02.10.2013. Today, the Support of Economic Initiatives Assistance (SEI) Public Union organized a roundtable discussion on "Problems and solutions of employment contracts in Azerbaijan" within the project "Support to the development of small business in Azerbaijan" implemented with the financial support of the USAID.
The discussion was attended by representatives of government agencies and international organizations, parliamentarians, entrepreneurs, independent experts and representatives of local NGOs.
Opening the event, the head of the SEI Public Union Azer Mehdiyev said that one of the most obvious problems in the field of regulation of entrepreneurial activity in our country in recent years is the employment of employees without an employment contract. He said that according to official statistics, at the end of 2012, out of 4.4 million employed people in the country's economy, only 1.48 million were employees, ie those with employment contracts. The seriousness of the problem and the need to solve it have been recognized by the government, and a number of steps have been taken in recent years. Mehdiyev said that a study on "Mechanisms governing the implementation of labor contracts in Azerbaijan: problems and ways to improve" was conducted within the "Support to Small Business Development" project supported by the US IDA to develop proposals and recommendations to solve the problem. At today's round table, the results of that research and the recommendations prepared are presented to you. An improved version of the study and recommendations will be submitted to the government, taking into account the suggestions made here.
Welcoming the participants, the head of the Entrepreneurship Development Foundation Sabit Bagirov informed about the activities and research carried out within the "Support to Small Business Development" project. He said that entrepreneurs are also interested in solving the problem of employment contracts. He noted the importance of establishing a legitimate labor relationship with employees for entrepreneurs, and said that such research aims to help solve the problem. Ayten Gahramanova, a project management specialist with the USAID, said that her organization's goal in supporting the project was to improve the business environment in the country and expand business-civil society cooperation.
Then Rovshan Agayev, Deputy Chairman of the Public Association for Support of Economic Initiatives, author of the study, made a presentation on "Mechanisms regulating the implementation of labor contracts in Azerbaijan: problems and ways to improve." He noted that the share of labor force in the total employed population in our country does not exceed 35%. This means that at best, 3-4 out of every 10 people working in the economy work on the basis of employment contracts. Only 2.5% of those employed in the agricultural sector and 35-40% of those employed in the construction, trade, catering and transport sectors work under contract.
If the country's legislation reveals significantly higher fines for enterprises evading employment contracts and their officials (for example, according to the Code of Administrative Offenses, employers are required to pay 3,000 manats if they employ an employee without concluding an employment contract in accordance with the Labor Code). The problem cannot be fully resolved, even if the inspection activities of the relevant government agencies have expanded in recent years, although fines of up to 5,000 manat and legal entities they represent should be fined from 20,000 to 25,000 manat.
The expert considers it important for the Azerbaijani government to take measures in four areas to prevent unregistered employment and promote employment contracts. According to him, first of all, it is necessary to change the existing system, ie to reduce the financial burden on employers. R.Agayev stressed that currently the tax burden on employment of employers in Azerbaijan is 29.1%, even higher than in some European countries. The expert suggests that in the current situation, it is expedient to reduce the social insurance burden for entrepreneurs from the current 22% to 15%;
The second proposal of the expert is to increase the efficiency of government agencies that monitor the implementation of employment contracts. He believes that it is necessary to increase the efficiency of inspections of labor inspectorates and find more effective forms of cooperation between the agencies responsible for the implementation of contracts. At present, the Central Office of the Labor Inspectorate and local agencies in Azerbaijan together have 365 staff, including more than 300 inspectors. This means that the number of employed people per 1 inspector in Azerbaijan is 13,600, and the number of employers per 1 inspector is 660 units, taking into account the actual business entities (individuals and legal entities). Based on international experience, the number of inspectors supervising labor contracts in Azerbaijan can be considered optimal. Therefore, the main focus should be on the quality and effectiveness of control.
Another important issue is the tightening of administrative sanctions for non-conclusion of employment contracts. In some countries, severe sanctions are not limited to fines for hiring an employee without a contract, but also include imprisonment for the employer, a ban on tenders for a period of time, and revocation of a license if there is a licensed activity.
Finally, one of the necessary activities is to strengthen awareness-raising and incentive measures to promote employment contracts.
Chairman of the League for the Protection of Labor Rights Sahib Mammadov made a report on "Legal problems of non-entrepreneurial individuals to hire other non-entrepreneurial individuals." He said that the root of the problem with employment contracts is often the entrepreneurship of officials. Some restrictions on the inspection activities of the State Labor Inspectorate (for example, the impossibility of conducting inspections without notice, etc.) also act as a factor that reduces the effectiveness of the work of this body. Mammadov later said that. Today, tens of thousands of people in the country work as nurses, cooks, housekeepers, gardeners, drivers, security guards and others. they do their work at home. However, while the activities of these people are full-time employment, most of them do not have employment contracts. One of the main reasons for this is that the Labor Code does not regulate labor relations with domestic workers. Mammadov considers it necessary to include in the Labor Code the concept of "non-entrepreneurial individual", as well as a chapter entitled "Peculiarities of the regulation of labor relations with persons involved in domestic work." According to the expert, by making relevant additions and amendments to the Tax Code and the Law on Social Insurance and other normative legal acts, different (less) taxes and compulsory social insurance payments may be provided for employees engaged in domestic work and engaged in paid employment.
The representative of the State Labor Inspectorate praised the research, the results of the study and the proposals made. He said that contract hiring is now more prevalent in the service and construction sectors.
Chairman of the Committee to Protect the Rights of Oil Workers Mirvari Gahramanli drew attention to the conclusion of temporary employment contracts with employees of large state companies, including oil companies and government agencies. He stressed that most small businesses do not even know what employment contracts are. The lack of trade unions in enterprises is also one of the factors leading to the violation of workers' labor rights.
Economist Nazim Mammadov said that the main reason for the dual accounting system in enterprises is the heavy official and unofficial tax burden on entrepreneurs, especially the high level of social insurance payments. He suggested merging employee income tax and social security contributions under the name "single social tax" and asking the government to set a 20 percent rate for this tax.
Ilkin Garayev, head of the Center for Support of Small and Medium Entrepreneurship Development, stressed the importance of taking into account the rights of entrepreneurs in solving this problem. He said that the amount of fines imposed on enterprises for employment without an employment contract should be differentiated depending on the size and turnover of enterprises. It is inadmissible to impose the same sanctions on large companies and small enterprises.
Abil Bayramov, chairman of the Public Union for Civil Society, noted that standard contracts were applied when signing employment contracts, that the contract was formal and that in most cases the rights of the employee were not taken into account during the preparation of the contract.
Chairman of the Center for Economic Research Galib Bayramov, businessman Ali Nabiyev, head of the Center for Economic Innovations Mahammad Talibli, representative of the Ministry of Taxes Shahin Mammadli, chairman of the Center for Free Economic Assistance Zohrab Ismayil, representative of the International Finance Corporation Hasan Huseynov and others made proposals and recommendations.
