A major trend affecting the energy and natural resources sector in Kazakhstan is the increasing emphasis on local input or participation. In 2011 several new restrictions for obtaining work permits - affecting the ratios of foreign to local employees - were introduced. The government, apparently in response to a backlash from the large international oil and gas companies operating in Kazakhstan, has recently introduced exemptions from the new labour permit requirements in connection with certain major oil and gas fields. However, as this update explains, certain aspects of the legislation remain unclear.

Foreign workers: rules and categorisation

As a general rule, employers are required to apply for work permits in order to hire a foreign employee in Kazakhstan. This requirement applies to employees in the following categories:

  • Category 1 - senior managers, deputy managers, financial and technical directors, and qualified and experienced engineers, constructors, power engineering specialists, metallurgists, architects, geologists and geophysicists.
  • Category 2 - managers and highly educated specialists.
  • Category 3 - highly educated workers.
  • Category 4 - seasonal workers.

The current rules provide as follows. From July 1 2011 until January 1 2012:

  • the proportion of foreign employees to local employees in the first category for any given employer must not exceed 50% (ie, for every foreign Category 1 employee, the employer must employ a local Category 1 employee); and
  • the proportion of foreign employees to local employees in Categories 2 and 3 shall not exceed 30% (ie, for every foreign employee in Categories 2 and 3, the employer must employ three local employees in Category 2 or 3).

With effect from January 1 2012:

  • the percentage of foreign employees in Category 1 for any given employer must not exceed 30%; and
  • the percentage of foreign employees in Categories 2 and 3 must not exceed 10%.

On November 2 2011 a new exemption from the above requirements was adopted. Subsoil users involved in certain major subsoil projects - namely, the Karachaganak, North Caspian and Tengiz projects - are exempt from the ratio requirements for foreign and local staff until January 1 2015. The exemption applies to operators, contractors and subcontractors (but does not extend to organisations engaged by subcontractors).

In order to obtain the benefit of the exemption, all qualifying entities must provide the relevant authorities with documentation confirming their participation in those projects.

Unresolved issues

A number of important issues arise in connection with the recent exemption.

Documentation
It is unclear whether the exemption will apply automatically, or whether the authorities must formally approve the submission of the required documents and confirm that the applicant is exempt from the foreign worker ratios in question.

Subcontractors
The new regulations refer only to "services agreements", with no further guidance as to the scope of the exemption. As such, the scope of the services agreements to be covered by the exemption is unclear. For example, it is unclear whether the services agreements must have a particular type of connection with the subsoil operations, or whether the exemption will extend to subcontractor services of any kind.

Application to covered and non-covered projects
It is unclear how the exemption will apply to contractors and subcontractors that work on both a covered project and a project not covered by the exemption.

In such a situation, it is unclear whether the exemption will apply to all foreign employees of a given contractor or subcontractor, or only to those foreign employees who work on one of the specifically exempt projects. For example, where a contractor has a total of 10 foreign employees and 90 local employees in Category 2, it would meet the 2012 10:90 ratio if it works only on a project covered by the exemption. However, if two of its 10 foreign employees and two of its 90 local employees work on a project that is not covered by the exemption (leaving eight foreigners and 88 locals working on a covered project), will the two foreign employees need work permits? It is similarly unclear how employees working on both a covered project and a project that is not covered by the exemption will be treated for the purposes of the exemption.

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