Uzbekistan, or the Republic of Uzbekistan, is located in central Asia with easy access to Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, and Turkmenistan markets. It is a gateway to 34.5 million domestic consumers and an 87 million regional consumer base. The country has a growing economy with a rapid shift towards a free market economy.
Employers can benefit by hiring employees in the country. It is one of the most popular countries in Central Asia, with half of its population under 25 boasting a high general education level.
However, hiring from the country requires compliance with the local employment act and labor code. Employers also need to design payroll policies and procedures in Uzbekistan. Learn how to do payroll in Uzbekistan by referring to this guide.
How Is Payroll Calculated in Uzbekistan?
The payroll in Uzbekistan can be calculated by deducting taxes and other components like insurance, loan recoveries, leave adjustments, social security contributions, and others from the gross salary. A rough idea of how to calculate payroll is as follows:
Payroll in Uzbekistan = Gross Salary – Gross Deduction
Important Elements of Salary Structure in Uzbekistan
There are crucial elements in the salary structure to the payroll requirements in Uzbekistan. We have discussed some of these elements here.
Minimum wage
The current minimum wage in Uzbekistan is UZS 920,000 or USD 80.96 per month. This minimum wage became valid on 1st June 2022.
Gross salary
The gross salary is calculated by adding various allowances to the basic salary. It does not include taxes and other deductions. The allowances include overtime pay, annual leave pay, and others.
Net salary
The net salary or net pay is a crucial element of the payroll in Uzbekistan. It is the amount the employee receives after adjusting the tax and other deductions with the gross salary.
Overtime allowance
Overtime allowance is another significant part of the payroll process in Uzbekistan. In most cases, the employers pay double the regular wage as overtime allowance.
How to Setup a Payroll in Uzbekistan
Setting up payroll in Uzbekistan can be achieved in a few steps. They are described below.
1. Register your company
You can register your company as individual entrepreneurship, private enterprise, representative office, permanent establishment, limited liability company, or joint stock company in Uzbekistan. The accreditation authority in Uzbekistan is the Ministry of Investment and Foreign Trade (MIFT).
2. Compliance with labor law
You need to know the labor law to understand every aspect of the payroll regulation in Uzbekistan. The labor law generally has all the crucial elements of an employment contract, like minimum wage, overtime pay, and various employee benefits.
3. Employee information collection
The employment contract must have all the required employee information. The crucial information includes
- Name
- Address
- Gender
- Agreed Working hours
- Wages
- Work location
- The location where the employment contract was signed
You need to collect that employee information and keep them in a secure location.
4. Set up a payroll policy
After gathering all the important employee information, employers should draft a flexible payroll policy. You must provide details, including the payroll schedule, procedure, and others. It is an employee handbook detailing how employees will receive salaries and other benefits.
5. Set up international treasury
You need to make sure that your employees receive their salaries on time. For that, you need to set up an international treasury process. You can open a bank account in Uzbekistan to pay salaries, taxes, and social security contributions.
A Step-by-step Process of Payroll Processing in Uzbekistan
There are several steps involved in the payroll process of Uzbekistan, which is as follows:
1. Collecting tax information
Before you start processing payroll in Uzbekistan, you need to collect all the tax information related to an employee. You can distribute various tax forms for the employees to fill out. You can also gather all the documents referring to various deductions and employee benefits.
2. Creating a payment schedule
The next step requires you to set up a payment schedule that suits you the best. According to the Labor Code of Uzbekistan, the employees must be paid once per month.
3. Calculating payroll
Now, it’s time to calculate the payroll, considering all the information you have gathered. First, you need to calculate the gross pay for each employee. Then you need to collect all the details on gross payroll deductions in Uzbekistan. Now you can calculate the net salary payable to every employee.
4. Making payments
After completing the calculation, you can either send advice on disbursement to the bank or use any payroll processing software.
5. Performing payroll accounting
Payroll accounting is an essential part of the payroll process in Uzbekistan, which keeps track of your payments. You can do payment accounting on your own, or you can outsource it.
6. Payroll compliance
The final step is to ensure compliance with the rules. Make the necessary contribution to the Social Security Fund and Pension scheme on the due dates.
Payroll Contributions
According to the rules, the employer and the employee follow the different percentages of contributions. The list below contains the employer payroll taxes in Uzbekistan.
Payroll Contribution Scheme | Employer Contribution Percentage |
Social Security | 12.0 |
Pension | 0.1 |
The list below contains the employee payroll taxes in Uzbekistan.
Payroll Contribution Scheme | Employee Contribution percentage |
Social Security | 4.0 |
Unemployment Insurance | 0.5 |
Housing Loan | 1.0 |
Employee Training | 0.5 |
Payroll Cycle
The cycle of payroll in Uzbekistan is monthly. That means the employers must pay the employees at least once per month. There is no mandatory 13th-month pay provision in the labor code of Uzbekistan. However, employers can decide to pay bonuses at their discretion.
Uzbekistan Payroll Options for Companies
For companies considering expanding their business, there are four options to manage the payroll process in Uzbekistan. The options are
Internal payroll
Comparatively larger companies around the world usually set up their internal payroll service. This type of payroll requires you to set up a company subsidiary in the country. In addition, it is necessary to hire personnel on the HR payroll in Uzbekistan.
Remote payroll
Remote payroll is a system that manages the payroll for out-of-state employees. In this form of payroll, you do not require to set up a subsidiary in the country. You can utilize your existing payroll in this form. However, you must follow the payroll regulations in Uzbekistan while setting up remote payroll.
Local outsourcing
The third option is outsourcing your payroll service to a local payroll processing company. This option is the best when you want to remain in the loop by having all the information related to payroll in the country. But still, you or your company will be responsible for compliance with all the payroll rules of Uzbekistan.
Hiring a global payroll service
The fourth option is hiring a global payroll service. Global payroll services have vast experience managing payroll for several multinational companies. Working with these means you don’t need to worry about following the labor code regulations while managing payroll in Uzbekistan.
Entitlement and Termination Terms
It is compulsory to mention the employment contract while discussing payroll rules and regulations in Uzbekistan. According to the labor code of Uzbekistan, written employment contracts are mandatory. Such employment contracts must contain entitlement and termination terms.
Probationary period
The probationary period in Uzbekistan can not exceed three months. During this period, employers have a chance to look at the performance of the employees.
Entitlement terms
While discussing the payroll regulations in Uzbekistan, the entitlement terms are an integral part that we should not miss. Now, employees in Uzbekistan can receive various benefits from their employees. Some of them are here.
Overtime pay
The employment contract must have provisions for overtime pay. There is no fixed or mandatory rate of overtime pay. It is up to the employers to pay the most suitable overtime amount. Overtime can not exceed 4 hours for two days or 120 hours per year.
Leave entitlements
There are several leave benefits entitled to an employee. These play a significant role in the payroll process in Uzbekistan.
Annual leave
The employees in Uzbekistan receive a paid annual leave of 15 days after working for at least one year. The annual leave can extend to 30 days for disabled employees, minors, and employees with dangerous jobs.
Public holidays
Public holidays are significant when discussing payroll rules in Uzbekistan. The country celebrates nine public holidays for which the employees get paid. The list below contains the national holidays in Uzbekistan.
- New Year’s Day
- International Women’s Day
- Navruz
- Ramadan-Khayit
- Day of Memory and Honor
- Eid al-Adha
- Independence Day
- Day of teachers and mentors
- Constitution Day
Maternity leave / Paternity leave
According to the labor law in Uzbekistan, there is a provision for maternity leave. The female employees will receive a maternity leave of 126 days; 70 days before childbirth, and 56 days after childbirth. The employer will pay the full salary during this period, but they will get reimbursement from the social security fund.
There is no provision regarding paternity leave in the labor law of Uzbekistan.
Other leaves
There is no mandate in the labor law directing the employer to pay employees during sick leave. Usually, the social security fund pays the employee’s entire wage or a percentage of it during the sick leave.
Other leaves include a leave if an employee adopts a child. This leave can be 56 to 70 days.
Termination terms
Termination of employment contracts is crucial in discussing the payroll policies in Uzbekistan. According to Article 97 of the Uzbekistan labor code, there are six types of employment termination. They are
- Both parties agree mutually
- An initiative by one of the parties
- Employment agreement terms coming to an end
- Circumstances beyond control
- Non-renewal of employment
- For grounds envisaged in the employment contract
The local municipalities, civil courts, and regional departments of the ministry of labor keep and regulate the termination of employment. This regulation secures that employees are only terminated only based on a just cause.
Notice period
The labor code of Uzbekistan has specific regulations on notice periods. An employer must notify an employee about the termination of the employment contract at least two months before the termination. This notification is applicable in cases where the employer terminates the employment contract.
Uzbekistan Payroll Processing Company
There are two options available for you to get the most out of the payroll process in Uzbekistan. You can choose to manage payroll yourself. You can opt for either internal or remote payroll processing. The second option is to partner with a global payroll service like Multiplier and outsource your payroll service. If you are interested to learn more, contact Multiplier.
How Multiplier Can Help with Global Payroll?
At Multiplier, we offer global payroll solutions in more than 150 countries around the world. Our experienced professionals have in-depth knowledge of payroll rules and regulations in Uzbekistan. We work 24×7 managing your payroll service so that you can concentrate on other significant attributes of your business.