Yemelyanova L. State Accounting of Employment Agreements: Practical Tips for Employers to Work with the Unified Employment Agreements Accounting System // Petroleum. – 2020 - №6.

  Continued. Please see beginning in article: Yemelyanova, L. A. Unified Employment Agreements Accounting System and Other Important Changes in Labor Legislation. Petroleum, No. 4, 2020.

  As a reminder, amendments to the Labor Code of the Republic of Kazakhstan (hereinafter, the "Labor Code") came into effect on May 16, 2020 to lay the legal foundation for introducing the Unified Employment Agreements Accounting System (hereinafter, the "UEAAS") in Kazakhstan. However, employer's obligation to enter information into the UEAAS "did not work" until the authorized agency has determined the procedure for entering information into the system.

  The Rules for the Provision and Obtainment of Data on Employment Agreements in the UEAAS were approved by Order No. 353 of the Minister of Labor and Social Protection of Population of the Republic of Kazakhstan of September 3, 2020 and entered into effect on September 18, 2020 (hereinafter, the "UEAAS Working Rules").

  Therefore, starting September 18, 2020 all employers are obligated to enter information on employment agreements into the UEAAS. This article sheds light on the practicalities of entering information into the UEAAS, which may be relevant for employers.

HOW AND WHERE INFORMATION SHOULD BE ENTERED

The information is entered in three ways:

• Via employer's personal account on the "Electronic Labor Exchange" state information portal (www.enbek.kz), or
• Via integration of the enterprise's HR-support information system with the UEAAS, or
• Via other information systems for employment agreements accounting automation integrated with the UEAAS.

INFORMATION TO BE ENTERED

General Comments

  As mentioned in the preceding article, the UEAAS is of an accounting nature. Therefore, employment agreements are not registered in the system, but accounting information thereon is entered. No copies of employment agreements are uploaded to the system.

  Entered into the UEAAS are data on employment agreements, which: Are effective with an employer as of September 18, 2020; Have been concluded by the employer before that date, but enter into force thereafter;

Are concluded by the employer after that date.   No historical data (information on employment agreements terminated prior to the effective date of the UEAAS Working Rules) are required to be entered into the system.

The employer must enter the following data:

On the employment agreement conclusion, On amendments being introduced:

• Employee's IIN
• Labor function (position, specialty, occupation, qualification)
• Place of work performance
• Term of employment agreement
• Date of work commencement
• Date of conclusion and number of employment agreement

On the employment agreement termination:

• Date of cancellation (termination)
• Reason for cancellation (see comments below)

 In the previous article we have already dwelled on some important aspects of working with the system. Further below we will comment on additional practical issues facing the employers when entering information into the system, taking into account the UEAAS Working Rules.

Term of Employment Agreement

 The system does not take into account the particularities of concluding employment agreements with CEOs of organizations, whose term of employment agreement may differ from the proposed answering options. Previously, it was not possible to choose the effective term of a foreign labor engagement permit (work permit), but recently this option has been added to the system. This is why information about employment agreements with foreign employees must also be entered.

Additional Data

The UEAAS has fields to enter the following additional data:

• Working time regime;
• Military service duty;
• Type of work (full-time or combining);
• Occupational skills;
• Personal qualities;

  Whether the employment agreement cancellation is in connection with the introduction of new technologies (digitalization) resulting in an increase in productivity.

  The Labor Code does not obligate the employer to enter these and other additional data into the UEAAS. Even more so, the data in c)-f) above are not mentioned at all in the UEAAS Working Rules. Since these may constitute personal data (especially occupational skills and personal qualities), the employer may enter optional data only in case the employee has consented thereto in writing.

  The "occupational skills" and "personal qualities" data entered into the UEAAS are not displayed in the employee's personal account on the egov.kz portal, which violates the employee's right to receive information from the UEAAS about his/her employment agreement and labor activities (Article 22.1(25) of the Labor Code). We deem that all data, not just mandatory, entered into the system must be available to employees for review.

  The UEAAS Working Rules say that the employer may additionally enter information on the employee's rest regime. As of today, the system offers no field to enter this information.

Working Time Regime

  The UEAAS has a field for entering working time regime that offers three answering options: normal, reduced and part-time. It is not possible to leave the field empty. Under the part-time regime, the system also offers to fill in the tariff rate as a mandatory field.

  This approach does not comply with the Labor Code – all these data are not to be filled in on a mandatory basis. Therefore, since the employer has no obligation to fill in the working time regime and the system does not provide for the "empty" option, the data in this entry cannot have any informational-and-statistical, and even less so legal, significance.

  The employer may as well keep the preset option of "normal" time for those employees who have reduced or part-time working regime. We believe that this approach is due to the system fault and does not testify to unreliability of data on the employment agreement. This issue is especially relevant during the current "quarantine" times, forcing employers to "transfer" employees to part-time regime and back. If part-time regime is entered into the system, changes will have to be made later, if the employee's work regime changes. And this goes beyond the Labor Code requirements.

  In this situation, one needs to be prepared to explain to the employee and inspection authorities the discrepancy between the UEAAS data and the actual working time, as the information on working time under the employment agreement is displayed in the employee's personal account on the egov.kz portal.

  The UEAAS developers should add an option to leave an empty field in the working time entry.

Transfer of an Employee to a Separate Structural Unit

  When transferring an employee from one structural unit of a company to another separate unit having its own BIN (e. g., in case of transfer from the head office to a branch), a problem arises with updating the data in the system.

  Entering data into the UEAAS is "tied" to the employer's BIN. The system has no functionality to transfer an employee from "one BIN to another" within one legal entity.

  We believe that one should not bring actual relationships in conformity with the "system"; for instance, cancel an employment agreement with an employee and then conclude it anew with the BIN of another unit of the same employer. This, as a minimum, may result in the violation of employee's right to annual leave (if any), which will be replaced by compensation in case of the first agreement cancellation.

  On the other hand, we also consider wrongful "fictitious cancellation" of an employment agreement with head organization (with one BIN) in the system and entering the same agreement into the system "for a branch" (with another BIN), because such actions are not true to reality and the legal nature of the transfer.

  The "Cancel agreement" pop-up window contains such grounds for the "cancellation" as "Transfer to another legal entity (within the Company)" and "Other cases provided for by the RK Labor Code, laws of the Republic of Kazakhstan and other regulatory legal acts of the Republic of Kazakhstan." The option "Other cases..." does not suit the situation of transfer. The option of "employment agreement cancellation" in the UEAAS named "transfer to another legal entity (within the Company)" does not comply with the legislation.

  The Labor Code (Article 49.4) provides for the ground for termination (not cancellation) of an employment agreement "in connection with transfer of the employee to another employer." This ground is not about the transfer proper (i.e., substitution of the employer legal entity) in keeping the employment agreement, but about termination of the employment agreement with the old employer and conclusion of a new employment agreement with the new employer within the same group of companies that meets the requirements of Article 55 of the Labor Code. That is, the employee is transferred not within the Company (as suggested by the UEAAS), but between two different, although affiliated, legal entities. If, however, this option is provided in the UEAAS for transfers between structural units within the same legal entity without cancelling the employment agreement, this approach cannot be viewed as sound. In case of such transfer there occurs no cancellation of the employment agreement – it remains the same, just the place of work is changed by a supplementary agreement to the employment agreement.

  If, however, one first enters into the UEAAS the agreement cancellation for the BIN of the head organization, and then the agreement conclusion for the BIN of a branch, then one agreement will be assigned two e-cards and the system will display incorrect information about the main contract cancellation. For the BIN of the branch, old details of the same agreement and all supplementary agreements thereto will have to be re-entered, because the agreement continues to operate, it has not been cancelled. This, in turn, may cause a formal breach of the deadlines for entering information into the system, and, moreover, the BIN discrepancy will persist.

  Another option for the employer might be to leave the agreement for the same BIN of the head company, but add the supplementary agreement to the agreement's e-card, changing the place of work. The agreement will continue to be accounted for by the system for the head company's, not the branch's BIN, but with the changed place of work. In this case, you need to be prepared to explain to the inspection authorities the reasons for discrepancy.

  In order to avoid these problems, we believe that the UEAAS developers should add the possibility to replace the BIN of employer (within the same company) through the "supplementary agreement" e-card in order to properly account for the transfer of an employee between the independent units of the same legal entity having different BINs.

Employment Agreement Termination

  The UEAAS Working Rules do not obligate the employer to specify the ground for employment agreement cancellation. These data are referred to "additional" (paragraph 6.2 of the UEAAS Working Rules), along with the military service duty and work and rest time regime, which are provided "if necessary." The UEAAS Working Rules do not specify what kind of necessity is meant. Since the legislation does not classify these data as mandatory, we believe that the "necessity" may arise if an employee demands that these data be entered.

  However, the current UEAAS version on the basis of the Electronic Labor Exchange refers the "reason for cancellation" to mandatory data, without which the system does not take account of the information on employment agreement cancellation. Thus, actually entered into the system will be the grounds for employment agreement termination, including those unfavorable for the employee, which may give rise to disputes with former employees who do not want this information to be displayed in the system. We should also mark the terminology inconsistencies: the UEAAS Working Rules speak about the "grounds for employment agreement cancellation." The term "cancellation" should be distinguished from the term "termination" of the employment agreement. The employment agreement may be terminated by means of cancellation and other types of termination that do not constitute cancellation (e.g., due to employment agreement term expiration, etc.). Therefore, if the UEAAS Working Rules are to be understood literally, entered "if necessary" may be the grounds for employment agreement cancellation, while the grounds for other types of termination must not be introduced.

  It is also obvious that the reason for cancellation (as offered by the UEAAS) is not identical to the ground for employment agreement cancellation. The reason is in the specific circumstances of the case, while the ground is a legal category. Therefore, the name of this field in the system should be corrected by the developers.

DEADLINES FOR ENTERING INFORMATION

General Deadlines

The UEAAS Working Rules provide the following general deadlines for entering information into the system:

Event	Deadline for entering data	Commencement of the period
Employment agreement conclusion	5 business days	Of the date of employment agreement signing by both parties
Employment agreement amendment	15 calendar days	Of the date of employment agreement amendments signing by both parties
Employment agreement termination	3 business days	Of the date of employment agreement termination
Correction of errors in the main and additional data	30 calendar days	Of the date of primary data entry
Removal of data in case of incorrect entry of employee's and/or employer's details	30 calendar days	Of the date of primary data entry
Reinstatement in job	10 business day	Of the date of reinstatement (data corrections are entered by way of specifying the date and number of, and the authority having adopted, the reinstatement resolution)

  Please note that information on the conclusion and amendment of an employment agreement is entered from the date of signing, not the date of entry into force of the relevant document.

  A limited period of time is allotted to correct errors and remove data. Therefore, employers are recommended to organize control over the entered information within the established period of time in order to timely identify and eliminate faults (30 calendar days of the date of entering the primary information). Moreover, once the employer has entered into the UEAAS the information on employment agreement termination, amendment of the UEAAS data is performed by the authorized state labor authority on the basis of employer's or employee's application in accordance with the Law of the Republic of Kazakhstan "On the Procedure for Consideration of Applications of Individuals and Legal Entities" dated January 12, 2007 (paragraph 13 of the UEAAS Working Rules).

  It is also necessary to monitor the entry of information about employment agreements termination on any grounds, including termination due to employment agreement term expiration and circumstances beyond the parties' control.

  It should be noted that "circumstances beyond the parties' control" do not always come to employer's knowledge in due time. For example, the employer might not promptly become aware of the entry into legal force of a court sentence condemning an employee to a punishment preventing continuation of labor relations. Meanwhile, the employment agreement is terminated starting from the date on which such sentence comes into force. Therefore, it is recommended to document the date on which the employer became aware of the "circumstances" and the method of obtaining the information thereon in order to justify the reason for delay in entering the information into the system.

"Transition Period" for Entering Information on Current Employment Agreements

The following periods are provided for entering information on the previously concluded employment agreements unexpired as of September 18, 2020:

Enterprise staff number	Deadline for entering data
Up to 2,000 employees	Until September 18, 2021
Over 2,000 employees	Until September 18, 2022

  Employment agreements terminated before September 18, 2020 are not subject to entry into the system.

  The current employment agreements, despite the extended "transition period" indicated above, will enjoy a limited period for entering data on the agreement amendment or termination, inasmuch as the agreements affected by such events are considered. For example, when transferring an employee to another position, the information about the agreement and its amendments must be entered within 15 calendar days of the date the amendments to the employment agreement have been signed, not within one or two years.

Automatic Extension of Employment Agreements

  A question arises whether it is required to enter into the UEAAS data concerning automatic extension of the employment agreement without the parties' signing a supplementary agreement in case of work continuation as described in Article 30.1(2) of the Labor Code.

  The Labor Code obligates the employer to provide information, inter alia, on employment agreement amendments containing data about the term thereof. We deem that, proceeding from the purport of this regulation, information on automatic extensions (i.e., on changes to the term of employment agreement made "automatically") should be included in the system.

  However, the UEAAS does not provide for the technical possibility to enter information about agreement automatic extension without signing a supplementary agreement thereto. We deem it wrong to change the term of agreement using the "Change the agreement" tab, given lack of the relevant indication in the UEAAS Working Rules, because in this case changes are made in the main e-card of the agreement and are not displayed as a history of changing the term of agreement. The UEAAS Working Rules link the deadline for entering information about agreement amendments only to the signing of amendments by both parties.

  Therefore, if construing the Rules literally, information on employment agreement automatic extension is not to be entered into the system. This, however, creates a discrepancy between the data from the system and the actual data on employees.

WHO ENTERS DATA INTO THE UEAAS

  Data must be entered by the employer, or on its behalf by the head of HR service accordingly entrusted by employer's act, who certify the entered data with their electronic digital signatures (hereinafter, the "EDS") (paragraphs 5, 6 and 10 of the UEAAS Working Rules).

  The scope of persons in charge proposed by the Rules in relation to employer legal entities is very restricted. It is either the "employer" or the "head of HR service." Obviously, the data are "physically" entered into the system by specific persons. In this case, the "employer" will be represented by the person by whose EDS the entered information is verified. CEOs of large enterprises and heads of their HR services will hardly be entering the information into the system themselves. Most likely this work will be assigned to subordinate employees in the HR department. Therefore, the restrictions imposed by the Rules on the scope of persons in charge, if literally understood, are not justified. A broader interpretation of the said UEAAS Working Rules requirements would be more acceptable. Pursuant to Article 1.1(40) of the Labor Code, employer's representatives may be individuals or legal entities authorized to represent the employer on the basis of foundation documents or a power of attorney. Since information is entered into the system on behalf of the employer (legal entity), this legal action can be performed by a person on the basis of foundation documents or a power of attorney. From the perspective of this rule, there appears a possibility to involve other persons (not only the CEO or the head of HR department) on the basis of a power of attorney to fill in the UEAAS on behalf of the employer.

  As to the head of HR department, the duty to enter information into the UEAAS may be entrusted to him by an employer's act (order, instruction, regulation, etc.) in accordance with the UEAAS Working Rules. In this case, he will be acting not on the basis of a power of attorney, but on the basis of that employer's act and the UEAAS Working Rules.

  This approach is consistent with the technical capabilities of the Electronic Labor Exchange portal. In particular, introduction of data into the UEAAS can be verified not only by the main EDS of the CEO, but also by other EDS of the RK National Certification Center, including the EDS of the categories "employee with the right of signature" or "employee of the HR department" (according to the EDS classification of the RK National Certification Center).

  Also, employers often have a question about the possibility to transfer the CEO's EDS to another employee so that he/she could enter data into the system.

  Such possibility is provided by law for the legal entity's CEO or a substituting person.

  The owner of the registration certificate of the legal entity's electronic digital signature – the legal entity's CEO or a substituting person – has the right to transfer to an employee of the legal entity or a person appointed by the CEO the powers to use the electronic digital signature on behalf of the legal entity (Article 10.3 of the Law No. 370-II of the Republic of Kazakhstan "On the Electronic Document and Electronic Digital Signature" dated January 7, 2003).

  The wording of this rule suggests that the CEO's right to use the corporate EDS can be transferred both to an employee and to another appointed person.

  However, instead of transferring the CEO's EDS to another person, we would recommend opening a separate personal corporate EDS for the respective employee, for the use of which within the scope of the granted powers the employee will be personally responsible.

  In any case, one should not forget about the need to establish the duties of the person to whom the corporate EDS is transferred (opened) in order to protect the interests of the employer. We believe that it is necessary to include in the duties of the empowered employees and other persons the following: (a) observance of restrictions on the EDS use, taking into account the powers under the issued power of attorney; (b) prohibition on further EDS transfer to any person; (c) timely and accurate entry of information into the system; (c) ensuring protection and non-disclosure of personal data and confidential information, and (d) compliance with other requirements, taking into account the process specifics.

CONFIDENTIALITY OF THE UEAAS DATA

  The July draft of the UEAAS Working Rules contained an important paragraph 26 saying that the dissemination of information on labor activities is permitted subject to observance of not only the requirements of legislation on personal data protection, but also of legislation on commercial and other information protected by law.

  This paragraph was not included in the final version of the UEAAS Working Rules.

  Of course, there are obligations on personal data protection and non-disclosure of commercial secret established by law and codes (civil, entrepreneurial and labor). However, there arise fair questions to the UEAAS that no protection of employer's commercial secret in the HR sphere has been technically implemented within the UEAAS framework. Please be reminded that beside personal data, the information entered into the UEAAS (number of employees, composition of positions, composition of personnel, etc.) may bear the nature of commercial secret and/or other information protected by law.

  Furthermore, until now, in violation of the Labor Code requirements, the User Agreement of the Electronic Labor Exchange portal and its Security Policy declare as "publicly available" all data entered on the portal (thus, into the UEAAS), except for the password to access the user's personal account. The portal and the UEAAS must be state-owned (paragraph 4 of the UEAAS Working Rules), but according to the sign publicly demonstrated on the portal, as well as according to KazNIC data, it is owned by a commercial legal entity – Human Resources Development Center JSC. The issues of personal data protection and commercial secret were discussed in more detail in the previous article. Unfortunately, so far, these problems persist and cry for technical and legal solutions.

  We believe that from the technical point of view, it would be expedient to include in the UEAAS the possibility for employers to assign to the entered information a commercial secret status in order to prevent its dissemination and use without employer's permission.

OBTAINING DATA FROM THE UEAAS

  An employer can review on the Electronic Labor Exchange portal only the information entered by him. The portal currently avails no technical possibility for the employer to obtain from the UEAAS information on a candidate's or employee's labor activities with other employers. The UEAAS Working Rules provide for the possibility to obtain such information:

• Through the UEAAS-integrated HR-support information system of an enterprise, provided that the candidate's (employee's) consent is obtained through such system (paragraph 17 of the Rules);
• By means of EDS-signed electronic request (paragraph 18 of the Rules). It is yet unclear via which platform such request should be submitted to the Ministry of Labor and Social Protection of Population of the Republic of Kazakhstan (probably, via the egov.kz portal, but the function of obtaining consents of persons whose information is requested should be implemented for that purpose);
• At the employer's paper-based request to the Ministry of Labor and Social Protection of Population of the Republic of Kazakhstan (paragraphs 15 and 19 of the Rules). However, it is unclear, from the practical point of view, according to which procedure (in which form) the Ministry will be ready to accept the written consents of persons whose information is requested;
• Possibly, via other information systems for employment agreements accounting automation integrated with the UEAAS (again, upon the individual's consent), but this does not quite follow from paragraph 17 of the Rules, as this paragraph says that the consent is to be obtained through the employer's HR-support information system.

  An employee can obtain information about himself from the UEAAS in his personal account on the egov.kz portal (however, as mentioned earlier, actually in some cases the displayed information is incomplete and not always correct), or may submit an electronic or paper-based request to the Ministry of Labor and Social Protection of Population of the Republic of Kazakhstan.

LIABILITY

Failure to enter information into the UEAAS in a timely and correct manner may entail the following major adverse implications for the employer:

1. Administrative liability, though not direct responsibility (which has not been established yet), but liability for failure to comply with the state labor inspector's ordinance issued in the course of state control. At the same time, a moratorium on inspections and preventive control and supervision with visits to small business entities (including micro business entities) is in effect in Kazakhstan until January 1, 2023;
2. Disputes with employees (e. g., where information from the UEAAS does not correspond to actual employment relations);
3. Difficulty in protecting the employer's interests in disputes with employees;
4. Claims by tax authorities in case of tax violations identified using the UEAAS information in the course of desk or other control, as well as claims by other authorized agencies that may eventually gain access to the system.

  Tax authorities have already launched automated desk control over reflection of payroll employees in the employer's individual income tax returns. Many employers have received notifications of discrepancies between the UEAAS information and tax reporting for the first half of 2020 by specific employees.

  It is likely that in the future "tax" notifications will continue to arrive on a regular basis, because in the course of "mechanical" auto-comparison of data in the tax forms and in the UEAAS the periods of unpaid leaves, which are not subject to be reflected in the employment agreements accounting system, are not taken into account.

  When preparing responses to such notifications, one should pay attention to the fact that the employer's obligation to enter information into the UEAAS has legally "started working" only from the effective date of the UEAAS Working Rules. The information on employment agreements terminated before that date is not subject to be entered into the system. In order to enter the information on current employment agreements, the Rules provide for a "transition period," which does not expire soon.

  In addition, please note that neither the Labor Code nor the UEAAS Working Rules regulate the procedure for, and the specific purposes of, the use of information from this system by governmental agencies. It is not defined which state information systems are integrated with the UEAAS and which governmental agencies may access it. Meanwhile, according to Article 7.4 of the Law No. 94-V of the Republic of Kazakhstan "On Personal Data and Protection Thereof" dated May 21, 2013, "personal data processing shall be limited to the attainment of concrete, predetermined and lawful objectives. No personal data processing inconsistent with the objectives of personal data collection shall be allowed."

  Some employers also started receiving notifications of inconsistencies through the Electronic Labor Exchange portal. Meantime, the portal administrator – Human Resources Development Center JSC – is not a governmental agency, therefore, has no right to implement state control measures in respect of employers.

  We would also like to draw your attention to the important statutory provision in the area of personal data protection, on the practical implementation of which we have received no information so far. The owners or holders of the information systems of governmental agencies must automatically notify personal data subjects through their user accounts on the "eGovernment" web portal about all cases of use and amendment of personal data in the framework of informational interaction, provided that the personal data subjects are registered on the "eGovernment" web portal (egov.kz) (Article 36.4 of the Law No. 418-V of the Republic of Kazakhstan "On Informatization" dated November 24, 2015).

CONCLUSION

  Introduction of the UEAAS is a good incentive for employers to conduct internal audit and streamline (if necessary) their personnel records. The UEAAS Working Rules are silent on the specifics of different situations in the course of "technical" work with the system. Largely, this is normal, as the system functionality has been recently considerably improved and continues to develop. In these circumstances, the UEAAS Working Rules cannot provide step-by-step instructions, but only govern the general issues of working with the system.

  At the moment, the system has a number of technical shortcomings, which put employers in a difficult situation and violate the rights of employees.

We deem that when working with the system, employers should:

• Copy and print out screenshots after entering information into the UEAAS and keep these in employee personal files as a confirmation that the employer's obligation to enter the information has been performed in a timely manner;
• Develop internal forms to document the date of entry of information into the system and the problems that arose while working with the system – in the future this will help show the reason why certain information has not been entered, as well as substantiate the inconsistencies arising while working with the system;
• Not try to "adjust to the system" the actual relations with employees – e. g., instead of transferring to another job, cancel the employee's employment agreement with the head office to immediately employ him/her at a branch. The UEAAS is just an accounting tool that must reflect the actual situation. If it is not adapted to such situation, it is necessary to apply to the authorized agency and the developer for changes in the program;
• Develop internal algorithms for filling in the information and execute these as an employer's act – again, we would like to emphasize that without the employees' consent information on them beyond mandatory data cannot be entered;
• Ensure internal control over the entered information within 30 calendar days of the date of its entry into the system;
• Be careful about the EDSs used to enter information. In our view, it is best not to transfer the CEO's corporate EDS to other persons, but obtain a separate corporate EDS for the employee in charge. If for some reason the employer does not want to open a separate corporate EDS for the employee, it is recommended to document the use of CEO's EDS by another person. It is recommended to describe in relevant documents the scope of rights and obligations of the employees and other persons involved in the entry of data into the system;
• The companies viewing their staff structure, personnel composition and staff reshuffles as a commercial secret are recommended to take steps to protect the confidentiality of these data, including submission of corresponding notifications to the authorized governmental agencies and to the administrator (operator) of the Electronic Labor Exchange portal.

  It would also be convenient if the UEAAS developers publicly inform the employers about changes made to the system. This will enable the employers to promptly correct the data previously incorrectly entered into (left in) the system due to technical flaws in the program, which are subsequently eliminated.

Republic of Kazakhstan Almaty, November 20, 2020