Labor relations governing the employment of all employees in the Republic of Azerbaijan are regulated by the Labor Code, effective from 1 July 1999 (the “Labor Code”), together with other laws issued pursuant to the Labor Code. The Labor Code codifies the legislative acts adopted in the early years of independence and a number of lower-tier normative legal acts.
Following recent amendments to the Labor Code, employment relationships will become effective, not following the signature of the employment agreement, as has been the case until now, but rather from the time of the registration of the employment agreement in the an electronic database for maintaining records of employment agreements to be created the Ministry of Labor and Social Protection. Under a newly established procedure, notification of all employment agreements, amendments to employment agreements and information on the termination of employment agreements must be submitted to the Ministry of Labor and Social Protection.
Employment contracts are concluded in most cases without a fixed term. In limited cases (such as seasonal employment, work on a fixed-term project or assignment, or by agreement of the employer and employee) the employment contract may be concluded for a fixed term of up to five years.
A fixed-term contract is deemed to be extended for the same period unless terminated by notice within seven days of the expiration of the original term of the contract. If the term of the fixed-term contract lasts continuously for more than five years, it will be deemed to be an indefinite term contract.
A contract without a fixed term may be terminated by the employer only in cases specified in the Labor Code. (See Termination below).
An employer has the duty of giving notice of termination. The general term of such notices is two months (e.g., redundancies). However, certain exceptions apply (e.g., in case of a gross violation of job duties, when no notice is required). An employee can terminate a contract at any time on one month’s notice. When employment is terminated by the employer due to redundancy, for a period of two months prior to termination the employer must allocate to the employee at least one business day in a working week to allow the employee to look for a new job.
For certain categories of employees (e.g., pregnant women, women with children under three years of age), termination of employment is prohibited, unless the employer is being liquidated.
In cases of termination of employment due to redundancy or the liquidation of an enterprise, the employer must make severance payments to employees, which may total up to three months of each employee's average salary and an additional two months if the employee is unable to find a job.
Generally, legal entities are required to make monthly social insurance contributions equal to 22% of the salary fund of their employees. Legal entities are also obligated to withhold employees' social insurance contributions in the amount of 3% of gross salaries and transfer them on the employees’ behalf to the State Social Protection Fund.
Individual entrepreneurs are generally required to pay social insurance contributions equal to 20% of the minimum salary. Different rates are provided for certain regions and categories of individual entrepreneurs (such as private notaries, auditors, accountants etc.).
Azerbaijani law also provides for mandatory insurance against accidents at work and occupational diseases to be obtained by all employers. The implementation of the Law “On Medical Insurance”, which requires that all employers obtain mandatory medical insurance for their employees, is expected to take place this year.
Also it should be noted that the Law “On Mandatory Types of Insurance” came into force on 18 October 2011. The Law stipulates four types of mandatory insurance:
* Insurance of immovable property;
* Insurance of civil liability of vehicle owners;
* Insurance of civil liability in relation to immovable property;
* Insurance of passengers.
Additionally, the Law stipulates the establishment of an Insurance Bureau. The purpose of creating the Insurance Bureau is to protect the interests of insurers, to prepare guidance on paying compensation and to propose changes in the legislation.