Spring 1995 (3.1)
Doing Business in Azerbaijan
The Most Frequently Asked Questions
by Ophelia Abdullayeva
How do you set up business in Azerbaijan? Many companies ask the same question? Here are some of the most frequently asked questions related to labor laws based on Azerbaijan's recent legislation, "On Trade Unions" (Feb 24, 1994), and "On Vacations" (Dec 1, 1994).
Does the law require an individual contract between employer and employee in order to legalize labor relations?
A labor agreement may be made both in writing or orally. However, the fact of employment must be legalized by an order of the management of the enterprise, and the employee must be notified and sign the agreement.
All employees who work more than five days at an enterprise should be issued workbooks which record general information about the employees, their job description, etc. Provisions of labor agreements that cause the situation of an employee to worsen in comparison with that provided by the labor laws of the Azerbaijan Republic are considered null and void. (Ernst & Young can provide a "Model Employment Contract" along with a Russian translation.)
Are there any restrictions on length of employment?
Length of employment may be indefinite or for a fixed term not to exceed three years. The Labor Code also allows agreements for specific periods for a particular job.
May an employee be hired for a probationary period?
Yes, the law allows for probationary periods not exceeding three months.
What are normal working hours?
Standard hours are 41 hours per week which may consist of 5 or 6 days, excluding lunch breaks. Exact schedules are left to management's discretion. Prior to a national holiday, the working day is one hour shorter. Different arrangements may apply to night shift workers.
What about overtime?
In general, an employee cannot be required to work overtime except in unusual circumstances. Blue collar workers are paid 1.5 times the normal rate during the first two hours of overtime and double time thereafter. If overtime occurs on a weekend or holiday, it is generally compensated by granting a day off work or double pay.
What are the main requirements concerning salary?
It cannot be less than minimum wage and should be paid at least twice a month. (Minimum wage is currently 4,000 manats, a ridiculously low rate of about $1. The government plans to reconsider the rate of minimum wage every quarter. It is important in calculating employees' taxes, allowances, pensions, etc.)
What about paid annual leave?
In addition to national holidays and weekends, a minimum of 21 calendar days are specified for annual leave for all employees. Individuals (managerial, professional and skilled staff) working on "non-fixed" schedules are entitled to 30 calendar days of paid leave. In addition, depending upon length of service, employees may be entitled up to 9 days of additional paid leave.
Is there maternity leave?
Paid maternity leave may total 126 days. However, upon request, a mother may take leave until her child reaches 3 years of age in which case payments are recoverable from the State Social Protection Fund.
What about sick leave?
Employees may take sick leave within reasonable limits if they are covered by State Social Insurance. If this period extends for more than four consecutive months, the employee may be dismissed unless, e.g., the employee is on maternity leave or the sickness is due to an occupational-related disease. Payments during sick leave are recoverable from the State Social Protection Fund.
Is there old-age pension?
If the employee has contributed to the Pension Fund of the Republic, then women may claim old-age pension at 55 if they have worked at least 20 years; and men may claim it at 60 if they have worked 25 years.
What about trade unions?
Trade unions may take part in making collective agreements with management and in issues related to work rules, regulations, dismissals, labor disputes, etc. No employee may be prevented from joining a trade union.
What are the major grounds for termination of a labor contract?
The employee may terminate an "indefinite term" contract on two months' notice and a "fixed-term" contract only for valid reasons such as prolonged illness and disability. The employer may terminate the contract under the following circumstances: liquidation of an enterprise, redundancy, serious disciplinary breaches (e.g., drunkenness, drugs, theft), poor quality of work, poor attendance record, etc. In some cases, e.g., the liquidation of an enterprise, compensation and two months' notice are required.
Ophelia Abdullayeva is legal consultant of Ernst & Young, 11 Mardanov Gardashlari Street (formerly Gogol Street), Apt 32, Baku 370000. Tel: (99412) 98-33-85; 94-14-13; or Fax: (99412) 98-33-85; 93-73-12.
Ernst & Young is the largest firm of professional advisers in the CIS. The Baku office produces a regular Newsletter which is available free of charge to all clients. If you would like to be placed on the mailing list, please request by fax.
From Azerbaijan International (3.1) Spring 1995.
© Azerbaijan International 1995. All rights reserved.