On 15 January 2021, the AIFC Employment Amendment Regulations 2021 No.39 dated 15 January 2021 came into force, introducing a new approach for 'end of service gratuity'. The new provision simplifies the earlier version.
End of Service Gratuity
The right to receive an end of service gratuity was a new concept in Kazakhstan first introduced by the Employment Regulations for employees in the AIFC. It was probably influenced by a similar entitlement that exists in the UAE where its primary purpose is to act as a substitute for a pension scheme for non-local citizens, although the right in the AIFC has been extended to apply to Kazakhstani nationals as well.
The old approach
Under s.64 of AIFC Employment Regulations 2017 as of 9 July 2019 ( “The Old Employment Regulations” ), end-of-service gratuity payment is subject to a detailed set of rules. In particular, an employee will only be entitled to such payment on the termination of the employment if he or she had been continuously employed for at least 1 year. In any case, the total of the payment must not exceed the employee's wages of 2 years of employment.
The Old Employment Regulations also set out that if a pension scheme has been established by the employer, it must give the employee the choice between participating in the pension scheme and receiving the end of service gratuity.
The New Approach
As of 15 January 2021, s. 64 is amended to the effect that an employee is entitled to an end-of-service gratuity payment as long as his or her employment contract provides so. The new law does not impose a restriction on the amount, nor does it provide for an extensive calculation method. Further, it appears that an employee is entitled to such payment in addition to his or her participation in a pension scheme.
However, readers should note that the approach under the Old Employment Regulations continues to be effective unless the employment contract is amended and explicitly provides that the old approach shall not apply.
Conclusion
The new approach seems to be more flexible. Parties are free to decide whether there should be an end-of-service gratuity payment on the termination of the employee's employment, and if so how much and how it should be paid. However, employment contracts that were signed before 15 January 2021 must be amended to reflect the same in order to benefit from the new approach.
Prepared by Victor Chan, Supervisor, AIFC Academy of Law
10 February 2021
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the AIFC Academy of Law, any other AIFC body or entity, or any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the authors and these views are always subject to change, revision, and rethinking at any time.
