The number of foreign citizens, who gets registered at the State Social Security Fund (SSSF) increases day by day. The SSSF registered 515 foreign citizens working in Azerbaijan, so since 1 January 2006 they should make remittances in obligatory social insurance, Salim Muslimov, the chairman of the SSSF. Whereas in mid-July the SSSF has registered around 600 foreign citizens employees of companies functioning in Azerbaijan in system of personal account of citizens, and they were given certifications on social insurance. In the future, this number will speedily increase, Muslimov underlined.
Such optimistic forecasts, of course, have exact grounds. In accordance with different versions, at present, from 6,000 to 18,000 foreign citizens are involved in the contractor and sub-contractor projects in Azerbaijan. Among them are representatives of different nationalities. However, the SSSF could not achieve to attract all of them to payment of social insurance fees. It turned out very uneasy work and 600,000 is a very good figure.
Firstly, the process of attraction of foreign employees to the registration of social insurance is something new for Azerbaijan. This innovation has been introduced since 1 January 2006 after injection of changes in to the Law on Social Insurance, under which the foreign employees, which gain definite incomes in the country, are also to pay obligatory state social insurance fees. Hence every of them will have private certificate on social insurance, while in the age of pension these people will receive the sum calculated on the base of appointment of proportional pensions.
Secondly, the statistics of foreign employees involved in the territory of Azerbaijan was calculated for the next time. It mainly concerns the employees of the companies involved under the oil contracts.
Thirdly, a process on admission of accounts are delayed due some problems linked with the contractors and subcontractors involved under the PSAs. The foreign citizens are mainly involved in the oil contracts.
The point is that under the ACG only the contractors have been released from payment of social insurance fees, while the question is open in respect to sub-contractors. In other oil companies he foreigners involved in contractor and sub-contractor companies are released from social payments. There are also problems with the contractor companies which along with the PSA also carry out other activities. So, there was established a special commission with their participation for the resolution of these issues. It will promote the foreigners involvement in the payment of social insurance fees.
This is a very new experience in Azerbaijan and is not well spread, while there is exists and has all bases for further development. A foreign employee in Azerbaijan is a foreign citizen, who is temporarily resides in the country works on the base of labor or civil law agreement on implementation of services.
Till 2006 the organizations which hired foreigners could pay insurance fees from the salaries calculated for these employees. Respectively, these employees do not have a right for pension and social security in the country at the expense of relevant state non-budget funds. The privilege was specified by a special item of the tax legislation.
However, on 1 January 2006 this item was changed and the privilege was removed following the reforms in the national pension system, in particular, transition to individual registration of obligatory social insurance. It means the organizations will have to pay social taxes from payments calculated in favor of foreign citizens without citizenship, irrespective of rights of foreign physical entities for acquisition of lags from relevant non-budgetary funds. Of course, if no other order is indicated in international agreements.
We are considering it in the context of contracts and definite talks are being conducted on every of them. The talks will reveal the foreign citizens due to pay duties for social insurance. We explain them it is very profitable, while simply the employers, who are to pay 22% of the salary fund. I am not the supporter of differentiation of rates, as we established a unified system for all, Muslimov noted. A process on revealing the taxpayers to remit social payments has been set up, while the registration is underway on other spheres.
A process on attraction of foreigners to obligatory social insurance payments have been activated thanks to establishment of a work force with the participation of foreign companies, which considered the issues. The SSSF underlined the highest number of foreign citizens employed under the contractor and subcontractor companies were fixed at BP.
SSSF officials had meetings with experts of BP, the Azerbaijani-US Chamber of Trade and Industry (AMCHAM), the US embassy in Azerbaijan and explained the importance of the process in connection with Azerbaijans transition to a new pension system and relevant international standards. The major requirement is the application of the system adopted in the European community. In accordance with this system, in EU countries pension provision is implemented through proportional system, which stipulates opening of individual accounts for any employee irrespective of citizenship, Muslimov stressed. The funds accumulated in the accounts of foreign citizens will be transferred to their accounts in the country where they will retire.
Azerbaijan is ready to apply the European system of proportional payments to resolve the problem. The issue on conclusion of agreements between the SSSF and relevant bodies is still questionable. The organization of payment is directly linked with the presence of contracts among the pension bodies of different countries. Representatives of the SSSF are ready to conclude agreement with the relevant bodies of the United States and the UK with the dominating number of citizens employed in Azerbaijan. The above said special group is involved in these issues and today close relationships is being carried out with the US Departments Social Insurance Agency for exchange of information.
The process of attraction of foreign employees has received green and gains speed. However, it is not excluded that in order not to pay 22% of the wage fund the employer will seek ways for avoiding the payment.
However, prior to attracting the foreigners to payment of social taxes it is necessary to encourage them with the amount of pensions. Taking into consideration into the expected economic rise and growth pace of consumer price index and average monthly salary in Azerbaijan by 2015, we have developed a growth dynamic of income and expenses, Muslimov underlined. In accordance with the initial calculations in 2008 the living minimum for pensioners will be increased to 55 manats. Respectively, the basic part of labor pension will be increased to this level in 2008. This parity will be maintained in the years to come.
Next rise in pensions is expected on 1 October 2006 and it will be increased to 35 manats. The previous rose dated 1 April, as a result of which the basic minimal amount of labor pension made up 30 manats.
The SSSF of Azerbaijan has presented more than 300 thousand certifications of individual count in accordance with the system of obligatory state social insurance. Today there are information about 911 thousand people in the system. Information about 480 thousand citizens has already been attached to the system, entered into registration and is ready to be published, Trend reports with reference to Salim Muslumov, the chairman of the same fund.
The Fund is planning to complete the process of presenting social certifications to citizens by the end of November 2006.
Staring with the registration of foreign employees, involved in the oil contracts, the SSSF is to set up the registration of the rest foreigners involved in different spheres of economy, for instance, the financial sector. Thus, highest growth pace of employees of employees in Azerbaijan was observed in the financial sector and it is not excluded that their number is high.
In January to April 2006 the special weight of the hired employees in financial sector rose 17.4% as compared to last year, in the construction sector 8.1%, energy, water and gas production and distribution 7.3%, refining industry, service sector, operation with property 6%, agriculture and forestry 4.1%.