The Form and Term of the Employment Contract in a Startup
For a startup, the team is the main resource, and the legal frame of that resource is set by the Georgian Labour Code. Article 12 regulates the conclusion of the employment contract: it is concluded orally or in writing, for a fixed or indefinite term; where the employment relationship exceeds 1 month, written form is mandatory. A fixed-term contract may be concluded only where one of the grounds named by law exists — for example, the performance of work of a specific volume, seasonal work, a temporarily increased workload or the replacement of an employee temporarily absent.
The law treats chains of fixed-term contracts strictly: if the term of the contract exceeds 30 months, or the relationship continued through two or more successive fixed-term contracts exceeding 30 months, it is deemed concluded for an indefinite term; succession also arises where a new contract is concluded within 60 days of the expiry of the previous one. For startups, the exception for a starting enterprise matters: an entrepreneur whose state registration took place less than 48 months ago is not subject to the restrictions on fixed-term contracts, provided the term is not less than 3 months; after the 48-month period expires, the relationship transforms into an indefinite one. The employer is also obliged to inform a fixed-term employee about existing vacancies, so that fixed-term staff have the same opportunity to take positions under indefinite contracts as other employees.
Remuneration and Liability for Delay
Article 41 sets the rules of remuneration: remuneration is the basic or minimum remuneration, salary or any other remuneration that the employee receives from the employer in return for the performance of work; its form and amount are determined by the contract, and it is paid at least once a month. For each day of delay of any payment or settlement, the employer must pay the employee 0.07 percent of the delayed amount — this rule tightens payment discipline and is an essential element of a startup's financial planning.
Grounds and Procedure for Termination
Article 47 lists the grounds of termination: economic, technological or organizational changes necessitating a reduction of the workforce; expiry of the term; completion of the work; the employee's departure by written notice; written agreement of the parties; lack of qualification; gross or repeated breach of obligations; death; commencement of liquidation; and other objective circumstances. Each ground requires its own evidentiary material, and a breach of an obligation imposed by the internal labour rules becomes a ground of termination only where those rules are part of the employment contract. For a startup this means that linking the rules to the contract and recording breaches in writing must happen in advance, not during the dispute.
The practical lesson for a startup is this: before using a fixed-term contract, verify and document the existence of a ground; while the 48-month window of the starting enterprise lasts, use the flexibility but plan the transition to an indefinite contract; observe the remuneration schedule to the day, since delay accrues daily; and record every termination decision in writing and within the deadlines. These four rules are a direct translation of the Labour Code's requirements into startup language, and observing them reduces the risk of dispute many times over.
Article 48 establishes the procedure: on leaving at the employee's initiative, the employer is warned in writing at least 30 calendar days in advance; the employee may, within 30 calendar days, demand written substantiation of the ground of termination, and the employer must respond within 7 calendar days. Appeal to the court is possible within 30 calendar days of receiving the substantiation; where the employer fails to substantiate, the burden of proof shifts to it. Where an unlawful termination is established, the court reinstates the person, secures equivalent work or awards compensation; the employee may also claim compensation for forced absence from the date of termination until the enforcement of the judgment. A procedural mistake thus costs the employer materially, and written fixation of every step is in the interest of both sides.
Frequently Asked Questions
When is a written contract mandatory?
When the employment relationship exceeds 1 month — written form is then required.
When does the law deem a contract indefinite?
When a fixed term exceeds 30 months, or successive contracts exceed 30 months; a new contract within 60 days counts as succession.
What exception applies to a starting enterprise?
Within 48 months of registration, fixed-term contracts are unrestricted, provided the term is not less than 3 months.
What is the penalty for delayed remuneration?
Payment of 0.07 percent of the delayed amount for each day of delay.
How to protect against unlawful dismissal?
Demand substantiation within 30 days and apply to the court within the same period; without substantiation, the burden of proof shifts to the employer.
How We Help on Legal.ge
The lawyers of Legal.ge assist startups across the full spectrum of HR law: drafting contracts, sound schemes of options and bonuses, documenting termination procedures and representing parties in disputes. Contact us on Legal.ge — we will help keep your team legally protected and the terms of cooperation transparent and motivating for every member.