Employer of Record (EOR) Georgia

Employment Contracts in Georgia

The legal nature of an employment contract in Georgia is that it is a bilateral agreement, meaning both the employer and employee have mutual obligations. It serves as a formalized arrangement where the employer hires the employee to perform specific duties in exchange for agreed compensation. The contract is legally binding and enforceable, ensuring both parties adhere to the agreed terms, including working hours, remuneration, and grounds for termination.

The employment contract can be concluded either orally or in writing, depending on the duration and type of work. Oral agreements are permitted for contracts of up to 1 year, while written agreements are required for longer contracts. If no explicit conditions are stated, the employment relationship is considered to have started when the employee begins performing their work.

Types of Employment Contracts

In Georgia, employment contracts can take two primary forms: individual and collective. An individual contract involves a direct employment relationship between a single employer and an employee, where the terms are specific to that individual worker. On the other hand, a collective contract is negotiated between one or more employers (or their unions) and one or more employees (or employee unions). This type of contract typically addresses the working conditions of a larger group of employees, often setting standards for an entire workforce.

Fixed-Term vs. Indefinite-Term Contracts

Employment contracts can be either fixed-term or indefinite-term. A fixed-term contract has a specific duration, and it ends once that period is complete. However, if the contract lasts longer than 30 months, it is automatically considered to be an indefinite-term contract, meaning there is no pre-determined end date. Fixed-term contracts, which are valid for up to 1 year, can only be concluded if certain legal conditions are met, as stipulated by the Labor Code.

An indefinite-term contract is more permanent and does not specify an end date. It continues until either party decides to terminate the agreement, in compliance with the provisions outlined in the Labor Code. For indefinite-term contracts, no expiration date is indicated, and termination cannot be solely based on the expiration of the contract term.

Key Terms and Conditions

A labor contract must include certain essential terms that define the working relationship. These include:

• Information about the parties involved in the contract, i.e., the employer and employee.
• Start date and duration of employment, specifying when the employee will begin work and how long the employment will last.
• Working hours and rest periods, indicating the times the employee is expected to work, as well as when rest periods or breaks are given.
• Workplace details, including the primary location where the employee will work and any secondary locations if applicable.
• Job position and duties, which should specify the employee’s role, rank, or category, as well as a description of the work to be performed.
• Compensation, including salary, allowances, and how and when the employee will be paid.
• Overtime pay terms, detailing how overtime will be compensated if applicable.
• Leave entitlements, which should specify the duration of paid and unpaid leave and the procedure for granting such leave.
• Termination conditions, including the procedures by which either the employer or the employee can terminate the employment relationship.

In addition to these conditions, employers may set internal labor regulations, which further detail the rules for employees. However, these regulations cannot contradict the rights and protections laid out in the Labor Code.

Working Hours

In Georgia, the Labor Code defines specific rules for working hours:

• Normal Working Hours: The standard workweek is 40 hours. For industries with continuous operations exceeding 8 hours, it can be 48 hours per week.
• Rest Between Shifts: Employees must have at least 12 hours of rest between shifts.
• Breaks: If the workday exceeds 6 hours, employees are entitled to a break of at least 60 minutes.

Overtime

It is important to keep in mind that the overtime pay rate must be agreed upon and should be higher than the regular hourly rate. However, since no minimum standard is established, this allows for varying interpretations by employers.

13th Month Salary

The 13th-month salary is not a mandatory requirement in Georgia; however, employers have the option to offer bonuses at their discretion.

Probation Period

In Georgia, a trial period may be included in an employment agreement, but it must be agreed upon by both parties and can only be applied once. The trial period cannot exceed six months and is intended to assess the employee’s suitability for the position. Such agreements must always be made in writing.

During the trial period, the employee is entitled to pay for the work performed. The amount and payment terms for this compensation are determined by mutual agreement between the employer and employee.

The employer has the flexibility to terminate the labor agreement during the trial period at any time, or alternatively, they can choose to formalize the employment by converting the trial agreement into a permanent contract.

It’s important to note that the provisions of Article 38 of the Labor Code, which usually govern termination procedures, do not apply to the trial period unless specifically outlined in the agreement. If the trial period agreement is terminated, the employee will be paid for the time worked up until the termination.

Termination, Severance Pay, and Notice Period

Termination

When a labor agreement is terminated, the employer must follow the provisions outlined in the Labor Code. The termination can be initiated by either the employer or the employee, depending on the specific grounds stipulated in the law. If the employer terminates the agreement, the reasons must be consistent with Article 37(1)(a, f, i, n) of the Labor Code. Employees also have the right to terminate the agreement, with certain procedures and notice requirements, particularly in cases of dissatisfaction with the terms.

Severance Pay

Upon termination of the labor agreement, the employee is entitled to severance pay. The amount depends on the circumstances of the termination.

• If the employer provides a 30-day notice, the employee must receive at least one month’s salary in severance pay, paid within 30 calendar days of termination.
• If the employer gives a shorter notice period (such as three days), severance pay must be at least two months’ salary and also paid within 30 calendar days.
  Severance pay ensures the employee has financial support following termination and is a key part of the employer’s obligations under the law.

Notice Period

The notice period is a critical component of terminating a labor agreement.

• If the employer is terminating the agreement for reasons under Article 37(1)(a, f, i, n), they must provide the employee with at least 30 calendar days’ written notice.
• If the employer shortens the notice period to three days for specific grounds, they must provide severance pay of at least two months’ salary.
• Employees who wish to terminate their agreement must give the employer 30 calendar days’ notice as well.
  During the notice period, employees can also request a written explanation for the termination, which the employer must provide within seven calendar days. If the employer fails to comply, the employee can appeal the decision in court.

Social Security in Georgia

Georgia does not require social security contributions.

Pension Contributions

Since January 1, 2019, participation in the national pension scheme is mandatory for all employees in Georgia, with a few exceptions:

• Individuals who were 60 years or older (or 55 years or older for women) at the time the law was enacted.
• Self-employed individuals.

The pension scheme is funded by contributions from the employer, the employee, and the government:

• Employer Contributions: Employers are required to contribute 2% of the employee’s salary to a private pension account on behalf of the employee each time they pay wages.
• Employee Contributions: Employees must also contribute 2% of their salary income to their private pension account.
• Self-Employed Contributions: Self-employed individuals must contribute 4% of their annual income to their personal pension account.
• Government Contributions: The government contributes to an individual’s private pension account based on income levels. Specifically, it provides a 2% contribution if the participant’s annual income is below GEL 24,000. For those earning between GEL 24,000 and GEL 60,000 annually, the contribution rate is 1%. If the participant’s income exceeds GEL 60,000, government contributions are capped at the GEL 60,000 income level.

Payroll in Georgia

• Minimum Wages: Set by the Tripartite Commission of Social Partnership in collaboration with the government, the minimum wage has stayed unchanged since 2006, holding steady at GEL 20 per month—approximately GBP 5.70 or EUR 6.79.
• Payroll Cycle: Georgia follows a monthly payroll cycle, where employees generally receive their pay at the end of each month. Employers are responsible for processing salary payments and deductions throughout the month, ensuring all are completed between the first and last working days.

Mercans’ payroll capabilities

• Payroll Cycle: Experience the streamlined efficiency of Mercans’ comprehensive payroll cycle management in Georgia. We ensure that payments to both employees and contractors are made accurately and on time, all in the local currency. Trust Mercans to simplify your payroll processes, providing a seamless and localized experience every step of the way.
• Payroll Setup, Processing, and Administration: Mercans offers more than just standard payroll services. We provide end-to-end solutions, handling everything from payroll setup to precise processing and effective administration. With our focus on accuracy and compliance, your payroll is in expert hands, allowing you to focus on what truly matters—growing your business.
• Statutory Filings and Payments: Navigating Georgia’s regulatory framework is made effortless with Mercans. Our dedicated team manages all statutory filings and payments, ensuring full compliance with local legal requirements. Rely on Mercans for timely and accurate submissions, giving you confidence that your business remains in good standing with all statutory obligations.

Personal Income Tax in Georgia

Income sourced outside Georgia is exempt from tax for resident individuals, while personal income generated within Georgia is taxed at a flat rate of 20%.

Georgia Employee Hiring Cost

For example, if you hire an employee with a gross annual salary of GEL 100,000.00, the total cost to the employer is higher than just the salary. In addition to the gross salary, the employer is responsible for annual employer costs such as social security contributions or other obligations, which in this case amount to GEL 2,000.00.

Thus, the total annual cost for the employer would be GEL 102,000.00, combining the employee’s salary and the employer’s additional costs.

Breakdown:

In this example, the employer’s total annual expense for the employee is GEL 102,000.00, which includes both salary and mandatory employer contributions.

Employee Benefits in Georgia

In Georgia, employee benefits are classified into mandatory and supplementary categories, each playing a vital role in protecting workers and enhancing the overall employment experience. Mandatory benefits are those required by Georgian law, including participation in the pension savings scheme, compulsory personal accident insurance for hazardous work, and access to the State Universal Health Care Program. These benefits ensure that employees are provided with essential financial security and healthcare coverage. 

Supplementary benefits, on the other hand, are optional and offered at the discretion of the employer. These can include private health insurance, performance-based bonuses, allowances, and additional retirement savings, all of which enhance employee satisfaction and help businesses attract and retain top talent. Understanding these benefit categories is essential for employers in Georgia to maintain legal compliance while also offering a competitive and supportive workplace.

Mandatory Benefits

• Pension Savings Scheme: As of January 1, 2019, Georgia mandates that all employees, as well as self-employed individuals, participate in the national pension savings scheme, with a few exceptions based on age and residency. For employees under the age of 40 as of August 6, 2018, and self-employed persons who voluntarily choose to join, participation is compulsory. Employers contribute 2% of each employee’s salary to their individual pension account, while employees themselves contribute 2% of their taxable income. Self-employed individuals must contribute 4% of their annual income. The government also contributes based on income thresholds: 2% for those earning under GEL 24,000, 1% for those making between GEL 24,000 and GEL 60,000, and no contribution for those earning over GEL 60,000.
• Accident Insurance for Hazardous Work: Under Georgian law, employers are required to provide personal accident insurance for employees engaged in high-risk jobs. This mandatory insurance was introduced in 2019 to ensure that workers in dangerous sectors are covered in case of work-related accidents. The requirement applies to all businesses, including self-employed individuals recognized by the government as performing hazardous work, as per the government resolution passed on July 27, 2018.
• Universal Healthcare Program: Georgia’s State Universal Health Care (UHC) program guarantees basic healthcare services for citizens who do not have access to private or employer-provided health insurance. However, individuals earning more than GEL 40,000 annually or those with private insurance are excluded from the UHC, except in the case of cancer treatments, which are universally covered for all citizens regardless of income.

Supplementary Benefits

• Private Health Insurance: While not required by law, many businesses, particularly large or multinational companies, offer private health insurance as an additional benefit for their employees. This typically provides a more extensive range of coverage, such as access to private healthcare providers, specialist treatments, and dental care, allowing employees to access higher-quality medical services beyond what is covered by the state healthcare program.
• Performance Bonuses and Allowances: In addition to basic salary and mandatory benefits, many employers provide employees with bonuses, performance-based incentives, or allowances as a way to motivate and reward staff. These benefits could include holiday bonuses, annual performance bonuses, meal vouchers, transport subsidies, or gifts for special occasions, enhancing overall job satisfaction and loyalty to the employer.
• Voluntary Pension Contributions: To supplement the government-mandated pension system, some employers offer additional pension plans or make supplementary contributions to employees’ retirement funds. These extra contributions can help employees build more substantial retirement savings, offering them a more secure financial future.

These supplementary benefits, though not required by law, provide employees with greater security and satisfaction, positioning businesses as attractive employers in the competitive Georgian job market.

Work Permit in Georgia

When expanding operations to Georgia or outsourcing certain business functions, assembling a capable team is essential to ensure a smooth transition. However, hiring international employees is only one step in the process. To operate legally in Georgia, your employees must secure the appropriate visas and residence permits. Understanding the visa requirements and application process is crucial for staying compliant and facilitating your company’s expansion.

Categories of Work Visas for Georgia

For foreign nationals intending to work in Georgia, the first step is to determine which type of visa they need. Georgia offers several categories of visas for various purposes:

• Diplomatic Visas (Type A)
• Special Visas (Type B)
• Ordinary Visas (Type C)
• Immigration Visas (Type D)
• Transit Visas (Type C)

Work-related visas fall under the long-term visa category, which functions as both a work permit and a residence permit. Long-term visas allow for multiple entries, making them suitable for individuals intending to live and work in Georgia for extended periods.

Conditions for obtaining a work visa

While specific visa requirements may differ by embassy or consulate, the general documents needed for a Georgia work visa include:

• A completed and signed visa application form
• A valid passport with at least one blank page for stamps
• A contract of employment with a Georgian company
• Payment for the visa processing fee

These documents must be submitted to the nearest Georgian embassy or consulate. In addition to in-person submissions, applicants can also apply online through Georgia’s e-application system. Once the online application is completed, supporting documents must be submitted either in person or via mail, depending on the embassy’s procedures.

Procedures for applying

The process of applying for a work visa begins by contacting the Georgian consulate or embassy in the applicant’s home country. The embassy will provide a comprehensive list of the specific requirements and steps needed for the visa application. Foreign nationals can submit their applications online via Georgia’s electronic system, but they must also submit hard copies of the completed forms and supporting documents to the embassy.

After receiving approval for the work visa, employees can travel to Georgia. Once in the country, they must apply for a residence permit at the Public Service Development Agency. This permit, valid for one year, can be renewed for up to five years. Dependents and family members accompanying the employee will also need to apply for residence permits to stay in Georgia legally.

By understanding the different visa categories, their requirements, and the application process, your company can ensure that its expansion into Georgia proceeds smoothly and legally.

EOR Solutions in Georgia

• EOR for Prospective Employees: Mercans provides comprehensive Employer of Record (EOR) services for businesses that have already selected their ideal candidates in Georgia. We manage all aspects of the employee lifecycle, ensuring full compliance with Georgian labor laws and regulations, allowing you to focus on your core business operations.
• EOR + Recruitment: For companies looking for end-to-end talent acquisition solutions, our combined EOR and recruitment services offer a streamlined process. Leveraging our extensive network and expertise, we help you attract, hire, onboard, and retain top talent, ensuring a smooth entry into the Georgian market.
• Visa Sponsorship and Global Mobility: Our visa sponsorship and global mobility services simplify the relocation of international employees to Georgia. We navigate the complexities of Georgian immigration and employment laws, ensuring your workforce is compliant and legally able to work in Georgia.
• AOR for Contractor Payments: For businesses dealing with contractor payments, our Assistance on Record (AOR) services help manage the complexities of contractor relationships. We ensure timely and accurate payments while maintaining full compliance with Georgian regulations.
• Converting Freelancers to Employees: Mercans facilitates the smooth transition of freelancers to permanent employees in Georgia, ensuring that the conversion complies with all local labor laws and regulations.
• HCM Integration: Enhance your HR operations by integrating Mercans’ EOR services with your Human Capital Management (HCM) system in Georgia. Our integration ensures real-time data exchange, improved compliance, and cost-effective workforce management, optimizing payroll and HR processes across your organization.

Best Employer of Record Georgia

Mercans is a leading Employer of Record (EOR) provider in Georgia for the following reasons:

• Compliance with Georgian Labor Laws: Mercans ensures full compliance with all employment regulations set by the Ministry of Internally Displaced Persons from the Occupied Territories, Labor, Health, and Social Affairs of Georgia. We manage your workforce while strictly adhering to local labor laws and statutory requirements.
• Independent Entity: Mercans operates as a standalone entity in Georgia, offering reliable and customized employment solutions to meet your business needs, ensuring a tailored approach that works for your specific requirements.
• Flexible Employment Solutions: Whether you are managing employees, contractors, freelancers, or expatriates, Mercans provides flexible solutions that accommodate various employment types. We ensure that all employment arrangements are compliant with Georgian laws.
• Enterprise-Ready Services: Designed to meet the complex needs of large enterprises, Mercans offers scalable services that support intricate organizational structures, making us the ideal partner for expanding or managing global operations.
• Multi-Currency Payroll Support: Mercans supports payroll management in multiple currencies, ensuring smooth financial operations for businesses with international teams and cross-border transactions in Georgia.
• Global Presence and Multi-Country Expertise: With a global network and multi-country payroll capabilities, Mercans excels at managing payroll across several jurisdictions. We provide seamless international operations for businesses operating in Georgia and beyond.
• Data Protection and Security: Mercans is committed to maintaining high standards of data security and privacy. We adhere to GDPR regulations and hold SOC 1 and SOC 2 compliance certifications, ensuring that all data handling and processing are secure and compliant with international standards.
• ISO 20000 & ISO 27001 Certifications: We hold ISO 20000 and ISO 27001 certifications, demonstrating our dedication to high-quality IT service management and robust information security practices, ensuring the protection of your business and employees’ data.
• OWASP ASVS 3.0 Compliance: Mercans follows best practices in security by meeting OWASP ASVS 3.0 standards for application security, ensuring the safety of all systems and platforms we use.
• HRBlizz: Our proprietary HRBlizz SaaS suite simplifies global payroll and talent management. With over 1,000 in-country specialists, we provide expert local knowledge to ensure compliance with Georgia’s labor laws and business practices.
• G2N Nova: Mercans utilizes G2N Nova, an advanced global gross-to-net payroll engine, supporting payroll processing in over 100 countries. Whether used as a standalone solution or integrated with HCM and workforce management systems, it guarantees efficient and compliant payroll management for your business in Georgia and worldwide.