Social insurance and personal accounting

What is social insurance?

Social insurance is a system designed to compensate individuals for lost wages, income, or additional expenses, as well as to help prevent such losses.

It includes two types: compulsory state social insurance and voluntary (additional) insurance. The compulsory state social insurance premium refers to the amount paid to the insurer for coverage. When a social insurance event occurs, the insured person becomes entitled to receive an insurance payment from the insurance company.

The social insurance event includes the following:

• Reaching retirement age
• Determination of disability
• Loss of the head of the family
• Pregnancy and childbirth
• Birth of a child
• Childcare
• Death
• Need for sanatorium treatment
• Temporary disability (for a legally defined period)

To be eligible for temporary disability benefits or maternity benefits, a person must have at least 6 months of social insurance experience. In both cases, the maximum monthly benefit amount cannot exceed 25 times the minimum labor pension amount, as defined in Article 6-1 of the Law of the Republic of Azerbaijan “On Labor Pensions.”

Rights of insurers

• Participate in all forms of social insurance;
• Independently choose an insurance organization for voluntary (additional) social insurance;
• Require compliance with the rules of social insurance and the terms of voluntary (additional) insurance contracts.

Obligations of insurers

• Pay social insurance premiums to the insurer within the established timeframe;
• Keep records of social insurance premiums and submit reports to the authority designated by the relevant executive body no later than the 20th day of the month following each quarter;
• In case of inactivity during the reporting period, submit a certificate of non-activity to the relevant authority in accordance with the procedure established by the Tax Code of the Republic of Azerbaijan, by the same reporting deadline;
• Fulfill other duties as specified by legislation.

Rights of the insured

• To access information recorded in their personal account from the relevant body responsible for individual registration in the state social insurance system at their place of residence or work;
• To receive a copy of the data submitted by the insurer for personal registration from the insurer or the relevant registration body;
• To apply to the relevant body or insurer for clarification in case of disagreement with the information reflected in their personal account;
• To request updates from the relevant executive authority or insurer if any personal information changes;
• To request the insurer to enroll them in compulsory state social insurance;
• To independently choose an insurer for voluntary (additional) social insurance;
• To request timely payment of social insurance benefits;
• To request information from the insurer or relevant body about their insurance record when determining social insurance benefits.

Obligations of the Insured Person

Timely payment of social insurance premiums;

To submit documents confirming the occurrence of the social insurance event to the insurer or the insurer;

To register with the relevant executive authority that carries out individual registration in the state social insurance system;

At the request of the relevant executive authority that carries out individual registration in the social insurance system, to submit information that must be entered into his / her personal account in accordance with the legislation;

Mandatory state social insurance premium rates

• For the insured who are not active in the oil and gas sector and in the private sector – 25% of the monthly income
  (6 manat + 10 percent of the part over 200 manat from the insured, 44 percent + 15 percent of the part over 200 manat from the insurer)
• On entrepreneurial activity – 25 percent of the minimum monthly wage in construction and trade, 15 percent in other areas:

• 100 percent in the city of Baku
• 90 percent in Sumgayit and Ganja cities
• 80 percent in other cities
• 60 percent in administrative territorial units and settlements that are the administrative center of district administrative territorial units
• 50 percent in rural areas

• Withholding from the source of payment for those working under civil law contracts (except for individual entrepreneurs) – 25 percent of their income
• For private notaries – 25 percent of ten times the minimum monthly salary
• Deducted from the source of payment for legal entities and individuals paying royalties – 15 percent of the calculated royalties
• Members of the Bar, independent auditors, independent accountants – 10 percent of income (excluding expenses)
• Individuals using agricultural land (except for those who work in other fields and pay compulsory state social insurance) and able-bodied family members of family households (persons with I and II degrees of disability, as well as children under 18 years of age with disabilities):
• The compulsory state social insurance premium for each family member (persons under the age specified in Article 7 of the Law of the Republic of Azerbaijan “On Labor Pensions”) is calculated at the following rates of the minimum monthly wage, depending on the area of land:

• Up to 5 hectares – 2 percent
• From 5 to 10 hectares – 6 percent
• More than 10 hectares – 10 percent

Voluntary (additional) social insurance

Citizens of the Republic of Azerbaijan, stateless persons, foreigners, as well as all departments, enterprises, and organizations have the right to voluntary (additional) social insurance.

Voluntary (additional) social insurance contract

Voluntary (additional) social insurance is carried out on the basis of a social insurance contract concluded between the insurer and the insured. The contract specifies the rights and obligations of the parties, the amount of social insurance premiums and payments, the insurance event, the liability of the parties, as well as other conditions agreed upon by both sides.

What is personal accounting?

Personal accounting refers to the organization and maintenance of information for each insured person to ensure their labor pension and other social protection rights in accordance with the legislation of the Republic of Azerbaijan.

Electronic services related to individual’s registration within the state social insurance system are provided through the centralized electronic information system of the Ministry of Labor and Social Protection of the Population.

Within the state social insurance system, an individual account is created for each insured person during the registration process, which includes a permanent (unchangeable) social insurance number.

The rights of the body carrying out individual registration in the state social insurance system are as follows:

• To require the employer and the insured to provide timely and accurate information as required by law;
• To verify the accuracy of the information provided by the employer regarding personal accounting;
• To issue an initial written warning to responsible officials of the employer who violate the rules of individual accounting, and, in case of repeated violations, to apply measures of responsibility in accordance with the legislation.

The responsibilities of the body carrying out individual registration in the state social insurance system are as follows:

• To ensure the timely and accurate entry of information provided by the employer and the insured into personal accounts, as well as its reliable storage and protection;
• To explain to the insured, upon their request, the rules for providing personal account information.