Understanding the nuances of regulating temporary staff matters in light of changes to labor legislation in the country.
This article uses the following terms:
Outsourcing – a service for transferring non-core functions (processes, business areas) to external organizations – contractors, which possess the relevant technical and/or managerial knowledge and resources in a particular field.
Outstaffing – a service for the temporary provision of workers who are officially employed by a specialized company (staffing agency). In this case, the client company receives employees who perform their duties under its management but legally remain employed by the contractor (staffing agency).
Until recently, outstaffing in Uzbekistan, unlike outsourcing, was in a gray area without proper legal regulation.
In October 2024, the Regulation on the Procedure for Providing Outstaffing Services (hereinafter – the Regulation) was approved, thereby significantly expanding the possibilities for using temporary staff.
Outstaffing - the Safest Way to Engage Temporary Staff
The staffing company assumes the obligations of entering into employment contracts with workers, timely payment of wages, and mandatory employer’s civil liability insurance for industrial accidents and occupational diseases of seconded workers. The receiving party, in turn, is responsible for ensuring safe working conditions and providing the temporary staff with the necessary tools and equipment.
The term for assigning workers to the receiving organization under an outstaffing agreement in Uzbekistan cannot exceed nine months within one calendar year; however, the term can be extended by agreement of the parties and with the consent of the worker.
Nuances of Concluding Fixed-Term Employment Contracts in Uzbekistan
A tool for engaging temporary staff without involving providers is concluding fixed-term employment contracts with workers.
The Labor Code of the Republic of Uzbekistan came into force in a new edition on April 30, 2023. Significant changes were made, including to the provisions regulating the procedure and grounds for concluding fixed-term employment contracts. Now, the contract must indicate the basis for its fixed-term nature in accordance with the exhaustive list provided in Articles 112 and 113 of the Labor Code of the Republic of Uzbekistan. Upon the expiry of the fixed-term employment contract, if grounds provided by the Labor Code exist, the parties have the right to extend its term. However, the total term of a fixed-term employment contract cannot exceed five years.
Violation of the aforementioned provisions may result in administrative liability for the employer, as well as the recognition of the employment contract with the worker as indefinite, with all ensuing consequences.
Outstaffing appears to be a more flexible and safer way to meet temporary staff needs compared to directly hiring workers on fixed-term employment contracts into the company’s staff.
Outsourcing IT Functions as a Way to Reduce Payroll Burden
One of the most common types of outsourcing is the provision of IT services. Engaging a provider with the status of a resident of the IT Park of Uzbekistan for outsourcing purposes can lead to significant savings on temporary staff costs.
Payroll taxes for commercial companies in Uzbekistan consist of three parts:
Personal Income Tax (PIT) – 12%
Social Tax – 12%
Contributions to an individual accumulative pension account in the amount of 0.1%.
The following tax benefits are provided for residents of the IT Park: PIT – 7.5% instead of 12% and exemption from payment of social tax.
Another important preference: foreigners employed by a company that is a resident of the IT Park do not require obtaining a confirmation of the right to work. This allows for savings on expenses related to the fee for issuing a work permit, which is about 870 USD per year, as, according to the general rule, confirmation of the right to work is mandatory for all foreign workers and is issued for a term not exceeding 1 year.
