Hire in Afghanistan through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively acting as the official employer for tax, legal, and compliance purposes. In the context of Afghanistan, an EOR can be particularly valuable for international companies looking to engage talent in the country without establishing their own local entity.

How Does EOR Work?

The EOR model operates through a straightforward process:

1. Client company selection: A business identifies talent they wish to hire in Afghanistan.

2. EOR partnership: The company partners with an EOR provider experienced in Afghan employment laws and regulations.

3. Employment contract: The EOR legally hires the selected individual, becoming the employer of record.

4. Day-to-day management: While the client company manages the employee's daily tasks and responsibilities, the EOR handles all administrative and legal aspects of employment.

5. Payroll and benefits: The EOR manages payroll, tax withholdings, and ensures compliance with local labor laws and benefits requirements.

6. Ongoing support: The EOR continues to provide HR support, legal guidance, and ensures ongoing compliance throughout the employment relationship.

Benefits of Using an EOR

Utilizing an EOR in Afghanistan offers several advantages:

1. Risk mitigation: EORs navigate the complex and often changing legal landscape in Afghanistan, reducing the risk of non-compliance for foreign companies.

2. Cost-effectiveness: Setting up a legal entity in Afghanistan can be expensive and time-consuming. An EOR eliminates this need, saving both time and money.

3. Flexibility: Companies can quickly enter or exit the Afghan market without the long-term commitments associated with establishing a local entity.

4. Local expertise: EORs possess in-depth knowledge of Afghan labor laws, cultural norms, and business practices, ensuring smooth operations and cultural sensitivity.

5. Focus on core business: By outsourcing employment administration, companies can concentrate on their primary business activities and employee productivity.

6. Simplified expansion: EORs facilitate easier international expansion, allowing companies to test new markets with minimal risk and investment.

7. Compliance assurance: In a country with complex and evolving regulations, EORs ensure ongoing compliance with local labor laws, tax requirements, and other legal obligations.

8. Cultural bridge: EORs can help navigate the unique cultural and social dynamics of Afghanistan, fostering better relationships with local employees.

In the context of Afghanistan's challenging business environment and recent political changes, an EOR can be an invaluable partner for companies seeking to engage talent in the country while minimizing risks and complexities.

Afghanistan's employment landscape is characterized by a young population facing significant challenges due to decades of conflict, limited access to quality education, and recent political upheaval. The workforce is predominantly unskilled or semi-skilled, with a large portion engaged in agriculture and informal sectors. The country's economic instability and the Taliban's restrictive policies, particularly towards women, have further complicated the employment situation.

Overview of Labor Laws

Afghanistan's labor laws have undergone significant changes in recent years, particularly following the Taliban's return to power in 2021. The current legal framework is uncertain and subject to rapid changes. Previously, the country had established labor laws that covered areas such as working hours, leave entitlements, and worker protections. However, the enforcement of these laws was often inconsistent, and many workers operated in the informal sector without legal protections.

Under the Taliban regime, labor laws are likely to be interpreted and enforced according to their strict interpretation of Islamic law. This has led to significant restrictions on women's participation in the workforce and changes in workplace regulations. International businesses and organizations operating in Afghanistan must stay informed about the evolving legal landscape and adapt their practices accordingly.

Cultural Considerations

When engaging with the Afghan workforce, it's crucial to be aware of the following cultural aspects:

1. Relationship-focused communication: Building trust and rapport is essential before engaging in business discussions.

2. Respect for authority: Hierarchical structures are common, with great respect shown to elders and those in positions of authority.

3. Indirect communication: To avoid confrontation and show respect, indirect communication is often preferred, especially in hierarchical situations.

4. Language: Pashto and Dari are the main languages spoken, and understanding their nuances can greatly enhance workplace interactions.

5. Religious practices: Islamic practices, such as prayer times, shape the daily rhythm of most workplaces.

6. Gender dynamics: Traditional gender roles and the Taliban's restrictions have significantly impacted women's participation in the workforce.

Challenges of Direct Hiring

Direct hiring in Afghanistan presents several challenges for international organizations:

1. Security concerns: The volatile security situation makes it difficult to conduct in-person interviews and maintain a physical presence.

2. Legal uncertainty: The rapidly changing legal landscape under the Taliban regime creates uncertainty regarding employment regulations and worker protections.

3. Skill shortages: Due to limited access to quality education and the exodus of skilled professionals, finding qualified candidates for specialized roles can be challenging.

4. Cultural differences: Navigating local customs, communication styles, and workplace expectations can be complex for foreign employers.

5. Infrastructure limitations: Poor infrastructure, including unreliable internet and electricity, can hinder remote work arrangements and communication.

6. Financial constraints: Economic instability and sanctions have made it difficult to transfer funds and manage payroll operations.

7. Gender restrictions: The Taliban's policies severely limiting women's participation in the workforce create significant challenges for organizations committed to gender equality.

8. Compliance risks: Ensuring compliance with both local regulations and international standards can be complex and risky in the current political climate.

Given these challenges, many international organizations opt to work with local partners or use third-party employment solutions to navigate the complexities of hiring in Afghanistan.

Afghanistan's payroll and tax system is structured to ensure both employers and employees contribute to the country's fiscal resources. The system encompasses various elements, including income tax, social security contributions, and corporate taxes. Understanding these components is crucial for businesses operating in Afghanistan and for employees working in the country.

In Afghanistan, employers play a significant role in the tax collection process, acting as intermediaries between employees and the government. They are responsible for withholding income tax from employee salaries and remitting it to the appropriate authorities. Additionally, employers have their own tax obligations, including corporate income tax and potential customs duties.

For employees, the tax system primarily revolves around income tax deductions from their salaries. The tax rates are progressive, meaning that higher earners pay a larger percentage of their income in taxes. While the deduction options for employees are somewhat limited compared to some other countries, there are still important considerations to keep in mind.

Let's delve deeper into the specific contributions required from both employers and employees in Afghanistan's payroll and tax system.

Employer Contributions

Employers in Afghanistan have several financial responsibilities when it comes to payroll and taxes:

1. Income Tax Withholding: Employers must calculate and withhold income tax from their employees' salaries each month. This withholding is based on the progressive tax rate table outlined in the Income Tax Law.

2. Corporate Income Tax: Companies are subject to a 20% corporate income tax on their taxable income. This is calculated by subtracting allowable business expenses from the company's gross revenue.

3. Social Security Contributions: Employers are required to contribute to their employees' social security funds. These contributions are considered part of the employee's taxable income.

4. Tax Remittance: Withheld taxes must be submitted to the government within 10 days of the end of the month in which they were withheld.

5. Customs Duties: If applicable, employers may need to pay customs duties on imported goods used for business purposes.

6. Property Tax: Business owners who own property may be subject to property tax.

7. Registration and Compliance: Employers need to register with the Afghanistan Revenue Department (ARD) to obtain a Tax Identification Number (TIN). They must also file tax returns and remit payments on a regular basis, typically monthly or annually, depending on the specific tax type.

Employee Contributions

Employees in Afghanistan also have tax and contribution responsibilities:

1. Income Tax: Employees are subject to income tax, which is withheld directly from their salaries by their employers. The tax is calculated using a progressive rate structure:

   • 0 – 5,000 AFN: 0%
   • 5,000 – 12,500 AFN: 2%
   • 12,500 – 100,000 AFN: 10% + 150 AFN
   • Over 100,000 AFN: 20% + 8,900 AFN

2. Social Security Contributions: Employees contribute to their social security or social insurance funds through deductions from their salaries.

3. Limited Deductions: Unlike some countries, Afghanistan offers limited tax deductions for employees. Personal expenses such as medical costs or charitable contributions are generally not deductible.

4. Standard Deduction: A standard deduction may apply to reduce an employee's taxable income, based on their filing status.

It's important to note that while this information provides a general overview of payroll and taxes in Afghanistan, tax laws and regulations can change. Both employers and employees should consult with local tax experts or the Afghanistan Revenue Department for the most up-to-date and specific information regarding their tax obligations.

The Afghan labor market is evolving, with employers recognizing the importance of comprehensive benefits packages to attract and retain top talent. While the Afghan Labor Code mandates certain benefits, many companies are going above and beyond to create attractive employment packages. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local regulations while helping businesses offer competitive packages to their employees in Afghanistan.

Mandatory Benefits

• Annual leave of 20 paid days per year
• 10 days of paid essential leave annually
• Paid public holidays, including Fridays and religious observances
• Up to 20 days of paid sick leave per year after six months of employment
• 90 days of paid maternity leave for female employees
• Overtime pay ranging from 15% to 25% above regular wages
• Notice period for employment termination
• Severance pay for termination without cause

Optional Benefits

• Health insurance plans (fully or partially subsidized)
• Wellness programs, including gym memberships or on-site fitness facilities
• Profit-sharing bonuses
• Transportation allowances or company-provided transportation
• Flexible work arrangements (remote work options or compressed workweeks)
• Childcare subsidies or on-site daycare facilities
• Professional development opportunities (training programs, workshops, or conferences)

By offering a mix of mandatory and optional benefits, employers in Afghanistan can create a more attractive work environment, fostering employee satisfaction and loyalty. As an EOR, Rivermate ensures that businesses can navigate the complexities of Afghan labor laws while providing competitive benefits packages tailored to their workforce needs.

The process of termination and offboarding in Afghanistan is governed by the Afghanistan Labor Code of 1999, which provides a framework for both employers and employees to follow. This process involves several key steps and considerations to ensure compliance with local labor laws and to maintain a smooth transition for all parties involved.

Permissible Reasons for Termination

The Afghan Labor Code outlines several legitimate grounds for employment termination. These include:

• Mutual agreement between the employer and employee
• Expiration of a fixed-term contract
• Employee retirement
• Death of the employee
• Disability that prevents the employee from performing their duties
• Extended absence from work
• Company closure or redundancy
• Employee conviction and imprisonment
• Disciplinary reasons

Notice Requirements

When an employer initiates termination for reasons other than disciplinary grounds, they are generally required to provide one month's written notice to the employee. This notice period allows the employee time to prepare for the transition and seek new employment opportunities.

However, there are exceptions to this rule:

• During a probationary period, immediate termination may be permissible
• If an employee has significantly violated the terms of their employment contract, the employer may terminate without notice

Employees also have the right to terminate their employment. For indefinite-term contracts, employees must provide one month's written notice. In cases where the employer has breached the contract or labor laws, the employee may terminate without notice.

Severance Pay

Unlike many other countries, severance pay in Afghanistan is not always guaranteed by law. The Afghan Labor Code does not explicitly mandate severance pay in most termination scenarios. However, there are exceptions:

• In cases of redundancy or company closure, severance pay may be required
• To avoid potential disputes, it's highly recommended that severance terms be clearly outlined in the employment contract

Offboarding Process

While not explicitly detailed in the Labor Code, a proper offboarding process typically includes:

1. Communicating the termination decision to the employee
2. Providing the required notice or severance pay (if applicable)
3. Collecting company property (e.g., equipment, access cards)
4. Revoking access to company systems and information
5. Conducting an exit interview (optional but recommended)
6. Providing necessary documentation (e.g., certificate of employment)

By following these guidelines and ensuring compliance with the Afghanistan Labor Code, employers can navigate the termination and offboarding process effectively while minimizing legal risks and maintaining positive relationships with departing employees.

Afghanistan has specific visa and work permit requirements for foreign nationals seeking employment in the country. While the process can be complex, understanding the basics can help streamline your entry and work authorization.

Visa Requirements

Foreign workers typically need to obtain a visa before entering Afghanistan. The most common types for employment purposes are:

1. Business Visa: For short-term business activities
2. Work Visa: For long-term employment

To apply for a visa, you'll need to submit:

• A valid passport
• Completed visa application form
• Passport-sized photographs
• Invitation letter from an Afghan employer or sponsor
• Proof of accommodation in Afghanistan
• Proof of sufficient funds

Work Permit Process

Once in Afghanistan with a valid visa, foreign workers must obtain a work permit. The process generally involves:

1. Employer sponsorship: Your Afghan employer must initiate the work permit application process.

2. Document submission: Required documents typically include:

   • Copy of passport and visa
   • Educational certificates
   • Professional qualifications
   • Police clearance certificate
   • Medical certificate

3. Ministry approval: The Ministry of Labor and Social Affairs reviews the application and issues the work permit if approved.

4. Renewal: Work permits are usually valid for one year and must be renewed annually.

Important Considerations

• Security situation: Due to the current political climate, it's crucial to stay informed about travel advisories and security risks.
• Cultural sensitivity: Familiarize yourself with local customs and dress codes to ensure respectful integration.
• Legal compliance: Always work with authorized employers and maintain valid documentation to avoid legal issues.

Remember that visa and work permit requirements can change, so it's advisable to consult with the Afghan embassy in your home country or a reputable immigration lawyer for the most up-to-date information.