Azerbaijan payroll and benefits guide
What global businesses need to know about payroll in Azerbaijan
Oil and gas remain the dominant force in Azerbaijan’s economy, making up two-thirds of its GDP and 90% of its revenue from exports. But this money has allowed Azerbaijan’s wider economy to accelerate, and its GDP per capita has more than quadrupled since the turn of the millennium.
The service economy still only accounts for less than half of Azeri economic output, which opens up some opportunities for international businesses here in particular. New income tax reforms for 2026 have brought Azerbaijan closer to major Western economies in terms of its approach to tax, along with consistent increases in minimum wage.
Understanding the specifics of how Azeri employment works is very important. Azerbaijan is under an authoritarian regime, and remains a country where corruption is a substantial problem. This guide sets out the key facts from a payroll and employment perspective.
Getting Started
Azerbaijan has made it simple to register a company online, with the starting point for new businesses being The Ministry of Communications and Information Technologies. Here organizations can apply for the e-signature necessary to move forward, which is generally provided by the ministry in just one business day.
Total foreign ownership of businesses in Azerbaijan is allowed, and directors and shareholders don’t necessarily need Azeri residency. However, there are some restrictions in place around foreign interests in a number of industries, including finance, media and utilities; licenses may be required in some cases here.
There is no minimum share capital requirement for a limited-liability company, but there is a small one for joint-stock companies of AZN 4,000 (approx. £1,750; $2,350; €2,020).
Documents such as a formal letter of intent, director identities, business address and company statutes should be drafted (in Azerbaijani, so make sure you access local legal expertise). These should then be notarized and submitted to the Centre for Company Registration, and successful applications should receive their registration card a week later. With this, VAT and tax registration can be completed at the Ministry of Taxes.
An in-country bank account in Azerbaijan is essential and should be opened within three months of registration.
Employment Considerations in Azerbaijan
Employee contracts in Azerbaijan must state the general information for the job (including pay and duration of services) in writing to be official. Without a written contract, an employee is generally not eligible for severance pay. A fixed-term contract cannot be used if an employer requires more than five years of service from the employee.
Azerbaijan runs a standard working week of 40 hours, across five shifts of eight hours each, although some employers run six shorter shifts a week instead. Employees should not work more than four hours of overtime (or more than two hours in hazardous working environments) on more than two consecutive days. Overtime is limited to 180 hours per year and should be paid at double the regular salary. If an employee works on a public holiday or one of their designated rest days, they can accept time off in lieu or overtime if they prefer.
Notice periods start at two weeks for employees, rising to four weeks after one year of service, six weeks after five years, and nine weeks after ten years. Probation periods are three months, or two weeks for fixed-term employment that is no more than six months in duration. The notice period during probation is three days.
Compensation, Bonuses & Severance
The minimum wage was increased to AZN 400 per month (approx. £175; $235; €200) at the start of 2025, and this rate was retained for 2026. This is still more than triple what the rate was as recently as 2018, so further increases are likely in the years ahead. Payroll can take place monthly or bi-monthly, although monthly payments are gradually becoming the norm. There is no requirement to pay 13th-month or mandatory bonuses in Azerbaijan.
Severance pay starts at one month’s salary for employees within their first 12 months of service, rising to 1.4 months after a year, 1.7 months after five years, and two months after ten years. Employees made redundant should receive a minimum of three months’ salary.
Tax and Social Security
From the start of 2019 until the end of 2025, anyone working in Azerbaijan’s private sector (excluding oil and gas) benefited from a major tax break, which exempted their first AZN 8,000 per month from income tax.
As of January 1 2026, that has ended, and a new progressive income tax model is now in place:
- Monthly earnings up to AZN 2,500 (approx. £1,090; $1,470; €1,260): 3% (this will rise to 5% in 2027, and 7% in 2028)
- Additional earnings up to AZN 8,000 per month (approx. £3,500; $4,700; €4,050): 10%
- Additional earnings above AZN 8,000 per month: 14%
Employees in the oil and gas industries, and in the public sector, are not affected by this change: they continue to pay 14% on the first AZN 2,500 earned per month, and 25% on anything above this.
The standard corporate tax rate is 20%, while VAT runs at 18% (although a number of exemptions apply, including exports and financial services, among other areas).
Social security contributions, however, are more complex:
- Unemployment: 0.5% employer, 0.5% employee
- Social security (on first AZN 200): 2% employer, 3% employee
- Social security (on earnings above AZN 200): 15% + AZN 44 employer, 10% + AZN 6 employee
- Medical insurance (on first AZN 8,000): 2% employer, 2% employee
- Medical insurance (on earnings above AZN 8,000): 0.5% + AZN 160 employer; 0.5% + AZN 160 employee
Slightly different rates apply in the oil and gas industry, most notably that the employer’s social security contribution goes up to a 22% flat rate.
Holidays and Leave in Azerbaijan
The minimum paid leave entitlement for employees in Azerbaijan is 21 days, with employees receiving two further days per year after every five years of service. The maximum of 27 days applies to employees with at least 15 years of service. At least two weeks of the leave entitlement must be taken in one continuous block. Unused leave should be carried over into the next year.
Azerbaijan marks as many as 22 days of public holidays each year, and days off in lieu are given on Mondays when holidays fall at the weekends.
Maternity leave entitlement is 18 weeks: unusually, ten weeks of this is before the due date, and eight weeks after. All maternity pay is at full salary by social security. New mothers also have some special employment rights: they cannot be terminated or work nights if their child is under three years old, and they cannot work more than 36 hours a week if their child is younger than 18 months.
Paternity leave is two weeks post-birth, but is unpaid.
There are also a number of types of parental leave available. Paid annual leave increases by two days for women with two children under 16, and five days for women with three children under 16. Furthermore, any woman or single father with any children under 16 can take up to 14 further days of unpaid leave each year. Sick pay is covered at full salary by employers for the first 14 days per year, and by social security thereafter.
Azerbaijan also has many other types of unpaid leave employees can apply for. These include, but are not necessarily limited to: caring for an unwell child, military service, qualifications and exams, family matters, or those who work in hazardous conditions.
Azerbaijan Payroll: A Summary
Azerbaijan can be a tricky country in which to get payroll up and running. With new income tax thresholds, complex social security and a large number of public holidays, things can vary substantially from one payroll cycle to the next. Ensuring all your business documents are in Azerbaijani can make things even tougher. This is definitely a country where working with a global payroll partner, one that can connect you to in-country expertise, can make a real difference.
This article is for informational purposes only and is not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.