Employer of Record in Azerbaijan

Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.

However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.

Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.

Businesses can only operate smoothly in Azerbaijan if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Azerbaijan below, to avoid any compliance issues.

Employment Contract Requirements

Written contracts are a legal requirement for Azerbaijan employees. While the law does not make it mandatory for contracts to be in the Azerbaijani language, it is common practice.

Onboarding Process

We can help you get a new employee started in Azerbaijan quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Azerbaijan

Standard working hours are set for employees over the age of 18 at no more than 8 hours a day and 40 hours per week, with a working week set at five working days.

Overtime in Azerbaijan

Any overtime is typically compensated with additional pay or time-off in lieu, as determined by the employment contract or collective agreement. The maximum allowable overtime is usually limited to 2 hours per day and 180 hours per year.

Probation Period in Azerbaijan

In Azerbaijan, the standard probation period is up to 3 months.

In Azerbaijan, you must comply with working hour and overtime laws – including daily limits, overtime thresholds, and rest requirements – to stay compliant and build a strong employee experience. In 2026, regulators are expected to keep tightening enforcement around accurate timekeeping, protection of vulnerable workers, and prevention of excessive overtime.

• Standard Working Hours: For most adult employees, the standard is 40 hours per week, typically 8 hours per day over 5 days.
• Overtime Thresholds: Overtime generally applies once employees work beyond standard daily or weekly limits set by law and contract, and should be tightly controlled via written approvals.
• Overtime Pay Rates: Overtime must be compensated at premium rates under the Labour Code, and you should document the applicable multipliers in contracts and payroll policies.
• Daily And Weekly Rest Requirements: You must ensure daily and weekly rest entitlements are met in rosters, especially for shift-based roles and extended-hour operations.
• Night Work Restrictions: Night work is regulated and should be used only where necessary, with safeguards and correct compensation applied.
• Penalties For Non-Compliance: Non-compliance may lead to labour disputes, inspection findings, and back pay exposure for misclassified or unpaid overtime.

Growing your team in Azerbaijan is exciting, but it’s not without challenges. Local labor laws are often nuanced, and hiring without the right legal structure or processes can lead to misclassification, non-compliance penalties, or disputes. An Employer of Record removes that risk by acting as the legal employer on your behalf, taking full responsibility for compliance, contracts, payroll, and employee benefits.

This gives you the freedom to scale at your own pace, whether you're adding one employee or building out an entire function, without the burden of setting up and managing a local entity. You remain in control of day-to-day responsibilities and performance, while the EOR ensures every hire is legally protected and properly supported. It's a strategic way to expand globally without spreading your internal team too thin or exposing your business to legal liabilities in unfamiliar markets.

To run payroll in Azerbaijan in 2026, you need to correctly apply sector-specific personal income tax rules, calculate and withhold employee social and medical contributions, and fund employer contributions that typically add around 24% – 28% on top of gross salaries. All obligations must be reported and paid monthly in AZN through the State Tax Service’s electronic systems, with accurate payslips and robust record keeping to support audits. Choosing between your own entity and an Employer of Record will determine whether you manage registrations and filings directly or rely on a local partner to stay compliant.

• Core Obligations: Manage personal income tax, state social insurance, compulsory medical insurance, and unemployment insurance through monthly payroll.
• Employer Cost: Budget for employer contributions of roughly 24% – 28% of gross salary depending on sector and salary level.
• Deadlines: Align your payroll calendar so that filings and payments reach the authorities by the 20th of the following month.
• Entity Strategy: Decide whether to register a local entity or use an Employer of Record to handle hiring and payroll compliance.
• Documentation: Maintain detailed contracts, payslips, declarations, and payment proofs to respond quickly to any tax or social insurance audit.
• Minimum Wage: As of January 1 2026, Azerbaijan's minimum wage is AZN 400 per month. The minimum wage applies uniformly to all workers regardless of age or experience.

Employees expect to be paid accurately, on time, and in full compliance with local standards. When you're hiring in Azerbaijan, providing a smooth payroll experience is critical to retention and trust. An Employer of Record ensures that employees receive what they’re owed, without errors, delays, or confusion about taxes or benefits.

Key Ways an EOR Supports Payroll in Azerbaijan:

• Reliable Salary Payments: Ensures employees are paid promptly in local currency.
• Clear Payslips & Documentation: Provides employees with compliant, understandable records.
• Correct Benefits & Contributions: Delivers legally mandated contributions and any changes in compensation, like bonuses.
• Payroll Setup & Processing: Handles salary calculations, tax withholdings, and local reporting obligations.
• Boosts Employee Confidence: Builds trust with compliant, consistent payroll operations.

In Azerbaijan, foreign nationals who wish to live and work in the country typically need both the correct entry visa (such as a business or employment-related visa) and a work-based temporary residence permit issued by the State Migration Service. In practice, the employer in Azerbaijan sponsors the foreign employee, submits most of the paperwork locally, and the employee then applies for the appropriate visa at an Azerbaijani embassy or consulate if they are abroad.

Once in Azerbaijan, the foreign worker usually holds a temporary residence permit linked to their specific employer and role, which functions as the core work authorization. Separate short-term business visas can be used for meetings or short assignments, but they do not replace the need for proper work authorization where there is an employment relationship or long-term presence.

Mandatory Leave Entitlement in Azerbaijan

The annual leave entitlement in Azerbaijan is 21 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Azerbaijan

There are 13 public holidays in Azerbaijan.

Paid Time Off in Azerbaijan

In Azerbaijan, employees are entitled to a minimum annual leave of 21 days. This entitlement progressively increases based on years of service within a single company:

• 5 -10 years of service: additional 2 extra days
• 0 - 15 years: additional 4 days
• 15 or more years: additional 6 days

Maternity Leave In Azerbaijan

Women are entitled to 126 days of maternity leave, with 70 days before the due date and 56 days after childbirth. In cases of difficult or multiple births, an additional 14 days may be granted. The State Social Protection fund fully covers maternity leave. Employment law also provides special protections for pregnant women and women with young children, including:

• No termination for pregnant women or those with a child under 3 years old.
• Reduced work week (maximum 36 hours) for pregnant women or those with a child under 18 months.
• No night shifts for pregnant women or those with a child under 3 years old.

Paternity Leave In Azerbaijan

Fathers can take 14 days of unpaid Paternity Leave following the birth of a child.

Sick Leave In Azerbaijan

Employees are entitled to 56 days of paid sick leave per year. The employer will fully compensate employees unable to work due to sickness for the initial 14 days. Subsequently, the State Social Protection Fund takes over payments. To avail the sick pay benefit, employees must provide a medical certificate.

Parental Leave In Azerbaijan

Azerbaijan's parental rights encompass several provisions, including additional time off if needed, with the main clauses being:

• A woman with two children under the age of 16 is entitled to 2 additional days of paid leave
• A woman with three or more children under the age of 16 is entitled to 5 days of additional paid leave
• A woman or single father with children under the age of 16 is entitled to 14 days of unpaid leave per year
• Female employees adopting children under two months of age are entitled to 56 calendar days of social leave

Employee benefits in Azerbaijan are designed to support financial stability, workplace safety and overall wellbeing. Employers are required to offer key statutory entitlements such as social security contributions, paid annual leave, sick leave and maternity benefits — all of which ensure employees have reliable protections when they need them.

Beyond the basics, supplemental benefits help employers stand out in Azerbaijan’s competitive labour market. Popular options like private medical insurance, meal or transport allowances and professional development opportunities enhance the employee experience and play an important role in retention. Staying compliant with labour laws and keeping accurate documentation is also essential for reducing legal risks and ensuring smooth payroll operations.

Key points to keep in mind:

• Mandatory benefits provide essential protection and income security
• Supplemental benefits improve the overall value of employment packages
• Compliance requires following labour, social insurance and occupational safety rules

In Azerbaijan, failing to provide the correct employee benefits can have serious consequences. Mistakes in benefits administration may result in fines and harm your reputation as an employer. An Employer of Record ensures statutory benefits and leave are handled correctly, every time, and provides comprehensive options for extra perks to reward your team.

Beyond just avoiding legal issues, a well-managed benefits program builds trust with your employees. An EOR ensures benefits are set up quickly during onboarding, updated when employee status changes, and fully compliant with national regulations. They also manage communication with employees, so there’s no confusion around what’s offered and how to access it. This combination of legal compliance and positive employee experience is hard to replicate without local infrastructure. With an EOR, you can offer peace of mind to your team (and to yourself) knowing that your benefits program in Azerbaijan is running as it should.

Termination Process in Azerbaijan

The major grounds of employment termination in Azerbaijan include:

1. Initiation by either one of the parties involved in the contract
2. Change in ownership
3. Mutual consent
4. Change in terms and conditions
5. Employment contract expiration
6. Cases relating to violations of job description
7. Prison sentence for employee
8. Liquidation of the enterprise
9. Staff redundancy
10. Employee's insufficient qualifications or lack of professionalism

Notice Period in Azerbaijan

In Azerbaijan regardless of tenure, employees are required to provide a minimum of one month's notice. However, the contractual notice period can be extended up to six months. The employer's standard notice period is also contingent upon the employee's length of service, as followed:

1. Up to 1 year: 2 weeks calendar notice
2. From 1 to 5 years: 4 calendar weeks notice
3. From 5 to 10 years: 6 calendar weeks notice
4. More than 10 years: 9 calendar weeks notice

When terminating an employment agreement due to downsizing, 2 months' notice is required. During this period, the employee is allowed to take one day of paid time off per week for finding new employment.

Severance in Azerbaijan

Employees terminated due to redundancy are entitled to a minimum of 3 months' severance pay. Severance pay, in general, varies based on the length of the employee's tenure:

1. 1 years service or less: 1 month salary
2. Between 1 to 5 years service: 1.4X the monthly salary
3. Between 5 to 10 years service: 1.7X the monthly salary
4. More than 10 years service: 2X the monthly salary