A Comprehensive Guide to Hiring Practices in Armenia

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Definitive Guide to Hiring in Armenia Find everything you need to confidently hire in Armenia - labor law, tax law, compliance, payroll, benefits and more.

Capital

Population

Monetary Unit

Yerevan

2.791 MM

Armenian dram

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Hiring in Armenia Hiring in Armenia Labor Laws in Armenia Armenia Salary and Wages Income Tax in Armenia Social Security in Armenia Immigration Armenia Value Added Tax (VAT) in Armenia

Hiring employees compliantly in Armenia means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Armenia so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can: (a) Establish your own new legal entity, banking, accounting and payroll service in Armenia or (b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Mandatory Benefits in Armenia Payment And Invoicing

Need assistance hiring in Armenia? Contact us about our International EOR Service

Payroll Accrual in Armenia Accrued Benefits in Armenia Why use Global Expansion to hire in Armenia

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Labor Laws in Armenia Employment laws in Armenia are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Armenia employment laws and Armenia policies here.

Employee Probation Period Hi and welcome to Global Expansion, yourprobation partner in global In principle, the duration of the period should not solutions. exceed three months,employment although, in certain cases, Armenian legislation may establish a probation period of up to six Can I help you find what you months. need?

Annual Leave in Armenia The minimum annual paid leave in Armenia is 28 days (Article 159 of the LC).

Extended and additional paid annual leave of up to 35 days (or up to 48 days in some exceptional cases) are granted to workers performing work in hazardous conditions, or in conditions of intellectual or emotional stress.

Holidays in Armenia

New Year's Day

1st January

Eastern Orthodox Christmas Eve

5th January

Orthodox Christmas Day

6th January

Army Day

28th January

International Women's Day

8th March

Easter Monday

13th April

Armenian Genocide Remembrance Day

24th April

Labor Day

1st May

Victory and Peace Day

9th May

Republic Day

28th May

Constitution Day

5th July

Vardavar

16th July

Elevation of the Holy Cross

14th September

Armenia Independence Day

21st September

New Year's Eve

31st December

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Maternity Leave Armenia Female employees are allowed up to 140 days of paid maternity leave.

Leave extends from 70 days before the birth to 70 days after the expected date of childbirth, or 155 days if there are complications and 180 days for multiple births.

Paternity Leave Armenia Male employees are entitled to 5 days of paid paternity leave

Sick Leave in Armenia Employees who are unable to work due to sickness or disability are entitled to 30 days of unpaid leave

Working Hours in Armenia Armenians work an eight-hour day and should not exceed 40 hours per week.

Overtime in Armenia Overtime is allowed, but at a maximum of four hours per day or eight hours per week.

Employees generally receive at least 150% of their regular hourly rate for each overtime hour.

Termination of Employment in Armenia An employment contract shall be terminated: upon the consent of the parties in case the contract expires upon the initiative of the employee upon the initiative of the employer in other cases, established by this Code.

Notice is required prior to dismissal for redundancy.

Employees are also entitled to severance pay of 2 weeks to 1 month of salary depending on the cause of dismissal.

Notice Period in Armenia Notice is required prior to dismissal for redundancy.

Notice Period is 14 days if given by employees Notice Period if given by an employer is as follows:- 2 months (in case of liquidation or organizational restructuring) - 2 weeks (in case of poor employee performance)

Severance in Armenia Severance pay is as follows:2 weeks if an employee is unsuitable or has reached retirement age 1 month in all other cases

Armenia Salary and Wages Start working with an EoR

13th / 14th Month Pay Yes N.B. Some sources say that it is mandatory - see first link. But I did not find evidence of such in the labour code.

There is a mandatory requirement to pay the 13th month salary. Although it is not statutory, Art 177 of the Armenian Labour law provides that 'higher pay for annual leave can be stipulated'.

Under Art 219 of the Labour law incentives are listed including 'lump sum' and 'supplementary paid vacation'.

Income Tax in Armenia Individuals are classified into two categories for personal income tax (PIT) purposes: - Residents are liable for tax on their worldwide income.

- Non-residents are liable for tax only on their Armeniansource income Income from royalties and interest (if not exempt) is subject to 10% tax.

If paid by a tax agent (i.e. legal entity, individual entrepreneur), tax should be withheld at source.

Income from lease of property is subject to 10% tax.

Income Starting from 1 January 2020, if the income from lease exceeds AMD 60 million during the tax year, the individual should pay 10% income tax in addition to the tax withheld by the tax agent.

The income from the sale of property is taxed at 10% or 20% (depending on the type of property and whether sold to a tax agent or individual).

The sale of non-entrepreneurial property to individuals is exempt from tax.

Starting from 1 January 2020, dividends received by foreigners are subject to 5% income tax (from dividends on the income generated after 1 January 2020), and dividends received by Armenian citizens are subject to 5% income tax (from dividends on the income generated after 1 January 2018).

The tax withheld from the dividends is subject to refund if the dividend received from a resident entity is invested in the capital of the same resident entity during the same tax year.

Other income paid by a tax agent is subject to final withholding on a monthly basis.

The taxable base is the gross income minus deductible income.

Other income will be withheld at a flat rate of 23% and will be gradually lowered to 20%, as presented below: - Starting from 1 January 2020: 23%.

- Starting from 1 January 2021: 22%.

- Starting from 1 January 2022: 21%.

- Starting from 1 January 2023: 20%

Income Tax Royalties & Interest

10%

Income from lease of property

10%

Income from sale of property

10% or 20%

Dividends

5%

Other Income

20%

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Social Security in Armenia As of 1 July 2014, mandatory contributions to pension funds are applicable for both Armenian and foreign citizens who were born after 1 January 1974 (inclusive).

However, employees were allowed to refuse the payment of social contributions until 1 July 2018 by submitting an appropriate application before 25 December 2014.

Yet, the employees working in the public sector and employees who were not employed as of 1 July 2014 may not refuse to pay social payments.

From 1 July 2018, all employees, notaries, and individual entrepreneurs born after 1 January 1974 should make funded pension contributions.

From 1 January 2023 the pension contribution payment should be calculated as follows: - 5% of the monthly gross salary if it is less than AMD 500,000.

- 10% of the monthly gross salary (but not more than the maximum threshold) minus AMD 25,000 if the monthly gross salary is more than AMD 500,000 [capped at AMD 87,500].

- An individual entrepreneur who participates in the scheme should make social payments in accordance to the following rates: An entrepreneur whose basic annual income does not exceed AMD 6 million should make monthly social payment in the amount of 5% of the gross income.

If the annual gross income of an individual entrepreneur exceeds AMD 6 million, the payment in the amount of the difference of 10% of the income and AMD 300,000 should be withheld.

Contribution

Pension Funds

Employer

-

5% of the monthly gross salary if it is less than AMD 500,000.

Employee

10% of the monthly gross salary (but not more than the maximum threshold) minus AMD 25,000 if the monthly gross salary is more than AMD 500,000 [capped at AMD 87,500].

Immigration Armenia Learn about immigration requirements in Armenia, work visa requirements, work permits and more.

One of the legal bases for a foreign citizen’s stay in Armenia is the entry visa.

In general, entry visas are issued by the Passport and Visa Department of the Police of the RA at the border crossing control points or on the territory of Armenia or by the Ministry of Foreign Affairs of the RA at the diplomatic missions and consular posts of the RA. The Ministry of Foreign Affairs of the RA also provides electronic entry visas to foreign citizens.

Citizens of certain countries (principally the countries of the former USSR) are not required to have a visa to enter Armenia and stay in the country for up to 180 days during a calendar year.

Armenian entry visas are provided for a period of stay up to 120 days, with the possible extension for a maximum of 60 days, and are issued for single or multiple entries.

The following types of Armenian visas are available: - Visitor visa - Official visa - Diplomatic visa - Transit visa Foreign employees must obtain work permit in Armenia to legally work for an Armenian company unless they are a highly skilled foreign specialist, business owner, or executive.

The Ministry of Labor and Social Affairs (MLSA) will conduct a test of the labor market in Armenia to make sure there aren’t any qualified or available local workers The following documents are necessary for a work permit - An application form - The employee’s passport - A diploma showing education or qualification for the job - Two photos - Proof of payment of the government’s fees

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Type of Visa/Permit

Documentation

Eligibility

Validity

Valid passport Passport size photographs Visitor Visa

Completed application form

Foreign nations visiting Armenia for tourism or business purposes must obtain a visitor visa

120 days

Proof of travel itinerary

Valid passport Passport size photographs Diplomatic Visa

Completed application form

Foreign diplomatic official seeking to visit Armenia must obtain a Diplomatic visa

120 days

Proof of travel itinerary

An application form T he employee’s passport

Work Permit

A diploma showing education or qualification for the job

Foreigners seeking employment in Armenia must obtain a work permit

1 year

Two photos Proof of payment of the government’s fees

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Value Added Tax (VAT) in Armenia The standard rate of VAT on domestic sales of goods and services and the importation of goods is 20%.

VAT Remaining States:

17%

Mandatory Benefits in Armenia These are mandatory benefits as postulated by law These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay Statutory benefits also include social security benefits

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Mandatory Benefits Overview Probationary period Annual Leave Public Holidays Maternity Leave Paternity Leave Sick Leave Overtime Pay Notice period Severance Pay Social Security Benefits

Payments And Invoicing Individuals who receive income that has not been subject to Armenian tax at source are required to file a personal tax return by 20 April of the following year.

Any income payment by a tax agent to an individual is subject to withholding unless the payment is to an individual entrepreneur and against appropriate invoices, and (or) the parties have signed a contract that indicates the individual’s tax identification number (TIN), passport data, domicile in Armenia, and the number of the state registration certificate issued when business activity commenced.

If this requirement is not met, payments from commercial organizations and private entrepreneurs are subject to 20% withholding tax (WHT).

WHT from payments to individuals must be transferred to the State Budget not later than the 20th day of the following month.

The tax corresponding to the personal tax return must be paid by 20 April.

Payroll Accrual in Armenia Country Accruals Additional Information

Social Insurance

4.5% if less than AMD500,000 10.0%

Christmas Bonus

8.33%

Vacations

9.86%

Also, from 1 January 2022 to 31 December 2022, the pension contribution payment will be calculated as follows:

-4.5% of the monthly gross salary if it is less than AMD 500,000.

-10% of the monthly gross salary (but not more than the maximum threshold) minus AMD 27,500 if the monthly gross salary is more than AMD 500,000.

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Payroll Accruals Additional Information

Employment Accruals

Annual Leave

T he minimum annual paid leave in Armenia is 28 days

Maternity Leave

Female employees are T his equals 38.35% allowed up to 140 days (140/365 days) of of paid maternity leave. annual income

Paternity Leave

Sick Leave

Male employees are entitled to 5 days of paid paternity leave

T his equals 7.67% (28/365 days) of annual income

T his equals 1.36% (5/365 days) of annual income

If the sickness or injury is not work related, the employee is guaranteed his/her job if his/her absence is no T his equals 32.8% more than 120 (120/365 days) of successive days or 140 annual income total days within the past 12 months.

Employees are entitled to receive full benefits while on sick leave.

Overtime

Overtime is allowed, but at a maximum of Normal hourly rate four hours per day or is around 4,843.75 eight hours per week.

AMD. Overtime is Employees generally paid at an receive at least 150% of additional 2,421.8 their regular hourly AMD. rate for each overtime hour.

Severance

Workers terminated due to redundancy are also entitled to severance pay of one month.

T his equals 8.33% (1/12 months) of annual income

Accrued Benefits in Armenia Christmas Bonus %

0%

Christmas Bonus Over Vacations %

0%

Severance per Year% Employees are entitled to one months pay based on one year's service (8.33% of annual salary)

8.33%

Vacations % The minimum annual paid leave in Armenia is 28 days (7.69% of annual salary)

4.69%

Notice % Employees are entitled to 30 days of notice period for one year of service or more (8.24%)

8.24%

Christmas Bonus Over Notifications %

0%

Vacations Plus %

0%

Total percentage of Salary (yearly)

24.35%

The total employment accruals as a percentage of salary per anum are equal to 24.35%

Why use Global Expansion to hire in Armenia Establishing a branch office or subsidiary in Armenia can be timeconsuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Armenian labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Armenian law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Armenia.

We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Armenian Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

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