Since March 2021, the Parliament considered adopting changes to the Labour Code of Azerbaijan. The changes affect service contracts and entered into force since 7 May 2021.
As per the amendments, in certain cases the legal entities will have to sign labour contracts instead of service contracts. The essence of the changes is to force employers to conclude employment contracts with those working on the basis of service contracts. The relationship between the parties is considered a labour (employment) relation and service contracts are not allowed, among others, in connection with the performance of work (services)1 :
- related to the main field of activity of the employer; (for example, a law company cannot conclude a service contract with a lawyer);
- on a replacement or temporary replacement basis (for example, it will not be allowed to temporarily hire a freelancer under a service contract to replace an outgoing employee).
These amendments to the Code have created a number of additional burdens for CSOs, as well as for other legal entities. CSOs will have to conclude employment contracts instead of service contracts for short-term work that is done by service providers. They will have to follow a more complex procedure for conclusion and termination of employment contract, which will mean additional obligations and costs for CSOs. CSOs will have to register the employment contracts on an electronic portal, issue an order, register in the employee's workbook, cover the employee's compulsory health insurance, pay taxes and social security contributions. This will require significant human and financial resources and time. In addition, the CSOs work is project based, with projects sometimes lasting only several months. This means there is a risk of inability to maintain the employment contract, after the funding is over. Finally, the non-compliance with this procedure can result in the imposition of sanctions on the organization.
- 1This list contains a selection of cases that affect specifically CSOs.