Article: Employement law remarks in Kazakhstan

 

In Kazakhstan, there are certain negative consequences for violation of the labor regulations. For this reason, the foreign companies entering the Kazakhstan market often address the consultants on various employment questions.

In this article you may find general and brief information about employment agreement questions that the foreign companies often address in Kazakhstan.

In Kazakhstan there are following employment agreement options:

1) Employment agreement for indefinite term;[1]

2) Employment agreement with fixed term of more than 1 year;[2]

3) Short-term employment agreement (less than 1 year) – only in particular situations as (i) for making specific work; (ii) replacement of the absent employee; (iii) seasonal works; (iv) employment with a foreigner (work permit term) (v) for small business companies.[3] The Kazakhstan court practice shows that a properly drafted employment agreement can reduce significant risks, and can protect the company in case of any legal disputes.

The Kazakhstan court practice shows that a properly drafted employment agreement can reduce significant risks, and can protect the company in case of any legal disputes.

For this reason, the main attention in the beginning of the employment relations should be paid to the drafting of the employment agreement. It is important to carefully review all of the provisions for compliance with the law and for protection of the company’s rights.

For example, we recommend including provision about personal data protection in the employment agreement itself. Since in case of any dispute, the company could prove that the employee gave his consent for using his personal data in the very beginning of their employment relations.

 

In Kazakhstan, employment prolongation procedure is simplified for the fixed-term employments of more than 1 year.

For example, the employment agreement will be automatically prolonged for the same term, if none of the parties notify each other about termination of the employment agreement on or before the last working day. Since it is going to be deemed that the parties wish to continue their employment relations. For example, if the employment agreement was made for two years, it will be prolonged for another two years.

Such automatic prolongation can only happen twice. After that, in case the agreement is not yet terminated, it is going to be deemed that the employment agreement is concluded for indefinite term. [4]

 

Kazakh law requires the companies to withhold certain payments from the employees’ salaries:

a. 10% Individual income tax;[5]

b. 10% Pension contributions.

Apart from the above withholdings, the companies are required to pay the following payments at their own expense:

a. 3.5% Social payments;

b. 9.5% Social tax – please note that social tax should be decreased by social payments

c. 1.5% Payments to Medical Insurance Fund.[6]

Usually, fiscal burden for salary taxes and fiscal payments varies from 15% up to 30% of the employee’s income amount.

 

By the Company’s initiative, the employment could be terminated in the following cases:

1. Upon expiry – with written notice of termination on or before the last working day under the employment agreement;

2. During probationary period with a notice indicating the reason of termination[7] – Kazakh law does not specify notification period, so there is no limitation for this;

3. With mutual agreement of the Parties: [8]

The Company shall send notice of termination, and the Employee shall give his decision within 3 working days. Or the parties could indicate in the agreement the Company’s right to pay compensation in agreed amount instead of providing such notice.

4. Upon Employer’s initiative, with a 1 months’ notice of termination, and compensation, depending on situation[9] – the employment agreement could indicate higher notice period; regarding compensations, please see below ‘Severance upon termination’ section.

Please note that there are several situations when the Company could terminate the agreement with a notice of more than 1 month, without compensation. This is mostly related to the Employee’s poor job performance or other negative actions.

 

The foreign companies often don’t know in which cases it is required to pay the severance payment when
terminating the employment agreements.

The Company shall pay compensation for employment termination in following cases:[10]

1) termination by the Company, in case of company liquidation – 1 months’ base salary compensation;

2) termination by the Company, in case of stuff reduction – 1 months’ base salary compensation;

3) termination by the Employee, in case the Company does not duly perform and comply with employment agreement terms and conditions – 1 months’ base salary compensation.

4) termination by the Company due to deterioration of the economic condition of the company – 2 months’ base salary compensation.

The Company could indicate the higher compensation rates and other compensation cases in
the employment agreement, upon Company’s discretion.

The compensation could also be paid in cases when the termination is by the mutual agreement of the parties, in lieu of notice period, as indicated above in the ‘Termination’ section.

 

In Kazakhstan, companies sometimes make commercial contracts with individuals. This depends on the purpose of hiring the person, scope of work, work place, etc.

Under ‘freedom of contract principle’, the commercial contract could indicate any provisions and obligations for the parties, which do not contradict general contract law. While the employment agreements have certain restrictions and limitations under Kazakh labor legislation.

The following aspects differentiate the employment agreements from the commercial contracts: (i) the individual has a certain work position; (ii) the individual shall comply with the company’s work schedule; (iii) the individual is enlisted as an official staff member; (iv) the company provides safety standards to the individual; (v) the company provides the individual with devices and resources for work; (vi) the individual is entitled to certain guarantees and compensations; (vii) the company needs to provide the individual with insurance; (viii) the salary must be above the minimum wage established by Kazakhstan Government; (ix) the company has certain other mandatory obligations under Kazakh labor legislation.

Choosing commercial contract option depends on particular situations and substance of the agreement, and should apply if the individual is going to work from distance, without certain work schedule, etc. We recommend to double check draft commercial contract with each individual in order to avoid any risks related to labor disputes.

 

Kazakh labor law stipulates numerous obligations for the companies, and it is very important to comply with such obligations and regulations. This article includes only brief employment law remarks on employment agreements in Kazakhstan. Depending on separate situations with separate individuals, there could be special requirements for the companies. For this reason, we recommend the companies to take the preventive strategy and to check all of the employee-related documents and agreements with the professional lawyers. This way companies could reduce the risk of future possible labor disputes.

 

 

[1] Article 30.1.1 of the Kazakhstan Labor Code

[2] Article 30.1.2 of the Kazakhstan Labor Code

[3] Article 30.1.3, 30.1.4, 30.1.5, 30.1.6, 30.2 of the Kazakhstan Labor Code

[4] Article 30 of the Kazakhstan Labor Code

[5] The employees have the right to apply fixed deductions equal to the minimum monthly wage established by the Kazakhstan Government

[6] Please note that from 2020 year Payments to Medical Insurance Fund will be applied with 2%

[7] Article 37.1 of the Kazakhstan Labor Code

[8] Article 50 of the Kazakhstan Labor Code

[9] Articles 52, 53 of the Kazakhstan Labor Code

[10] Article 131 of the Kazakhstan Labor Code