As everyone knows, on 20 August 2015, the Government and the
National Bank of the Republic of Kazakhstan made the decision to
launch a new monetary credit policy based on an inflation targeting
regime and to move to the free floating currency of the tenge.
In connection with this, many of our clients ask the question:
Is it possible to set the salary in the employment contract in
foreign currency or to set the indexation in the event of a change
in the currency exchange rate?
Considering the urgency of these issues, we decided to release
the Client Update on "Changing the rate of the tenge: salary
In case of the employer's interest in the social support of
its employees in a period of national currency instability, the
issue of salary indexation can be settled in employment
The Labour Code of the Republic of Kazakhstan provides for
salary payment in cash in the national currency of the Republic of
This means that, as a general rule, the employer cannot pay its
employees their salaries in foreign currency.
However, the Law "On Currency Regulation and Currency
Control" allows exceptions to this rule.
Thus, salary payment in foreign currency is permitted for
resident legal entities of Kazakhstan when their employees are
non-residents as well as for non-resident legal entities for salary
payment to all their employees regardless of their residency
Considering that the majority of employers do not fall among
these exceptions, the inclusion of the employment contract's
so-called "currency clause" may be the way out of this
In the section of the employment contract that determines the
amount of the salary, the Parties may specify that, in the case of
a change in the US dollar (or other currency, for example, euro) to
tenge rate, the fixed amount of the salary in tenge in the contract
is subject to recalculation in accordance with the contract.
At recalculation, the applied coefficient is defined as the
ratio of the tenge rate to the respective currency rate on the date
of salary payment and the exchange rate of that foreign currency on
the date of the execution of the employment contract.
Usually, the exchange rate established by the National Bank of
the RoK is taken as the basis for recalculation. However, the
parties may determine other ways.
For the ease of use of such a clause, Parties usually provide
that it is applicable only in the event of a significant rate
change, for example, one greater than 5%.
Besides the currency clause, the salary indexation mechanism by
the Parties of the employment contract provided for by Labour
legislation of the Republic of Kazakhstan can be used.
Indexation is carried out based on the assumption of the
inflation rate as defined in the respective period of the
legislation of the RoK. The procedure involved in such indexation
may be determined by employment, collective agreements as well as
by the acts of the Employer.
In conclusion, it should be mentioned that the balance of the
convenience of employees and that of the employer is not only one
of the principles of Labour Law, but it is also one of the
fundamental factors that affect the labour market and business
development in general.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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