Hiring Your First Employee in Georgia: Contracts, Payroll and the Rules That Bite
What a Georgian company must do the moment it pays someone: the written contract and its essential terms, monthly payroll withholding and pension, probation and termination under the Labour Code, and the extra steps when the person is not Georgian.
Paying someone changes your company's obligations more than almost anything else it can do. Georgian employment is governed by the Labour Code of Georgia, payroll withholding by the Tax Code, and pension contributions by the Law on Funded Pensions. The first payment to a person is the moment all three attach - not the first month, not the first quarter.
The three bodies of law that attach at once
It helps to see the obligations as three separate regimes that switch on together the first time you pay a worker. The Labour Code governs the relationship itself - the contract, working time, leave, termination. The Tax Code makes the employer a tax agent, responsible for withholding personal income tax at source and remitting it. The Law on Funded Pensions brings the funded pension scheme into play where it applies. Getting one right and the others wrong still leaves the company exposed, so they are planned together from the first hire.
The contract
- Written form, in a language both parties understand, with the essential terms: role, start date, remuneration, working hours, place of work and duration.
- A fixed-term contract needs a reason that fits the statutory grounds; otherwise it is treated as indefinite.
- Probation, where used, is limited in length and must be agreed in writing.
- Working time, rest, overtime and leave are floors set by law - a contract can improve on them and cannot go below.
An employment contract with a term exceeding the statutory minimum is concluded in writing and sets out the essential terms of employment, including the parties, the work to be performed, remuneration, working time and rest time, and the duration; conditions less favourable to the employee than those set by law are invalid.
Payroll, month by month
20%
Personal income tax
Withheld by the employer at source
2+2+2%
Pension contributions
Employee, employer and state, where the scheme applies
Monthly
Filing cycle
Tax transferred when the salary is paid; return by the 15th of the next month
Income received by a natural person from employment is taxed at the rate established by the Code, and the employer, as tax agent, withholds the tax at source and remits it within the statutory period.
What the monthly cycle actually involves
| Item | Rate | Borne by | Paid by |
|---|---|---|---|
| Personal income tax | 20% flat | Employee (withheld) | Employer withholds and remits |
| Pension contribution, employee share | 2% | Employee (withheld) | Employer withholds and remits |
| Pension contribution, employer share | 2% | Employer, on top of gross | Employer |
| Pension contribution, state share | 2% (income-dependent) | State | State |
| Monthly payroll return | n/a | Employer | Employer, monthly, even for one employee |
- 1
Register the employee in the Revenue Service system and set up payroll before the first payment.
- 2
Each month, calculate gross pay, withhold the 20% personal income tax, and calculate the pension contributions where the scheme applies.
- 3
Transfer the withheld tax when the salary is paid, as the Tax Code words it, and make the pension contributions no later than the day the monthly return is filed; the return is due by the 15th of the following month. Confirm with your accountant how payment is settled in practice.
- 4
File the monthly payroll return, keeping the calculations and payslips on file as evidence.
- 5
Put the whole cycle on the compliance calendar with a named owner, so a missed month is visible rather than discovered.
Paying a person as a "contractor" to avoid payroll is a classification question, not a planning technique. If the relationship has the substance of employment - fixed hours, your equipment, your direction, no other clients - it is employment however the invoice is titled.
When the hire is a foreign national
Since 1 March 2026 a foreign national without a permanent residence permit may work for a Georgian employer only with a right to work granted under the Law on Labour Migration, unless one of the Law's exemptions applies. The employer applies after the contract is signed, the right is issued for that employer, and working without it is an offence with a fine of GEL 2,000 for each side at the time of writing. The employment and the immigration question still have to be planned together, and the company's own turnover matters twice: the application asks for Revenue Service proof of turnover per foreign employee, and turnover is also the condition behind a work residence permit. Our article on the 2026 right-to-work rule covers the detail; confirm the current requirements before hiring.
A three-person company hiring its first designer
An IT LLC with two founders hires a designer in Tbilisi on 3,000 GEL gross per month, starting 1 September.
- 1Written employment contract signed before the start date, with role, salary, hours and probation stated.
- 2The employee is registered in the Revenue Service system, and payroll is set up before the first payment - not after it.
- 3Each month: personal income tax withheld and remitted, pension contributions made where the scheme applies, and the payroll return filed in the following month.
- 4The obligation goes onto the compliance calendar so the monthly cycle is never a memory exercise.
The cost to the company is the gross salary plus the employer pension contribution; the employee receives net of withholding. Nothing about that is negotiable once the first payment is made.
Illustrative figures. Confirm current rates and pension applicability for your case.
Ending the relationship
The contractor who was an employee all along
A company engages a designer on a contractor agreement for eighteen months: fixed hours, company equipment, daily direction, no other clients.
- 1The relationship is characterised by its substance rather than by the label on the agreement.
- 2Fixed hours, company equipment, direction and exclusivity are the classic indicators of employment.
- 3Reclassification brings the payroll obligations that were never operated: income tax withheld, pension contributions, monthly returns.
- 4The exposure runs backwards across the whole engagement, with interest, and the individual acquires employment rights that were never accounted for.
You cannot contract out of employment by naming the document differently. If the working relationship looks like employment on the facts, it is employment - and the cheapest moment to face that is at the start.
Illustrative. Classification is assessed on the facts under Georgian labour and tax law.
- Termination requires a lawful ground under the Labour Code; "at will" is not the Georgian model.
- Notice periods and, in defined cases, compensation apply depending on the ground relied on.
- Final pay is settled within seven calendar days of termination. The Labour Code's express rule on compensation for unused leave covers termination on the employer's initiative, so check the position on any other ground.
- Document the reason contemporaneously. A dispute is decided on the file that existed at the time, not the explanation assembled afterwards.
General information, not legal or tax advice. Rates, thresholds, the pension scheme's scope and the Labour Code's termination rules change; confirm the current position for your case before acting.
How Trustlex handles it
Payroll and employer registration sit in our tax and compliance services; employment contracts and internal policies sit with the lawyer. Once you have staff, the monthly payroll obligation appears on the deadline board with an owner, alongside the VAT and profit-tax cycle, so a missed month is visible rather than discovered.
Next step
Keep the company clean after registration
Registered address, bookkeeping and tax returns, the compliance calendar and official notices as one monthly plan.
See the compliance plan