Key Takeaways

  1. Azerbaijan’s growing economy is attributed to the oil and gas sector, socio-economic reforms, and foreign investment treaties. 
  2. Hiring employees and adhering to local labor laws are made easier with the expertise of an Employer of Record (EOR) in Azerbaijan. 
  3. An Employer of Record allows foreign companies to hire Azerbaijani employees without establishing a legal entity. 
  4. Hiring employees in the country can be challenging without a professional EOR because of the complex labor laws. 

Thinking of expanding your business in to Azerbaijan or hiring a team there? Here we explain how an Employer of Record (EOR) solution can help you save time and money on your Azerbaijan hiring.

We look at the pros and cons of this solution, how it helps you manage your labor law and tax regulations, and how to choose the best Azerbaijan EOR provider. 

What Is an Azerbaijan EOR?

An Employer of Record (EOR) in Azerbaijan is a third-party HR provide that takes on the role of the official employer in Azerbaijan, on behalf of international companies. the EOR assumes responsibility for meeting local labor requirements, ensuring that work arrangements comply with Azerbaijan’s Labor Code. This setup lets businesses establish a local workforce without creating their own legal entity.

In practical terms, an EOR oversees every aspect of employment administration. This includes managing payroll and taxes, providing benefits, handling HR tasks, and guiding both onboarding and offboarding procedures. The EOR regularly monitors Azerbaijani labor regulations and implements changes as needed, thereby protecting clients from compliance risks.

How Does an Azerbaijan EOR Work?

When partnering with an Azerbaijan EOR, the provider takes on several key responsibilities:

  • Drafting local employment contracts in accordance with the Labor Code of the Republic of Azerbaijan.
  • Managing payroll in Azerbaijani manat (AZN), including tax withholdings and social insurance contributions.
  • Ensuring compliance with any obligations set by the Ministry of Labor and Social Protection of the Population.
  • Overseeing benefits and insurance as mandated by local regulations.
  • Updating employment practices if Azerbaijani labor laws change.

Because employment laws in Azerbaijan include requirements for formal work contracts, specific termination procedures, and social security payments, the EOR works continuously to stay aligned with these regulations. The provider calculates personal income tax and social security contributions, ensuring the correct amounts are submitted to the State Tax Service and the State Social Protection Fund. This reduces risks for foreign companies that may not be familiar with local administrative protocols.

Finally, the EOR manages day-to-day HR tasks such as onboarding, offboarding, and performance documentation, allowing client companies to focus on strategic goals. The client retains control over directing and evaluating the work of its Azerbaijani team, while the EOR assumes the legal liabilities that come with formal employment. This setup makes it possible for businesses to enter the Azerbaijani market quickly, test growth opportunities, and scale operations without worrying about establishing a legal entity of their own.

Some Azerbaijan EORs also provide additional HR services like visa support and talent acquisition in Azerbaijan. 

Start hiring with an Azerbaijan EOR

Let us handle the complexities of hiring, compliance, and payroll in Azerbaijan while you focus on growing your team.

  • Hire employees in Azerbaijan with an Azerbaijan EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in Azerbaijan
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Azerbaijan EOR vs Azerbaijan Entity

If you wish to hire employees in Azerbaijan without the assistance of an EOR, you’ll need to register a legal entity. This means setting up a Limited Liability Company (LLC). To set up an LLC, you must register the company for commercial activity and tax with the State Register of Legal Entities in Azerbaijan.  LLC registration requires a permit to operate legally in Azerbaijan. Employers must register with the State Tax Service to obtain a tax identification number and Company Charter. There is no minimum capital deposit required for an LLC.

Setting up a legal entity in Azerbaijan can be time-consuming and costly, particularly if documents are incorrectly filed, or legal procedures are not followed. The most efficient method of expanding your business in Azerbaijan is by setting up an EOR. Not only does an EOR help you hire skilled and qualified employees, but they also specialize in HR, payroll, taxes, and the administration of employee benefits. EORs work with you to keep you compliant and eliminate the need to register a legal entity in the country. It allows you to test the commercial market before deciding to establish an entity at a later stage.

Is EOR Legal in Azerbaijan?

Yes, hiring an EOR in Azerbaijan is legal and gives foreign businesses a competitive edge. An Employer of Record is a strategic partner that handles payroll and oversees legalities, so you can focus on growing your company. Consider the role of an EOR when expanding your business in Azerbaijan.

How Much Does EOR Cost in Azerbaijan?

In Azerbaijan, an EOR can cost between $199 and $500 per employee per month. The total costs depend on the size of the workforce and the services included in the package.

How Does an Azerbaijani EOR Help with Payroll and Taxes?

The role of an Azerbaijani EOR is to calculate wages, salaries, benefits, and taxes. They will pay employees, register employees for tax, and ensure that your company remains compliant with updated payroll and tax laws. In Azerbaijan, annual salaries are paid monthly, and monthly salaries are paid twice a month. An EOR will pay employees on time and ensure that the correct deductions are made for social security and benefits as agreed upon in the employment contract.

How Does an Azerbaijan EOR Help with Benefits Administration?

The EOR is a third-party service provider, relieving the administrative burden placed on businesses. Using specialized software and with reliance on an expert in-house team, they streamline benefits administration.

An Azerbaijan EOR assists companies with compliance and benefits packages consisting of leave, healthcare, and retirement plans. Furthermore, they will modify or cancel benefits based on labor law and employer requirements.

What Labor Laws Apply to Hiring in Azerbaijan?

Employers must abide by the Labor Code of the Republic of Azerbaijan to hire Azerbaijani employees. This includes regulations governing employment contracts, minimum wages, benefits, working hours, and anti-discrimination practices. A closer look at the relevant labor laws will support a legal, efficient, and cost-effective hiring process.

Employment Contracts

Written employment contracts are required for all forms of legal employment in Azerbaijan. Each employment contract must be signed in electronic form and registered via the Ministry of Labour’s digital platform. Both the employer and the employee should sign with an enhanced electronic signature.

Note that in the public sector, a traditional physical contract is still required. Contracts should clearly state the job title, role, pay, benefits, annual leave, and termination procedures, among other clauses.

Working Hours and Paid Holidays

Azerbaijan follows the standard 40-hour working week, consisting of five eight-hour days. The general rule is five days of work plus two consecutive days off. However, employers are entitled to opt for a six-day work week, as long as the total number of hours doesn’t exceed 40.

Social Security Contributions

The State Social Protection Fund is responsible for administering Azerbaijan’s social insurance system. Registration is compulsory and can result in fines for the employer if new hires aren’t registered promptly.

Currently, the rate of employer contributions is 22% of the overall payroll base, whereas employees pay just 3% of their gross salaries. It’s also worth mentioning that mandatory unemployment insurance payments are split between 0.5% for the employer and 0.5% for the employee, per the Unemployment Insurance Law.

Additionally, all employers and workers are required to participate in the Mandatory Medical Insurance (MMI) system. Employers and employees pay 2% on salaries of up to AZN 8,000 monthly. For amounts in excess of AZN 8,000, the tax will be 0.5% for both sides. 

Under the social insurance system of Azerbaijan, workers receive a variety of benefits, including access to:

  • Pensions
  • Disability payments
  • Maternity payments
  • Healthcare
  • Unemployment coverage

The current retirement age in Azerbaijan is 65 for men and 64.5 for women. Note that Article 7 of the Law on Labor Pensions is gradually increasing the female retirement age each year until it reaches parity with men in July 2027.

Overtime

Overtime rates are in effect for any hours worked in excess of the 40-hour work week. It’s also worth mentioning that work between the hours of 22:00 and 06:00 is classified as night work, so rates will always be higher for these workers. 

Based on the Azerbaijan Labour Code, overtime rates are usually compensated at 200% of an employee’s base hourly rate. It’s also important to remember that the state caps the maximum amount of overtime at two hours per day and 180 hours per year to prevent exploitation. It’s also permitted to provide additional rest days in lieu of extra pay if overtime takes place on rest days or public holidays.

Probation Periods

Probationary periods are recognized in Azerbaijan. Generally, probationary periods can last for up to three months on most contracts. When fixed-term contracts are six months or less, employers may only levy a maximum two-week probation period.

All probationary clauses must be incorporated into the original employment contract. Without this clause in place, employment is considered permanent from day one. Although anti-discrimination protections continue to apply to probationary workers, either party is entitled to terminate the relationship with three days of written notice.

Payroll and Employment Taxes in Azerbaijan

Payroll Cycle

Azerbaijan uses a monthly payroll cycle, and employers are responsible for deducting taxes at source and remitting the reported amounts to the State Tax Service, which sits under the Ministry of Economy. Note that the government and oil & gas sectors operate on a different tax system from the rest of the private sector. 

Minimum Wage

Azerbaijan’s new minimum wage law took effect in January 2025, requiring that all workers be paid at least 400 AZN per month. It applies to all full-time employees, regardless of their nationality or the economic sector they work in. Failure to pay the standard minimum wage can result in significant penalties and legal action taken against your business.

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Taxes

Personal income tax rates for non-government/oil & gas are 0% on the first AZN 8,000 per month and 14% thereafter. This is due to the seven-year incentive passed in 2019. Within the oil & gas and government sectors, tax rates are 14% on up to AZN 2,500 per month and AZN 350 + 25% of any amount over AZN 2,500.

On the seven-year incentive, there are as yet no indications that this will be extended, but there’s still time. If it isn’t extended, the standard rate for all workers will revert to the current rates for the energy and government sectors.

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Bonus Payments

The 13th-month bonus payment isn’t a statutory requirement under Azerbaijani law. If employers choose to incorporate it as a benefit or any other form of paid bonus, it will be taxed as ordinary income.

Work Permits and Visas in Azerbaijan

Foreign nationals looking to work in Azerbaijan must have the necessary work permits before they can begin working legally. These authorizations must be obtained from the State Migration Service (SMS).

Generally, work permits are issued for one year or the length of the contract, if the contract length is shorter than a year. These work permits are renewable for an additional year at a time if the contract is expected to continue beyond the standard permit duration. Employees will also need to get a temporary residence permit, which is linked to their employment contract.

Dealing with the Azerbaijani authorities to ensure you’re complying with immigration and labor law can be daunting. Instead of trying to manage it yourself in an unfamiliar language, Remote People can support your company in coordinating with the authorities and aligning timelines with your onboarding process.

Hiring Contractors in Azerbaijan

It’s not uncommon for businesses to consider contractors over full-time employees. There’s a strong argument for it because it means you don’t have to worry about the same benefits, paperwork, and lengthy dismissal procedures. However, it’s vital to prove that you’re not using contractors to circumvent labor laws.

Azerbaijan takes disguised employment extremely seriously, and misclassification of your workforce can result in significant fines and even legal action if the situation is deemed serious enough. Ensure you familiarize yourself with the law on employees vs. independent contractors in Azerbaijan to check your compliance.

Workers’ Compensation in Azerbaijan

Workers’ compensation in Azerbaijan takes the form of the country’s compulsory insurance framework. Employers pay 22% of the payroll base every month, with employees paying 3%.

Even though this is higher than in many countries, it covers just about every relevant benefit for employees, including work-related injury/illness. Plus, the MMI system means that workers are protected if they suffer a temporary or permanent disability in the workplace.

Time Off and Leave in Azerbaijan

The Labor Code of Azerbaijan provides comprehensive leave benefits for all workers within the country. Understanding these entitlements is vital for compliance and to ensure workers get what they deserve.

Mandatory Leave Entitlement

Azerbaijani workers must receive 21 days of paid leave each year as standard. More senior positions, such as managers and technical specialists, are entitled to 30 days a year. Employees only become eligible for paid leave after six months of continuous service. Moreover, at least two weeks of annual leave must be taken in a continuous period.

Workers with longer tenures can also receive additional days of annual leave under the law, which works out to:

Service lengthAdditional paid annual leave
5–10 yearsExtra 2 days
10–15 yearsExtra 4 days
15+ yearsExtra 6 days

Public holidays aren’t included as part of annual leave and must be paid out separately.

Paternity Leave

New fathers are entitled to take up to 14 days of unpaid paternity leave. A new bill is planned to turn this into paid annual leave in the future, but as of this writing, it remains unpaid.

Maternity Leave

Maternity leave in Azerbaijan consists of 126 days of fully paid leave for new mothers. Mothers can take 70 days of leave before giving birth and 56 days after giving birth. The law also allows for an extra 70 days of fully paid annual leave if there are any complications or multiple births.

All paid maternity leave is funded by the State Social Protection Fund, rather than employers themselves.

Other Leave

The Labor Code also allows for other forms of leave. These include fully paid sick days, as long as a medical certificate is provided, bereavement leave for the deaths of close family members, and civic duty leave.

Terminations and Severance in Azerbaijan

Termination Requirements

Terminations must follow a defined process to protect the rights of workers. Both formal notice periods and severance pay may be required in the case of redundancies. Generally, how much notice and severance pay an employee is entitled to will depend on how long they’ve worked for you.

Here’s what that looks like:

TenureMinimum notice period
Exactly 1 year2 calendar weeks
More than 1 to 5 years4 calendar weeks
More than 5 to 10 years6 calendar weeks
10+ years9 calendar weeks

Severance Pay

Severance pay is also calculated in the same way, starting at 0.5 times the average monthly salary and topping out at twice the average monthly salary. In some cases, extra severance is required, such as if an employee has been permanently incapacitated.

Engage an Employer of Record in Azerbaijan with Remote People

An Employer of Record in Azerbaijan makes the process of expansion and hiring a skilled workforce easier and more affordable. Acting as the legal employer, the Azerbaijani EOR handles processes such as onboarding, payroll, tax registration with the relevant authorities, and the administration of benefits.

Most importantly, an EOR maintains compliance, which means they will help you draft employment contracts, onboard employees, pay salaries, and resolve disputes as per the Labor Code. You can establish a workforce in the liberal investment environment of Azerbaijan without registering a legal entity.

To ensure you partner with the right Azerbaijan EOR, connect with Remote People—a trusted global recruitment partner helping companies hire top remote talent with full compliance.

Frequently Asked Questions

An Azerbaijani EOR is beneficial because it helps streamline practices such as payroll, easing the administrative burden placed on the company. If you are interested in doing business in Azerbaijan, an EOR can set up a workforce without a legal entity. It is a more efficient option as you can be operational in a few days rather than weeks or months if registering an entity. EORs are also considered more economical.

 

An EOR handles many aspects of a company’s compliance and HR, leaving employers to feel a lack of control over their employees and processes.

To use an EOR in Azerbaijan, you can contact Remote People to connect you to the relevant global service providers and the hiring process. An EOR is used to hire international employees, increase your global workforce, ease international expansion, and eliminate the risks of non-compliance with labor laws.

An EOR will provide comprehensive services and full legal compliance with Azerbaijan labor law. Their role is to ease HR, payroll, taxes, and onboarding while keeping you compliant with mandatory regulations from social security contributions to terminating employment contracts. They act as the legal employer of Azerbaijan staff.

 

Azerbaijan Professional Employer Organization (PEO) manage HR and benefits administration and limited compliance with labor law. They are co-employers and work with you to recruit and oversee tax and payroll rather than independently manage these processes. Note, the terms Azerbaijan EOR and Azerbaijan PEO are often used interchangeably.