Labor Law

Employee Contract

A written contract is a legal requirement for employees in Azerbaijan and must be signed, sealed, or both. The law does not mandate that contracts be in the Azerbaijani language, but it is recommended.

Probation

The maximum probation period in Azerbaijan is three months.

Employee Vacation

Leave type	period	mandatory
annual leave	21 days	Yes
sick leave	14 days	Yes
maternity leave	126 days	Yes

Employee Benefits:

Disability and death benefits
retirement benefits
compulsory medical insurance
Paid maternity leave
Unpaid paternity leave
take a vacation

Tax

Employer Payroll Tax

tax type	oil and gas industry	Private Sector
social Security	twenty two%	2.00% to 200 AZN; 15% above 200 AZN + 44 AZN
unemployment	0.5%	0.5%
compulsory medical insurance	2%	2% up to AZN 8,000; 0.5% higher than AZN 8000 + 160 AZN

After a seven-year grace period, from 2019 private sector social security contributions for employers and employees will be the same as those for the oil and gas industry.

Employee Payroll Taxes

tax type	oil and gas industry	Private Sector
social Security	3%	3.00% below 200, 10% above 200 AZN + 6 AZN
unemployment	0.5%	0.5%
compulsory medical insurance	2%	2% up to AZN 8,000; 0.5% higher than AZN 8000 + 160 AZN

Employee Income Tax

monthly taxable income	Private Sector	oil and gas industry
Up to AZN 8000	0%	—
AZN 8000 and above	14% for amounts exceeding AZN 8000	—
Up to 2,500 AZN	—	14%
AZN 2,500 and above	—	AZN 350 + 25% of the amount exceeding AZN 2,500

Private sector employees (whose monthly income does not exceed AZN 8,000) are exempt from income tax for a grace period of 7 years, after which they will pay income tax at the standard government rates already followed by the oil and gas industry.

VAT

Azerbaijan follows a standard tax rate of 18%.

Resignation and Termination

Terminate Process

The main grounds for termination of employment in Azerbaijan include:

Initiated by any party involved in the contract
Change of ownership
The two sides agreed
Changes to terms and conditions
Labor contract expires
Cases of violation of job description
employee jailed

Notice Period

Azerbaijan usually follows a one-month notice period.

Termination compensation is mandatory in Azerbaijan. If an employee's contract is terminated in accordance with paragraphs A and B of Article 70, the employee shall pay as follows:

Termination compensation is equal to the minimum average monthly salary.
During the second and third months after dismissal, the employee will receive his average monthly salary until he finds a new job.

If the employment contract is terminated for the following reasons:

Conditions of employment have been modified.
Employees were drafted into the army.
Employees are unable to perform their jobs.

In addition to the normal severance package, an additional two months' salary must be paid as termination compensation. If an employee dies while on the job, his or her dependents are entitled to a salary allowance for three months.

On the other hand, employees who are laid off due to redundancy require at least three months of severance pay. Termination compensation is as follows:

Service time 1 year or less: 1 month’s salary
Service time 1-5 years: 4 times monthly salary
Service time 5-10 years: 7 times monthly salary
Service time of more than 10 years: 2 times monthly salary

Please note that the above information is based on knowledge as of September 2021. In the event of any legal changes or modifications, please consult the relevant authorities or professionals for the latest information.

Visas and Immigration

Foreign employees need to obtain a work permit from the Azerbaijan State Migration Service through their employer. The license is valid for one year and must be renewed thereafter.

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