Potential shift in Azerbaijan's labor landscape: Benefits of hourly minimum wage

The monthly minimum wage may be replaced by an hourly minimum wage in Azerbaijan. This is reflected in the 2024 roadmap for implementing improvements and communications in the relevant area, based on the World Bank Group's Business Ready report. The Ministry of Labor and Social Protection has been instructed to prepare and submit appropriate proposals to replace the monthly minimum wage with an hourly wage by July 1 of this year.

Head of the Innovative Economic Research Center of Azerbaijan Technical University, professor, and economist Elshad Mammadov stated to Azernews that the implementation of the hourly minimum wage can give impetus in two directions, depending on the formation of the wage fund in the country.

“On the one hand, this can contribute to the overall increase in wages. Because the implementation of the minimum hourly wage undoubtedly will impose new obligations on employers and this can gradually impact the increase in the wage fund. On the other hand, it is known that today in our country, as well as in this global experience, such tendencies and trends have formed that short-term employment experiences are becoming widespread. In such cases, specific labor contracts can be concluded for the completion of daily or weekly tasks, and it is now obvious that the application of an hourly minimum wage, rather than monthly, is more effective and rational,” he said.

Being further optimistic, the expert also said that there is great confidence that this new application in the labour contract will be more effective.

“Therefore, I believe that the implementation of these approaches can yield positive results. Let's not forget that in recent years, as a result of the direct efforts of the country's leadership, positive results have been achieved in ensuring transparency in the field of social protection. This indicates that we have already achieved results in legalizing labor relations in the employment process, and at the same time, positive steps such as increasing the wage fund and raising the minimum wage have been taken, yielding positive indicators. In this regard, I believe that the implementation of an hourly minimum wage can also provide an additional impetus to these positive changes, and overall, I would evaluate this step positively,” the expert concluded.

Sahib Mammadov, head of the Citizen’s Labor Rights Protection League, initially noted that people misunderstand certain positions.

“A misconception has arisen that when the hourly minimum wage is implemented, individuals in the country will receive wages corresponding to the number of hours worked. This is a completely erroneous approach. Here, the discussion revolves around the minimum wage intended for unskilled workers as specified in the Labor Code. That is, whatever the minimum monthly wage can be for an unskilled worker, it is not possible to set this figure lower. Now they want to convert that amount into hourly instead of monthly. This system exists in many countries around the world.”

He mentioned that, however, when implementing this on an hourly basis, certain issues arise that need to be addressed.

“For example, suppose the current amount is 345 manat, and when divided into hours and days, a very small amount is obtained for eight hours a day over 22 days. Therefore, if a transition to hourly wages is considered, the amount should be increased slightly. For instance, if the amount were three manats, the monthly salary would exceed 500 manats, meaning setting a payment of three manats per hour would result in a small amount, especially when converted into dollars. However, if the hourly wage system were adopted, the salary would exceed 500 manat. This significantly increases the minimum wage. The Ministry of Finance and the Ministry of Economy should provide their opinion on this matter, based on which the Ministry of Labor and Social Protection should prepare proposals and submit them to the government.”

According to him, this process will happen sooner or later.

“However, this is still at the proposal stage. It has both negative and positive aspects. This is a modern, implemented standard. For example, there are European countries where the hourly wage is 11 euros, and there are even countries where it is higher, exceeding 30 or 40 euros. This discussion pertains to unskilled workers.”

The expert said that however, the implementation of this has not yet occurred within the CIS.

“It seems that it also depends on the fact that when the amount is divided into hours, it appears to be a very small figure, which is why they cannot transition to this system. However, in many initiatives and endeavors, we have played a pioneering role among the CIS countries. It is possible that this system could be realized in our country. In any case, certain proposals are being prepared regarding this matter now. The Ministry of Labor and Social Protection will present relevant proposals to the government,” he concluded.