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published on 26 october 2022 | reading time approx. 4 minutes
Kazakhstan has increasingly become the focus of Western media attention in recent weeks. One of the reasons is the partial mobilisation of conscripts for the war in Ukraine. The figures on the number of Russian citizens who have left differ. While the Western media speak of around 100,000 Russian citizens who have entered Kazakhstan, the Kazakh Ministry of Labour and Social Affairs announced on 26 September 2022 that a total of only around 31,000 Russian citizens are in Kazakhstan with the aim of pursuing employment. The comparatively high degree of digitalisation of the Kazakh administration leads to the conclusion that the information provided by the Kazakh Ministry of Labour and Social Affairs is reliable.
Since the beginning of the war in Ukraine, many German and foreign companies have been asking themselves whether the staff previously employed in the Russian subsidiaries can be transferred to Kazakhstan and employed there by local Kazakh subsidiaries or other branches. Due to their social responsibility for long-serving employees, but also because they want to retain long-serving and experienced employees from Russia and employ them in Kazakhstan, German companies would like to find out what hurdles have to be overcome in the case of labour migration.
Kazakhstan ratified the Treaty on the Establishment of the Eurasian Economic Union in 2014. The Treaty on the Eurasian Economic Union (hereinafter referred to as the "EEU Treaty") has been in force since 01.01.2015. At the level of the Eurasian Economic Union, there are no supranational labour regulations or a unified labour law.
However, Article 97 of the EEU Treaty contains provisions on labour migration and a single labour market. The principles enshrined there are quite comparable to the principle of free movement of workers within the European Union. Workers from other member states of the EEU do not need a work permit.
The EAWU Treaty thus gives workers from EAWU member states the right to freely choose their place of work within the EAWU, even if further regulations exist at the national level of each EAWU member state, e.g. on the recognition of university degrees from another EAWU member state. Thus, although labour migration and movement of workers between the EEU member states is regulated at the supranational level, the legal relationship between the worker from another EEU state and the Kazakh employer must be regulated according to the norms of national labour law.
In addition to labour law regulations, a number of norms of Kazakh migration law must be observed when transferring staff from Russia to Kazakhstan.
In the case of the transfer of an employee with Russian citizenship, it is necessary, among other things, for the employee to obtain a so-called temporary residence permit with a validity period of up to one year. In this case, the Kazakh employer must issue an invitation with which the employee from a member state of the EAEU can apply for the issuance of the above-mentioned residence permit. As a general rule, the duration of the stay is based on the contractually agreed duration of the employment relationship and can be extended after one year.
If the employment contract with the employee from another member state of the EAWU is terminated, the employee has the right to conclude an employment contract with another employer. With regard to the registration of the stay in Kazakhstan, which may be necessary, more extensive requirements of the Kazakh migration law apply. Such reporting or registration requirements aim to statistically record flows of workers from the EEU. Although services provided by the Kazakh migration administration have been digitalised to the greatest possible extent, there are often difficulties of interpretation in the application of legal provisions in administrative practice, which can only be overcome quickly by the personal presence of an advisor.
Obtaining a temporary residence permit, which consists of several steps, such as obtaining an Individual Identification Number, can take up to 7 working days.
As a result of the ongoing digitalisation of the Kazakh administration, every Kazakh citizen, but also foreign citizens, including Russian citizens with a residence permit, must be in possession of an Individual Identification Number (IIN). By using the IIN, the identity of a person (along with other identification documents) can be established beyond doubt, among other things for social security, tax and pension insurance purposes.
According to Article 28, paragraph 1, sentence 1 of the Kazakhstan Labour Code, the employment contract must contain the full name, residence and address, identification data and the individual identification number of the employee. The conclusion of an employment contract therefore requires that the worker from another member state of the EEU has already received a so-called IIN before the conclusion of the employment contract.
Obtaining an IIN requires an application and the submission of various documents. The application can in principle be made by a third party. However, this requires a power of attorney and other documents to be notarised.
According to provisions of the Kazakh Labour Code, salary must be paid to an employee in Kazakh currency (Tenge - KZT). The effect of this is that workers from EAWU member states must have a bank account in Kazakh tenge. At least from a practical point of view, the employee must therefore open a local bank account.
However, with the exception of the requirement of personal presence at the bank, this should not be an obstacle for Russian workers. The use of VISA or MASTER cards is no longer possible anyway in view of the sanctions. The Russian payment system "MIR" is currently only supported by two Kazakh banks (BTB Bank and Bereke Bank) in Kazakhstan. Although there are no prohibitions in this respect on the part of the Kazakh banking supervisory authorities, there is uncertainty in view of the US sanctions against Russian banks, which means that most Kazakh banks do not accept cards from the "MIR" payment system.
This leads to Russian workers opening bank accounts not only in Kazakh currency but also in foreign currencies. The issuance of VISA or MASTERCARD has been possible under Kazakh foreign exchange law for decades, even for foreign workers. A money transfer from Kazakhstan to Russia is in any case possible for employees without any restrictions.
Opening bank accounts in Kazakhstan is therefore not seen as an obstacle by almost all workers from Russia, but as a good opportunity.
Outstaffing is a variant of outsourcing and, under Kazakh law, has the de facto function of temporary agency work.
Working on a temporary basis" means that the employee concludes an employment contract with a rental company, which hires him out to a client for a limited period of time. In Kazakhstan there is a legal framework for the use of temporary workers, which is not only intended to protect the employee, including those from other member states of the EAEU, but also to provide tax law protection, which plays an important role in considering whether the outstaffing model should be chosen until the company is established. The involvement of a competent legal and tax advisor is strongly recommended.
Germans and other foreign companies who, in view of the mobilisation of the Russian armed forces, are concerned about their long-standing and trusted employees in Russia, can be advised not only to consider Kazakhstan as an alternative sales market, but to see this EAEU state as a place of retreat which, in view of the applicable freedom of movement of workers within the EAEU, offers favourable framework conditions for investors. Due to the advantages of the tax and customs framework, Kazakhstan will continue to play an important economic role as a new investment location and thus as a new gateway in Central Asia. The influx of well-educated professionals from Russia to Kazakhstan is likely to further incentivise the country as an attractive economic hub in Central Asia.
Michael Quiring
Attorney at Law (Germany)
Partner, Office head
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Korlan Alikhanova, LL.M.
Associate Partner
