are entitled to paid maternity leave for 70 calendar days prior to and 56 days (70 in certain cases) after the birth of a child, while a maternity allowance is paid by the State Social Protection Fund and not the employer.

    Other types of leave may be specified by the employment contractor collective contract.

Employee Entitlements

Information Explanation
Working on Sundays ?

Employees may be required to work on Sunday where necessary.

Disclosure and Confidentiality of Personal Information ?

Azerbaijan law protects personal and confidential information of employees against illicit disclosure from their employers.

Employee Protection and Anti-discrimination Rights ?

In case of hiring or change in or termination of employment, no discrimination among employees shall be permitted on the basis of:

  • citizenship;
  • sex;
  • race;
  • nationality;
  • language;
  • place of residence;
  • economic standing;
  • social origin;
  • age;
  • family circumstances;
  • religion;
  • political views;
  • affiliation with trade unions or other public associations;
  • professional standing;
  • beliefs;
  • job performance;
  • professional skills of the employees.

 

Time Off Work ?

The number of days off an employee is entitle during the week (on a five-day schedule) is 2 days; for employees on a six-day schedule, 1 day. The period of continuous weekly time off must be at least 42 hours.

Medical Leave ?

Compensation for the first 14 days of sick leave must be provided by the employer. Compensation for the remaining days of sick leave will be provided by the State Social Protection Fund.

Employment Termination

Information Explanation
Severance / Redundancy Pay ?

All employees affected by termination of employment must be paid a one-off severance amount of not less than an average monthly salary, including benefits and bonuses.

Termination of Employment ?

In cases of dismissal due to downsizing or an employee’s unsuitability for the position, the employer must first seek for the consent of the trade union and he shall give 3 months’ notice to any relevant trade union, indicating the categories of staff scheduled for redundancy.

The employer must also give at minimum of 2 months’ prior notice to the employment authorities indicating the profession, specialisation and salary of the employees to be terminated due to downsizing.

Finally, the employer shall notify the affected employees at least 2 months prior to the termination of the employment agreement and the employee must be given free time (at least one paid day off per week) to look for another job.

GEO Solutions or DIY Employment in Azerbaijan?

GEO Solutions or DIY Employment

Companies entering Azerbaijan must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organisation to handle payroll and employment responsibilities.  A GEO solution makes it faster, easier and cheaper to deploy staff if they don’t have a Azerbaijan entity established that can run payroll.

A DIY approach will typically take 6-9 months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally, Shield GEO is responsible for all compliance issues related to the employment.

Payroll

Payroll Azerbaijan
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ? AZN (0.62 USD)
 
Grossed income Tax Rate (%)
Up to AZN 30,000 14%
Over AZN 30,000 AZN 4,200+ 25% of the amount exceeding AZN 30,000
Tax Returns Supplied

Yes

Employers Social Security and statutory contributions

22%, calculated on gross income

Employees Social Security and statutory contributions

3%, calculated on gross income

Payroll and Tax in Azerbaijan

Since 2011, Azerbaijan made significant progresses in reducing fiscal burdens, including the profit tax rate, and in simplifying the payment process of both the corporate income tax and VAT.

On top of that, the country introduced an electronic system that allows to file and pay social insurance contributions.

The e-registration system of Azerbaijan, however, do not provides sufficient information in English and a local GEO will be necessary to effectively comply with local rules.

Information Explanation
Remote Payroll ?

A remote payroll system is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Azerbaijan. Under Azerbaijan Law, companies registered in other countries are allowed to obtain a license to do business and have employees in the country.

Local Payroll Administration ?

In some cases, a company will register their business in Azerbaijan under one of the forms available: Limited liability partnerships (LLP), joint stock companies (JSC), and branches of foreign legal entities; but prefer to have another company administering its payroll.  This can be accomplished through a payroll provider.

It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Azerbaijan may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Azerbaijan payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Azerbaijan employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in Azerbaijan to a GEO, like Shield GEO. This is possible for both foreign workers and Azerbaijan nationals. This is the easiest, fastest and safest way to payroll staff in Azerbaijan.

Shield GEO manages all aspects of payroll for workers in Azerbaijan, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Azerbaijan

Information Explanation
Employee Information Required ?

In order for a new employee to be set up for payroll purposes it is required to be registered with social security max five days within starting work and to have a life insurance.

Documents and information required to register the new employee are:

  • A work record book;
  • A health report of the employee;
  • The employee’s ID Card;
  • Social Security ID;
  • Proof of work and residency permit.
Social Security Registration ?

The e-service system of the State Social Protection Fund in Azerbaijan does not provide comprehensive informations in English for registration purposes, as such it suggested either to rely on a local GEO agency to make sure your business fully complies with national guidelines or contact directly the Azerbaijan Government at info@sspf.gov.az.

Documents needed for a successful application to the State Social Protection Fund are as follows:

  • Q3 application form (which must be re-filled in case the insured changes address);
  • In case the social insurance certificate gets lost or a duplicate certificate is needed, a Q5 application form must be filled out;
  • Additional table (provided by the SSPF to the insured);
  • S4 form (provided by the insured to the SSPF);
  • In case further information are needed it is possible to consult the Government website;
  • Here the link for the application forms to be submitted to the SSPF (english is not available).

 

 

Income Tax (Personal Allowance) ?

The Azerbaijan Personal Income tax liability must be calculated at the rates stipulated in the Azerbaijan legislation, being applicable at the date of payment of the taxable income (from 0% to 30%).

Payments

Information Explanation
Payment Mode ?

The Labor Code of Azerbaijan indicates wages as the total daily or monthly amounts paid in cash or check by the employer to the employee for work performed (or services rendered) while carrying out his duties during the work period in accordance with the employment contract as well as supplements, bonuses, and other payments.

Frequency of Salary Payment ?

Employer in Azerbaijan are responsible for making monthly payments in relation to social insurance contributions on the same day of the Employees’ salary and no later than the 15th day of the month following the month when the income was accrued.

Invoice / Payslips required ?

A payslip (electronic or hard-copy) certification is required.

Minimum Wage ?

The national monthly minimum wage is 131 AZN (Approx. USD 80) new manat.

The minimum wage is the amount equal to a monthly salary paid to a non-skilled employee based on economic and social conditions and is a social norm which establishes the lowest salary level.

Immigration and Work Permits in Azerbaijan

Foreign workers are required to have the proper visas and work permits in Azerbaijan, as established by immigration laws.  Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Azerbaijan market.  If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.

Types of visas in Azerbaijan

Category Description of Visa
Single Entry Visa

A single- entry visa allows only one entry-exit to the country.

A transit visa it is issued to foreigners and stateless persons who pass through the Republic of Azerbaijan to a destination outside Azerbaijan.

Validity period of a transit visa is 30 days, while staying period in the country is 5 days. Transit visas are granted on the basis of circumstances of a particular transit itinerary, use of air, water, railway and other types of transport means and for a necessary period of time.  

Foreigners and stateless persons may obtain ordinary entry visas if they come to the country for the following purposes:

– Official;

– Business;

– Science and education;

– Labor;

– Tourism;

– Culture and sport;

– Humanitarian;

– Personal travel;

– Medical treatment.

The following documents are required for visa issuance:

– Sample of application form approved by an appropriate authority of executive power;

– Passport or other travel document (a validity period of a passport or other travel document should exceed a validity period of an expected visa at least by 3 months) and copies of their main pages;

– Two color photographs (3x4cm) matching with biometric identification requirements;

– A copy of medical insurance certificate (if a host does not undertake to pay for medical services);

– Document certifying payment of a state duty for visa issuance;

– Application submitted by a party inviting a foreigner and a stateless person to the Republic of Azerbaijan, a sample of which is approved by an appropriate authority of the executive power, a registered copy of a certificate (for non-governmental organisations), a document proving the purpose of an invitation (these documents are not required for transit, tourism, official and personal travel visas).

In addition to these documents a notarised copy of a birth certificate, a permission of parents or a legitimate representative and copies of identification documents are required for issuance of visa to foreigners and stateless persons under 18 holders of a passport travelling without his/her parent or a legitimate representative.

Single entry visa – 50 USD
Single entry transit visa – 20 USD

Multiple entry Visa

A multiple entry visa is valid for 2 years and it allows a person to enter and exit the country several times within relevant period.

The following documents are required for visa issuance:

– Sample of application form approved by an appropriate authority of executive power.

– Passport or other travel document (a validity period of a passport or other travel document should exceed a validity period of an expected visa at least by 3 months) and copies of their main pages;

– Two color photographs (3x4cm) matching with biometric identification requirements;

– A copy of medical insurance certificate (if a host does not undertake to pay for medical services);
Document certifying payment of a state duty for visa issuance;

– Application submitted by a party inviting a foreigner and a stateless person to the Republic of Azerbaijan, a sample of which is approved by an appropriate authority of the executive power, a registered copy of a certificate (for non-governmental organisations), a document proving the purpose of an invitation (these documents are not required for transit, tourism, official and personal travel visas).

In addition to these documents a notarised copy of a birth certificate, a permission of parents or a legitimate representative and copies of identification documents are required for issuance of visa to foreigners and stateless persons under 18 holders of a passport travelling without his/her parent or a legitimate representative.

Multiple entry visa – 350 USD
Double entry transit visa – 40 USD

Setting up a company in Azerbaijan

When setting up a company you may want to consider these factors:

  1. Business Factors

    During the last three years, Azerbaijan made great improvements in easing incorporation procedure in the country.

    To begin with, the country introduced free online registration services and eliminated preregistration requirements. Secondly, a reduction in time needed for obtaining electronic signatures speeded up the online tax registration.

    Finally, the country abolished the requirement to use a corporate seal.

  2. Corruption

The legislation in Azerbaijan provides for rather wide range of organisational forms of business entities. Joint stock companies (JSCs), Limited liability companies (LLCs), Partnerships and Branches and representative offices are the most popular.

The incorporation process in Azerbaijan results to be fast and straightforward after the country introduced a one-stop shop in order for foreign entrepreneurs to set up a business in the country. All information are written in english, although the available forms are provided in Azerbaijan. As such it is suggested to rely on a local GEO agency to ensure full compliance with e-registration processes.

Limited liability companies (LLCs)

A LLC is a business entity established by 1 or more individuals and/or legal entities which contribute their participatory interests to the charter capital.

Normally, all participants in an LLC are liable only for their contributions and the company cannot be liable to the extent of their obligations to third parties.

First step: Obtain an electronic signature and register online

Having an electronic signature (provided by the Ministry of Taxes and Information Technology) allows for an online company registration (it takes approximately 1 day to get one).

Costs can range from AZN 18-36 for citizens-individuals to 72 for companies. (1 AZN=0.61 USD)

Second step: Complete the online registration

The online registration procedure is free of charge and can be completed in 2 days through the Ministry of Tax’s web page.

Confirmation will be sent via email or, in hard-copy, at the Tax Office.

If a registration is made in hard-copy, documents required are as follows:

  • Application form
  • Founding documents (signed by the founder or his/her representative)
  • Resolution of establishment
  • Copy of the founder’s identity card (if a person);
  • A proof of identification of the legal address of the company.

When proceeding with an e-registration, it is necessary to  attach only the charter to the application.

Processing Time: Approx. one week

Cost: Approx. USD 45

Joint stock companies (JSCs)

A joint stock company is a company with a charter capital divided into a determinate number of shares.

Only these kind of companies can issue shares and their property is formed via investment of its shares, its financial and economic activity as other means allowed by law.

A business entity consisting of only 1 person cannot not be a sole founder of a joint stock company.

The company name of a this type of company must contain its name with the following: «open joint stock company» or «closed Joint Stock Company».

Many of the rules mentioned for the LLC apply to a JSC.
The application is signed by the founder(s) or any authorised (and notary-certified representative.

Required documents to attach to the application are as follows:

  • Charter approved by the founder(s)/representative of the business entity (2 copies);
  • The founder’s resolution signed to establish the entity to become a legal person and approve Charter;
  • Addendum including the founders’ details; If passport details of the founder are not confirmed by the Ministry of Internal Affairs’ database, it may be required to attach ID-copies to the application;
  • If the founder is a foreign legal person, it is necessary to attach a notary-certified copy of documents to confirm the foreign registration of this legal person: a certificate of registration (registry extract) or Charter. In this case, such document must be properly legalised by the Republic of Azerbaijan’s diplomatic mission to the legal person’s country or by another foreign mission;
  • In case the founder is not a local, a properly legalised document that confirms his/her economic activity in any country will be required;
  • If the supervisory board has been elected in the same date of the state registration application to the tax body, then data on its members will be required with the according addendum of Application for State Registration of Commercial Legal Person. In case the members’ passport details are not confirmed by the Ministry of Internal Affairs’ database, ID-copies to the application must be attached;
  • A copy of the resolution by the founders to appoint a legal representative or chief, authorised for executive and administrative powers;
  • The document to confirm the address of the entity to be a legal person;
  • A document confirming the payment of the charter capital;
  • If signed by the founder’s proper agent, the letter of attorney must be attached to the application.

Partnerships and Branches and representative offices

Foreign companies may operate in Azerbaijan without establishing a local legal entity by registering a branch or a representative office using the the Ministry of Taxes web page. Branches and representative offices are fully allowed to conduct commercial activities in Azerbaijan.

In order to register a branch or representative office, the parent company must submit the following documents to the registration authorities of the Ministry of Justice:

  • application form to establish the entity;
  • a proof that the parent company is a validly existing business entity under the legislation of its home country;
  • copy of the articles of association of the parent entity;
  • the resolution of the parent entity which establishes the business entity;
  • the regulation governing the operation of the company;
  • a power of attorney for the manager of the company;
  • the tax registration number of the manager company;
  • documents confirming the address of the company; and
  • confirmation of payment of the state registration fee.

Once the company is registered, it must comply with certain post-registration formalities, including:

  • VAT registration;
  • creating a seal; and
  • opening a bank accounts.

 Processing TimeThe overall process can take up to 4 weeks. 

Cost: KZT 8,275 (approximately USD 70)

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Azerbaijan, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Azerbaijan they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

– the company is looking to setup an office quickly

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Azerbaijan

– the company needs help with tax, employment, immigration and payroll compliance in Azerbaijan

The complexity of employment regulations in Azerbaijan makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Azerbaijan allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Azerbaijan.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Azerbaijan. Read more about outsourced employment through Shield GEO.

 

  • Azerbaijan Employer of Record Overview

Azerbaijan Employer of Record Overview

  • Azerbaijan Employer of Record Overview

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