Minimum Wage

In Azerbaijan, the minimum wage is set at 345 AZN per month. This wage is applicable to all sectors and must be adhered to by employers, ensuring that all employees receive at least this amount for their work. Employers are responsible for ensuring compliance with this minimum wage regulation.

Minimum Wage	Amount (AZN)
Monthly Minimum Wage	345

Income Tax

Azerbaijan employs a progressive income tax system, where the tax rates range from 0% to 25% based on the individual’s income level. Employees are subject to income tax on their earnings, and employers are responsible for withholding the correct amount from employees’ salaries and remitting it to the tax authorities.

Income Tax Rate	Income Bracket
0%	Up to 2,500 AZN
14%	2,501 – 8,000 AZN
25%	Above 8,000 AZN

Payroll Cost

Payroll costs in Azerbaijan consist of several components, including social security contributions, unemployment insurance, and mandatory medical insurance. Employers must contribute a percentage of the employee’s gross salary to these funds. The total employer payroll contribution can vary depending on the industry.

Payroll Cost Component	Employer Contribution (%)
Social Security	22% for income up to 200 AZN; 15% above
Unemployment Insurance	0.5%
Mandatory Medical Insurance	2% for income up to 8,000 AZN; 0.5% above

Overtime Pay

In Azerbaijan, standard working hours are typically 40 hours per week, with employees working 8 hours per day from Monday to Friday. Overtime is defined as any hours worked beyond these standard hours and must be compensated accordingly. Overtime pay is mandatory and calculated at a rate higher than the regular hourly wage.

Overtime Regulation	Description
Standard Working Hours	40 hours per week
Overtime Rate	Typically paid at 150% of regular hourly wage

This comprehensive overview covers minimum wage, income tax obligations, payroll costs, and overtime pay in Azerbaijan. Understanding these aspects is essential for employers and employees navigating the employment landscape in this country.

Regular & Maximum Working Hours

In Azerbaijan, the standard working hours are governed by the Labor Code. The typical workweek consists of 40 hours, spread over five days, with Saturday and Sunday designated as weekends. Daily working hours are typically 8 hours, including a one-hour break for lunch or rest.

• Maximum Working Hours: The maximum daily working hours cannot exceed 8 hours. In certain industries, a six-day workweek may be implemented, but the total weekly hours must not exceed 40.

Work Schedule	Standard Hours	Maximum Hours
Daily	8 hours	8 hours
Weekly	40 hours	40 hours

Leave

Employees in Azerbaijan are entitled to various types of leave as per the Labor Code. The key types of leave include:

• Annual Leave: Employees are entitled to a minimum of 21 days of paid annual leave. In some sectors such as education, science, and medicine, this entitlement may increase to 30 days.
• Sick Leave: Employees can take sick leave as necessary, typically requiring a medical certificate for absences longer than three days.
• Maternity Leave: Female employees are entitled to 126 days of maternity leave (70 days before and 56 days after childbirth).
• Paternity Leave: Fathers can take up to 14 days of unpaid paternity leave following the birth of a child.

Type of Leave	Duration
Annual Leave	Minimum 21 days; up to 30 days in some sectors
Sick Leave	As needed; medical certificate required for extended leave
Maternity Leave	126 days (70 days before and 56 days after childbirth)
Paternity Leave	14 days unpaid

Holidays

Azerbaijan observes several public holidays throughout the year. These holidays are recognized as non-working days, and employees are entitled to paid time off on these dates. The following table lists major public holidays:

Holiday	Date
New Year’s Day	January 1
International Women’s Day	March 8
Novruz Bayram	March 20-24
National Revival Day	May 28
Gurban Bayram	Date varies (Islamic calendar)
State Independence Day	October 18
National Revival Day	November 17
Constitution Day	November 12
National Mourning Day	December 20

This comprehensive overview covers regular and maximum working hours, various types of leave, and holiday observances in Azerbaijan. Understanding these aspects is essential for employers and employees navigating the employment landscape in this country.

Termination Requirements

In Azerbaijan, the termination of an employment contract must comply with the Labor Code. The process is structured to ensure fairness and transparency. Both employers and employees have specific rights and responsibilities during termination.

• Grounds for Termination: Employment can be terminated for various reasons, including employee misconduct, redundancy, or expiration of the contract.
• Final Payment: Employers are required to deliver the final payment to the employee by the last day of employment.
• Notification: The termination must be registered in an electronic information system, along with a notification to the Ministry of Labor and Social Protection detailing the role and salary of the terminated employee.

Termination Type	Description
Employee Misconduct	Immediate termination based on misconduct
Redundancy	Must provide notice and severance pay
Contract Expiration	Ends automatically unless renewed

Notice Period

The notice period required for termination varies based on the length of service and the terms outlined in the employment contract.

• Standard Notice: Employees must provide at least one month’s notice before termination.
• Extended Notice: This can be increased up to six months if specified in the contract.
• Redundancy Notice: If terminating due to downsizing, a two-month notice is required, during which employees can take one day of paid leave per week to seek new employment.

Length of Service	Notice Period
Less than 1 year	1 month
1 to 5 years	1 month
More than 5 years	Up to 6 months (contract dependent)
Redundancy	2 months

Severance Pay

Severance pay is mandated for employees terminated without cause or due to redundancy. The amount varies based on the length of service:

• Less than 1 Year: One month’s salary
• 1 to 5 Years: 1.4 times the monthly salary
• 5 to 10 Years: 1.7 times the monthly salary
• More than 10 Years: Two times the monthly salary

Additionally, severance pay is required in cases such as changes in employment terms or if an employee is called for military service.

Length of Service	Severance Pay Calculation
Less than 1 year	1 month’s salary
1 to 5 years	1.4 times monthly salary
5 to 10 years	1.7 times monthly salary
More than 10 years	2 times monthly salary

Probation Periods

The standard probation period in Azerbaijan is typically up to three months. During this time, either party can terminate the employment agreement with a shorter notice period:

• Notice Requirement: A notice period of just three days is required during probation.
• Evaluation Period: This period allows both employers and employees to assess suitability for long-term employment.

Probation Period Duration	Standard Duration
Standard	Up to 3 months
Notice During Probation	3 days

This detailed overview covers termination requirements, notice periods, severance pay, and probation periods in Azerbaijan. Understanding these aspects is essential for employers and employees navigating the employment landscape in this country.

Misclassification of Workers

In Azerbaijan, it is crucial to correctly classify workers as either employees or independent contractors. Misclassification can lead to significant legal and financial penalties for businesses, as well as loss of benefits for workers. The distinction is primarily based on the level of control exerted by the employer and the nature of the work relationship.

• Employees: Work under the control of the employer, who dictates working hours, methods, and tools. They receive a fixed salary and are entitled to benefits such as paid leave and social security contributions.
• Independent Contractors: Operate with greater autonomy, setting their own hours and using their own tools. They are typically paid per project without additional benefits.

Classification Factor	Employee	Independent Contractor
Level of Control	High	Low
Autonomy	Limited	High
Benefits	Yes	No

Legal Framework

The legal framework governing independent contractors in Azerbaijan is primarily based on civil law rather than labor law. This means that the relationship between the contractor and the hiring entity is regulated through service agreements rather than employment contracts. This distinction affects the rights and obligations of both parties.

• Service Agreements: These contracts should clearly outline the scope of work, payment terms, duration, confidentiality obligations, and termination conditions. This clarity helps avoid misunderstandings and provides legal protection for both parties.

Contract Type	Description
Service Agreement	Defines specific services to be provided
License Agreement	Often used for creative or intellectual work

Tax Responsibilities

Independent contractors in Azerbaijan are responsible for their own tax filings and social security contributions. They must register with the tax authorities and obtain a taxpayer identification number. The hiring entity is not responsible for withholding taxes or making social security contributions on behalf of the contractor.

• Tax Registration: Contractors must ensure they are registered with local tax authorities.
• Self-Assessment: Contractors are required to file their own tax returns annually.

Tax Responsibility	Description
Self-Assessment	Required to file annual tax returns
Tax Registration	Must register with local tax authorities

Compliance Considerations

Ensuring compliance with local laws is essential when hiring independent contractors. Misclassification can lead to significant penalties, including back payments for social security contributions and unpaid leave. Factors considered when determining the nature of the working relationship include:

• Degree of Control: The extent to which the employer controls how work is performed.
• Provision of Tools: Whether the employer provides tools and equipment necessary for work.
• Exclusivity: Whether the contractor works exclusively for one client or multiple clients.

Compliance Factor	Employee	Independent Contractor
Control over Work	High	Low
Provision of Tools	Yes	No
Exclusivity	Often required	Not required