Hire in Armenia 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 expanding their global reach without the need to establish a local subsidiary.

For a country like Armenia, EORs play a crucial role in facilitating international business operations and attracting foreign investment. They provide a streamlined solution for companies looking to tap into Armenia's skilled workforce or explore its emerging market potential without navigating the complexities of local labor laws and regulations on their own.

How Does EOR Work?

When a company decides to use an EOR service in Armenia, the process typically unfolds as follows:

1. The client company identifies a candidate they wish to hire in Armenia.
2. The EOR becomes the legal employer of the worker, handling all administrative tasks such as payroll, tax withholding, and benefits administration.
3. The client company maintains day-to-day management of the employee, including work assignments and performance evaluations.
4. The EOR ensures compliance with Armenian labor laws, manages employee contracts, and handles any legal issues that may arise.
5. The client company pays the EOR a fee for their services, which includes the employee's salary and additional costs associated with employment.

This arrangement allows companies to quickly establish a presence in Armenia without the need for extensive legal knowledge or local infrastructure.

Benefits of Using an EOR

Utilizing an EOR in Armenia offers several advantages for international businesses:

1. Rapid market entry: Companies can start operations in Armenia quickly without the need to set up a local entity, which can be time-consuming and costly.

2. Compliance assurance: EORs are well-versed in Armenian labor laws and regulations, ensuring that the client company remains compliant with local requirements.

3. Risk mitigation: By taking on the legal responsibilities of employment, EORs shield client companies from potential legal issues related to labor disputes or regulatory violations.

4. Cost-effectiveness: EORs eliminate the need for companies to invest in local infrastructure, legal counsel, and HR personnel, potentially reducing overall operational costs.

5. Flexibility: Companies can easily scale their operations up or down without the complications associated with hiring or terminating employees directly.

6. Access to local expertise: EORs often provide valuable insights into the local business culture and practices, helping companies navigate the Armenian market more effectively.

7. Focus on core business: By outsourcing administrative and legal tasks to the EOR, companies can concentrate on their primary business activities and strategic goals in Armenia.

8. Simplified global expansion: For businesses looking to expand into multiple countries, using EORs provides a consistent and manageable approach to international hiring.

By leveraging the services of an EOR, companies can take advantage of Armenia's skilled workforce and growing economy while minimizing the risks and complexities associated with international expansion. This arrangement not only benefits the expanding businesses but also contributes to Armenia's economic growth by facilitating foreign investment and job creation.

Armenia's employment landscape is characterized by a well-educated workforce with a growing focus on technology sectors. The country faces challenges such as an aging population, gender disparities, and a significant rural workforce. While the service sector dominates employment, agriculture remains important, and there's a push to develop the industrial sector. Armenia grapples with high unemployment rates, emigration of skilled workers, and a sizable informal economy.

Overview of Labor Laws

Armenia's labor laws aim to protect workers' rights and establish fair employment practices. Key aspects include:

• Maximum 40-hour workweek with overtime regulations
• Minimum of 20 days of paid annual leave
• Maternity leave of 140 days with job protection
• Prohibition of discrimination based on gender, age, or ethnicity
• Mandatory written employment contracts
• Regulations on termination and severance pay

Employers must comply with these laws to ensure legal and ethical employment practices in Armenia.

Cultural Considerations

Understanding Armenian work culture is crucial for successful business operations:

• Family-oriented: Employees often prioritize family commitments alongside work
• Relationship-focused: Building personal connections is important before business discussions
• Direct communication: Open feedback is common, but non-verbal cues are equally important
• Hierarchical structure: Respect for authority and clear chains of command are prevalent
• Flexibility: Time management may be more relaxed compared to strictly time-oriented cultures

Adapting to these cultural norms can greatly enhance workplace harmony and productivity.

Challenges of Direct Hiring

Direct hiring in Armenia presents several challenges:

1. Language barriers: While many professionals speak English, Armenian is the primary language
2. Skill mismatches: Aligning educational outcomes with specific industry needs can be difficult
3. Regulatory compliance: Navigating complex labor laws and tax regulations
4. Cultural adaptation: Understanding and integrating local work culture into company practices
5. Talent retention: Addressing the issue of skilled worker emigration
6. Infrastructure: Dealing with potential disparities in rural areas

Overcoming these challenges requires careful planning, local expertise, and a willingness to adapt to the Armenian business environment.

Armenia's payroll and tax system is structured to ensure both employers and employees contribute to the country's social and economic development. The system is designed with a flat tax rate for income and corporate taxes, simplifying calculations but requiring careful attention to specific rules and thresholds. Understanding these regulations is crucial for businesses operating in Armenia and for employees working in the country.

In Armenia, the payroll process involves various components, including income tax, social contributions, and other deductions. Both employers and employees have distinct responsibilities when it comes to taxes and contributions. Let's delve into the specifics for each group.

Employer Contributions

While employers in Armenia are not typically required to make direct contributions to social security funds for their employees, they do have several tax responsibilities:

1. Corporate Income Tax: Armenian companies are subject to a flat corporate income tax rate of 18% on their profits after allowable deductions.

2. Withholding Tax on Dividends: A standard 5% withholding tax is applied to dividends paid to both resident and non-resident shareholders.

3. Social Contributions (in specific circumstances):

   • If an employer chooses to contribute to their employees' voluntary pension plans, these contributions may be tax-deductible.
   • For employees with monthly gross salaries exceeding AMD 500,000, employers must handle the calculation and withholding of a portion of the social contribution.

4. Payroll Management: Most Armenian companies operate on a monthly payroll cycle. Many choose to outsource payroll management to specialized firms or accountants to ensure compliance with evolving tax regulations.

Employee Contributions

Employees in Armenia are responsible for several tax and social contributions:

1. Income Tax: Armenia has a flat income tax rate of 20% on all taxable income, regardless of the amount. However, certain types of income, such as state pensions and specific social benefits, are exempt from taxation.

2. Pension Contributions: Employees are required to contribute to their pension funds based on their salary:

   • 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 of around AMD 87,500) minus AMD 25,000 if the monthly gross salary is more than AMD 500,000

3. Mandatory Health Insurance Payments: In certain circumstances, employees may be subject to mandatory health insurance contributions.

4. Trade Union Fees: If an employee is a member of a trade union, membership fees might be deducted from their salary.

It's important to note that pension calculations can be complex, and employees are advised to consult with their pension fund for precise calculations.

Understanding these tax and contribution requirements is essential for both employers and employees in Armenia. Employers must ensure they're complying with all relevant regulations and making accurate deductions, while employees should be aware of their financial obligations and how they impact their take-home pay. As tax laws can change, it's advisable to stay informed about any updates or modifications to the Armenian tax system.

Armenia offers a comprehensive set of employee benefits, combining mandatory provisions with optional perks that enhance the overall employment package. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local labor laws while helping companies attract and retain top talent. By partnering with an EOR, businesses can navigate the complexities of Armenian employment regulations and provide a competitive benefits package tailored to their workforce needs.

Mandatory Benefits

Armenian labor law mandates several essential benefits that employers must provide to their employees:

• Paid Time Off:

  • Minimum 20 days of paid annual vacation
  • 10 paid public holidays
  • Paid sick leave (employer covers first 5 days at 80% of average salary)

• Social Security Contributions:

  • Mandatory employer contributions to social security scheme
  • Covers pensions, healthcare, and unemployment insurance

• Maternity Leave:

  • 140 days of paid maternity leave (70 days before and after childbirth)
  • Extended to 155 days for complicated deliveries and 180 days for multiple births
  • 100% of average monthly earnings during leave

Optional Benefits

To stand out in the job market, many Armenian employers offer additional benefits beyond the mandatory requirements:

• Supplemental Private Health Insurance:

  • Wider coverage for medical services, medications, and dental care

• Life and Accidental Death Insurance:

  • Provides financial security for employees' families

• Professional Development Opportunities:

  • Financial assistance or paid time off for conferences, workshops, or certifications

• Flexible Work Arrangements:

  • Remote work options or flexible working hours

• Transportation Allowances:

  • Help cover commuting costs

• Additional Paid Time Off:

  • Personal leave days or compassionate leave

• Recreation and Wellness Programs:

  • Organized activities, gym memberships, or wellness initiatives

By offering a mix of mandatory and optional benefits, employers in Armenia can create an attractive compensation package that supports employee well-being and job satisfaction. As an EOR, Rivermate ensures that companies comply with local regulations while implementing these benefits effectively.

The process of termination and offboarding in Armenia is governed by specific regulations outlined in the Labor Code of the Republic of Armenia. Understanding these rules is crucial for both employers and employees to ensure a smooth and lawful transition.

Termination Process in Armenia

In Armenia, employment contracts can be terminated for various reasons, including those initiated by the employer or the employee. The most common grounds for dismissal by the employer include:

• Liquidation of the organization or cessation of business activities
• Reduction in staff due to downsizing or restructuring
• Employee's incompatibility with the position or inadequate performance
• Systematic failure to fulfill job duties
• Loss of trust in the employee
• Appearing at work under the influence of alcohol or drugs
• Prolonged or repeated absenteeism without valid reasons

Employees also have the right to resign by providing written notice, with the specific terms typically outlined in the employment contract or the Labor Code.

Notice Requirements

The notice period for termination varies depending on the circumstances:

• For mutual agreement terminations, the terms are set by both parties
• Fixed-term contracts generally require a 10-day written notice before expiration
• Employer-initiated terminations have varying notice periods based on the reason for dismissal
• Employee-initiated terminations typically require a one-month written notice

Severance Pay

Armenian law mandates severance pay in certain cases of employer-initiated termination. The amount depends on the reason for dismissal and the employee's length of service. Severance pay is typically required in cases such as:

• Liquidation of the organization
• Reduction in staff
• Employee's incompatibility with the position

Offboarding Process

While not explicitly outlined in the Labor Code, a proper offboarding process is essential for a smooth transition. This typically includes:

1. Communicating the termination decision clearly and professionally
2. Completing all necessary paperwork, including termination letters and final pay calculations
3. Retrieving company property and revoking access to systems and facilities
4. Conducting an exit interview to gather feedback and ensure all loose ends are tied up
5. Providing necessary documentation, such as reference letters or certificates of employment

By following these guidelines and adhering to the Labor Code of Armenia, employers can ensure a compliant and respectful termination and offboarding process. It's always advisable to consult with legal experts or HR professionals familiar with Armenian labor laws to navigate any complex situations or specific cases.

Armenia welcomes foreign workers and has made efforts to streamline its visa and work permit processes in recent years. However, it's essential for both employers and employees to understand the requirements for legally working in the country.

Visa Requirements

Most foreign nationals require a visa to enter Armenia. There are several types of visas available, including:

1. Tourist visa: Valid for up to 120 days
2. Business visa: Valid for up to 120 days
3. Work visa: Valid for up to one year

Visitors from certain countries, including the United States, European Union member states, and several others, can enter Armenia visa-free for up to 180 days per year.

Work Permit Process

Armenia has simplified its work permit process, making it easier for foreign workers to obtain legal employment in the country. Here are the key points to remember:

1. Work permits are not required for stays of up to 90 days.
2. For longer stays, foreign workers must obtain a work permit before starting employment.
3. The employer is responsible for applying for the work permit on behalf of the foreign employee.
4. Work permits are typically valid for up to one year and can be renewed.

Required Documents

To apply for a work permit, the following documents are generally required:

• Completed application form
• Valid passport
• Employment contract or job offer letter
• Educational qualifications and professional certificates
• Passport-sized photographs
• Health certificate

Processing Time and Fees

The processing time for work permits in Armenia is usually between 10 to 15 working days. Fees for work permits vary depending on the duration of stay and type of employment.

Employer Obligations

Employers hiring foreign workers in Armenia must:

1. Register the employee with the tax authorities
2. Provide health insurance coverage
3. Ensure compliance with Armenian labor laws

By understanding and following these visa and work permit requirements, foreign workers and their employers can ensure a smooth transition to working in Armenia.