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Insights Employer of Record in Kazakhstan

Employer of Record in Kazakhstan

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​​​​​​​​​​​​published on 9 April 2024 | reading time approx. 6 minutes​

Confused about hiring in Kazakhstan? EoR might be the answer. Expanding your business to Kazakhstan can be exciting, but managing foreign employment laws can be a headache. The Employer of Record (EoR) model can help.​ EoR lets you hire staff in Kazakhstan without setting up a local company. An EoR provider handles payroll, taxes, and compliance, so that you can focus on growing your business. 



Is the concept of EoR known in your country? Is the concept of EoR regulated by law in your country?

The concept of the Employer of Record (EoR) in Kazakhstan is increasingly gaining recognition as companies pursue international expansion and seek efficient solutions for engaging employees in foreign jurisdictions. Nevertheless, the specific regulation of the Employer of Record by law in Kazakhstan is an aspect that de­mands further attention. Presently, there is a lack of explicit legal provisions addressing the Employer of Record in Kazakhstan's legislation. It is neither legislatively regulated nor prohibited by the law. 

Consequently, numerous companies are exclusively offering EoR services in Kazakhstan. These services are in high demand from foreign companies looking to relocate their employees to Kazakhstan for short-term or long-term assignments. These companies facilitate the employment process in compliance with local laws and regulations, serving as a conduit for foreign entities to engage workers without establishing a legal entity in Kazakhstan. 

The demand for EoR services in Kazakhstan is steadily increasing as more businesses seek to navigate the complexities of international employment. Both local and foreign companies are expressing interest in EoR services. Foreign firms often turn to EoR providers as they enter the Kazakh market to ensure compliance with employment laws and regulations. ​

Is the EoR concept similar to temporary employment/labour leasing in your country?

In Kazakhstan, the concept of labour leasing is not recognised. The closest equivalent is the secondment of an employee, where an employee from one company may work temporarily for another. However, this arrangement is only permitted for companies that are shareholders of the actual employer or where the employer acts as the shareholder, in accordance with the Labor Code of the Republic of Kazakhstan. 

Please note, that there are other options from a migration and labour perspective to attract foreign employees to Kazakhstani companies with no direct or indirect ownership* 

When seconding an employee, a supplementary agreement to the employment contract is executed, specifying the workplace and the duration of the secondment and a seconded employee shall retain his/her place of work (position) with the employer who carries out the secondment. Thus, both EoR and secondment have similar concepts regarding the sending of employees to another company, however under secondment employee remains employed at the “sending party”, whereas under EoR concept on the contrary, economic employer does not have any direct employment relations with sending employees. ​

Special features of the activity within the framework of the EoR concept

For the provision of EoR services no special licenses or other permits required. The employment conditions, requirements, rights and obligations with the employees shall be the same as for the local employees of EoR.

Employment contracts may be open-ended, but if they are fixed term, the minimum duration must be one year, however, under specific circumstances, the employment agreement can be terminated earlier. ​


What are the special tax features of the EoR concept in your country?

Given the absence of a legal framework for the concept of Employer of Record (EoR) in Kazakhstan, there are no specific tax provisions designated for it. 

However, there is a potential risk of creating a permanent establishment (PE) in the country where the employee is deployed. If the employee works on the territory of another country on behalf of the economic employer (an individual other than an independent agent acts on behalf of the economic employer and possesses, and typically exercises, the authority to conclude contracts on behalf of the economic employer), this may result in the economic employer being acknowledged by the tax authorities of that country as a taxpayer with a PE. As a consequence, the economic employer will be obliged to pay taxes in that country. 

 This risk stems from the fact that most double tax treaties stipulate the presence of a permanent establishment for a economic employer in a case of abovementioned actions from individual working per EOR. 
To mitigate this risk, it is imperative to refrain from granting employees the aforementioned authorities and to provide them with appropriate guidance regarding this risk. There are additional risks associated with providing EoR services in the Republic of Kazakhstan, including:
  • Potential discrimination against local employees through differential treatment
  • Non-compliance with regulations pertaining to the percentage ratio of foreign employees to national employees. ​

How do you anticipate the concept of EoR evolving in your country from your perspective?​

According to the Ministry of Labour and Social Protection of the Population in Kazakhstan, the declining birthrates and the trend of citizens leaving the country to seek employment opportunities abroad are expected to lead to a labour shortage in the near future.

 

The introduction of the Employer of Record (EoR) framework has provided foreign companies with a viable alternative to establishing a legal entity or other legal form in the Republic of Kazakhstan. This strategic approach enables foreign entities to operate in the country without the need for physical presence, thereby facilitating a new influx of employees and businesses into the market. This development could provide implications for the country, as it fosters increased investments and contributes to its economic growth.

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