Salary indexation in the Republic of Kazakhstan


published on 6 March 2023 | reading time approx. 2 minutes

Currently, due to the geopolitical situation in the world, there is a growing number of foreign companies registered in Kazakhstan and also an influx of foreign workers, due to which salaries in foreign currency are being fixed more and more frequently asked by both employees and employers. Below we will look at the legal regulation of wages in the Republic of Kazakhstan and how they may be indexed. 


In accordance with paragraphs 1 and 2 of Article 107 of the Labour Code of the Republic of Kazakhstan (hereinafter “LC RoK”), wages are established by the employment contract in accordance with the employer's wage payment system. The wage system is established by the employment contract, collective agreements and the employer's acts (e.g., the Wage Regulations).
According to Article 113 of the LC RoK wages are established in monetary form in the national currency of the Republic of Kazakhstan – KZT – and are paid at least once a month not later than the first ten-day period of the following month. Based on the above, wages are the monetary remuneration of an employee for the work he or she has performed, which is paid in KZT at least once a month.
Nevertheless, in fact, the law does not prohibit wages equated to foreign currency at the exchange rate on the date of signing the employment contract. Hence, the question arises as to how an employee should deal with constant changes in the exchange rate in order not to lose money in the event that wages in KZT are equated with the amount of foreign currency. In this case, a wage indexation clause may be one way of protecting the employee.
Indexation is a means of protection against inflation by linking the amount of a contract, loan, salary, pension, benefits, deposits, etc. to the consumer price index. Wage indexation is not an employer's obligation, although it was in the previous version of the Labour Code (in force until 1. January 2016).
However, the law does not prohibit indexation and gives the possibility for each employer to approve it sepa­rately. Indexation may be specified either in the employment contract itself or in the employer's acts, e.g., in the internal regulations on remuneration. If the indexation is provided in the employer's internal regulations, he is obliged to make each employee acquainted with such regulations.
Subparagraph 2) of paragraph 2 of Article 157 of the LC RoK states that a collective agreement may specify mutual obligations of parties to said agreement on the order of indexation of wages. In case of a collective agreement with the employees the inclusion of an indexation clause isn’t mandatory for the employer. However, if the indexation clause has been included in the collective agreement, the employer is obliged to comply with it and therefore to index wages.
One example used in practice is the use of an indexation factor ("CI") whereby the monthly wage is adjusted by multiplying the contracted wage amount by the CI.
Note, however, that this adjustment applies only to increases in the employee's wages and the CI is only appli­cable for changes in labour conditions under the Labour Code, if the currency exchange rate at the time of wage payment is lower than the initial rate at the date of signing the contract.
Thus, the legislation of Kazakhstan allows each employer to independently determine whether he will index wages or not. At the same time, the employer must take into account the provisions of the LC RoK, with respect to equal rights and opportunities of employees. Thus, the addition of an indexation clause should be offered to all employees.
The most important precondition is that the indexation clause is included in the employment and collective agreements, as well as in the legal acts of the employer. If indexation is indicated as an obligation of the em­ploy­er in the documents mentioned above, the employer has no right to violate this clause. If the employer violates this clause, the employee has the right to claim extrajudicially and in court to oblige the employer to comply with this requirement and to claim for the unpaid part of his wages.


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