Payroll & Employment Guide Azerbaijan

Azerbaijani labour law mandates that employment agreements must be in writing. If an employment contract is not put in writing, a written notification must be provided within three days to comply with legal requirements.

Notice periods: Ranging from two weeks to two months

Termination of employment: Termination can occur through normal processes, immediate dismissal for cause, or mutual agreement, depending on the scenario.

Severance pay: Employees are entitled to severance pay in specific situations, such as redundancy or company closure, equivalent to at least one month’s average salary. Severance pay does not apply in cases of voluntary resignation or dismissal for cause.

Employers in Azerbaijan must provide mandatory employment benefits as outlined in the country’s labour code. To attract and retain top talent, many also offer additional perks. Understanding both mandatory and optional benefits is key to building a competitive employment offering.

• Mandatory benefits: State healthcare, social security, pension contributions, paid leave entitlements (annual, sick, and maternity leave).
• Common perks: Voluntary private health insurance, meal allowances, transport reimbursements, flexible work arrangements, and training budgets.
• Leave policies: Paid annual leave, sick leave, parental leave.
• Severance pay: Applicable in specific cases, such as redundancy or company closure, where the employee is entitled to at least one month’s average salary. It does not apply in cases of voluntary resignation or dismissal for cause.

Azerbaijan has a structured tax system that applies to both individuals and businesses. Employers are responsible for withholding personal income taxes and social security contributions. Specific tax rules also apply to dividends, royalties, and VAT.

Personal income tax (Non-oil & gas private sector): Transitional rates effective from January 1, 2026, to January 1, 2027, replacing the previous tax holiday.

• Monthly income up to AZN 2,500
  Income tax rate: 3%
• Monthly income from AZN 2,500 to AZN 8,000
  Income tax: AZN 75 + 10% of the amount exceeding AZN 2,500
• Monthly income exceeding AZN 8,000
  Income tax: AZN 625 + 14% of the amount exceeding AZN 8,000

Note: The income tax changes outlined above are preliminary and are currently pending final signature into law.

VAT: 18%

Corporate profit tax: 20%

Tax allowances: Standard personal allowance, certain deductions for dependents and disability status.

Additional tax reliefs: Income tax exemptions for IT specialists (valid until 2026); regional tax incentives in certain zones.

Other tax obligations: Employees in the oil and gas sector, or those employed by state-owned enterprises, are taxed at a flat rate of 14% on income exceeding 8,000 AZN annually. Income up to 8,000 AZN is tax-exempt.

In Azerbaijan, employers must pay salaries in accordance with individual or collective employment agreements, and wages must not fall below the statutory minimum set by the government. Salaries are generally paid on a monthly basis, unless a different arrangement is agreed upon.

Salary payment deadline: By the end of the relevant pay period (usually by the end of the month). This includes reporting employee earnings, deductions, and contributions to the relevant authorities.

Payroll taxes: Must be paid by the 10th of the month following the salary payment month, ensuring timely compliance with tax obligations.

Annual tax declarations: Not provided to employees, as these reports are managed internally by the company.

Taxes and contributions payment deadline: By the 20th of the following month.

Payroll declarations deadline: By the 20th of the following month

Payroll currency: AZN, EUR, or USD.

Azerbaijan’s labour law is defined by the national Labour Code. This covers all the essential aspects of employment, including employment types, minimum wage, probation periods, payroll, and other employer obligations. Staying compliant with the country’s regulations requires understanding these local frameworks.

Total employment cost:

• Employer’s social security contributions: 22%
• Employer’s health insurance costs: Included in social security contributions
• Employees’ social security contributions: 3%
• Employees’ health insurance costs: Included in social security contributions

Termination: The final salary payment must be made on their last working day. This ensures that employees receive their due compensation promptly upon termination, and employees must be paid for any unused leave, ensuring they receive all compensation owed to them.

Minimum wage: AZN 400 per month

Probation period: Up to three months

Using EOR services in Azerbaijan enables you to hire employees legally in the country without the need to establish a local legal entity. The EOR assumes full legal responsibility as the official employer, which includes:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

Utilising PEO services in Azerbaijan offers HR and administrative assistance while you retain the status of the legal employer. PEO services are perfect for companies that already have a legal presence in Azerbaijan but require support in managing their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams offers a payroll calculator tailored to Azerbaijan’s labour regulations. With our tool, you can quickly and accurately estimate net and gross salaries, employer and employee contributions, as well as other required deductions in Azerbaijan.

Here is a list of public holidays in Azerbaijan: