Russia At A Glance

• Estimated Population: 146.18 million 
• Currency: Russian Ruble RUB
• Capital: Moscow
• Languages spoken: Russian
• GDP: -3.06% (2020)

Employment in Russia

Employment law in Russia is based on the Russian Labor Code adopted in 2002. The Russian Labor Code is the principal document that upholds the rights of employers and employees. The Employment Law applies to all companies in Russia and each employable person residing in Russia regardless of their citizenship.

There are several industries functioning within the Russian economy and some of these regulations tend to vary for certain specific sectors. This is the reason why there are overriding regulations apart from the Employment Act that governs the hiring of personnel in Russia. There can be federal laws, regional or municipal regulations to be adhered to by certain industries/ sectors in Russia.  

Russia permits foreign companies to hire Russian citizens through their branches and subsidiaries and they hereby are needed to comply with the Russian Labor Code.

Keeping these things in mind can save a lot of time for companies while expanding their operations in Russia. Hence, partnering with EOR like Skuad places the company at a pragmatic advantage.

What Needs to be Understood Before Employing Someone in Russia

The Russian Labor Law applies to both local and foreign workers employed by a company to do a paid activity. 

In the Russian Federation it is mandatory to have an agreement between the employer and employee working for the company. There are mainly two types of employment agreements, namely:

• Indefinite Term Agreements: The employment document does not contain a term of validity and is considered unlimited.
• Definite Term Agreements: This is an employment scenario where employment relations cannot be established for an indefinite period and the terms of the agreement are fixed.

To ensure your expansion endeavors are in compliance with the Russian employment laws, Contact Skuad today.

Contractors Vs Full-time Employees

In Russia, an individual can be employed by a company by entering into a labor contract as per the prevailing labor law or as a contract under the civil law known as the civil law contract. A labor contract is governed by the Russian Labour Code under labor law regulations. While the civil contract falls beyond or outside the norms of labor law regulations.

While contractors will be covered by the civil law contract. In the case of a civil contract, the company does not intend to establish a labor contract. The main distinction between both arrangements is that under the labor contract, the employee is guaranteed certain safety as enshrined in the labor law (such as overtime, sick leave compensation, vacations, and protection from termination).

Most often, companies go with temporary or contract staffing to fulfill temporary projects or auxiliary work or ad hoc projects where there isn't a consistent supply of work. These are typically carried out by hiring contract staff in place of regular staff. There are certain mandatory conditions (Chapter 37 and 39 Civil Code) that must be met in the contract, which include:

• Scope of work and its quality
• Completion of work – start and end dates
• Price of contract and terms of the settlement

In certain exceptional cases, a Russian court may requalify a civil law contract into a labor contract if it feels the work meets the criteria of the labor law.

Apart from labor contracts (full-time) and Civil contracts (part-time/ contractors), there are three more significant employee segments under the Russian Labour Code. These are:

I.  Domestic Workers: These are individuals employed by the company but work from home (Chapter 49 Labor Code). This mainly applies to light consumer and artisan goods from materials and instruments provided by the employer or purchased by the domestic worker under their own expense.

II. Remote Workers: This was created as an amendment to Chapter 49 of the labor code (49.1), where the President of Russia signed the law making it legal for anyone to work on a remote basis from their own home. This law was enacted to bridge the limited scope of the “domestic worker” law. The employment contract must foresee the following:

a. Procedures and terms for providing hardware, software, and equipment must be delivered or recommended by the employer.

b. Procedures for determining attendance at work

c. Procedure of reimbursing costs connected with the performance of remote work

d. Compensating for the use of equipment, software, and hardware, if owned by the remote worker.

III.Apprentice Agreement: An apprenticeship or on-the-job training may be entered by the potential candidates, who have just passed out and have entered the job market (Chapter 32 Labour Code).

Hiring in Russia

Russian companies recruit through newspaper ads, employment agencies, job boards, and regional social media networks.

Companies immediately seeking to recruit Russian citizens must switch to job boards when it comes to finding talent. There are sites like Headhunter Russia, SuperJob, Zarplata, and Rabota.ru that can be made use of to attract lots of potential candidates.

multiple social media platforms that provide enough scope to attract candidates. These include Vkontakte, Odnoklassniki and Moi Mir. Besides this, LinkedIn continues to remain a popular destination among job seekers. Companies by all means must leverage the reach of all these social networking platforms.

After the hiring process concludes, a company is expected to maintain a work record book of each employee. This record will reflect the complete employment history of the employee. And upon request from the employee, the company is expected to make copies available.

Hiring talent in a relatively short period of time is a daunting task in Russia. Partnering with an Employer of Record (EOR) like Skuad Russia is an apt solution. This will allow your organization to focus on operations without getting held back by compliance regulations governing recruitment, sourcing, and the hiring process per se. Moreover, EoR will speed up the hiring process with virtual onboarding tools and e-signing of documents with selected candidates.

Skuad EOR is not just limited to hiring, we can even streamline your other human-resources-related functions like payroll management, time and expense management, security, compliance, and tax filing. All this adds up to a seamless job experience for both the organization and the candidates.

Probation & Termination

As per the labor regulation of the Russian Federation, a mandatory probationary period has to be established for a new employee. As a general rule, the maximum duration of this period may not exceed three months. Individuals under 18 and mothers with children below 18 months are exempted from this rule.

Employers are obligated to inform their employees if they have failed to pass the probationary period at least 3 days prior to the expiry date of the probation. If no such communication is provided, then the employee is considered to have passed.

Ending of a labor contract is difficult once the probationary period is over. The grounds and proceedings for ending a contract are enumerated in the labor code. Redundancy is the most common reason for termination. In such cases, the employee gets a 2-months notice period and a severance package for one to three months.

Another reason for termination may be the non-performance of the employee as stipulated in the labor code. Pregnant women and mothers with children less than 3 years cannot be dismissed as per the labor code.

There are other provisions for termination of employment with a notice. This includes – liquidation of the company where the notice period is 2-months and the expiration of a fixed-term employment contract with a notice period of 3 days.

Working with an EOR like Skuad helps organizations to carry out such actions while adhering to the local laws without inviting a dispute. Skuad can even draft reliable and well-written labor contracts while being in compliance with the Russian labor code.

EOR Solution

Opting for an Employer of Record (EOR) comes with its own set of benefits. It allows companies to free up their time and resources from recruitment, and aspects related to HR. In a way, EOR is one of the best ways to enter the Russian workspace. By partnering with Skuad, you are allowing the expansion of the organization without the need to establish a new subsidiary to take care of the employment management process.

Partnering with an Employer of Record will allow companies to save valuable time that goes into setting up a hiring process, tax management, payroll management, and other associated aspects related to HR.

Skuad can execute tailor-made contracts in complete compliance with local laws. We at Skuad can even amend existing contracts and expedite the hiring process with applications like the e-signing of documents.

Types of Visas in Russia

To know more about the visa process in Russia, speak to our experts at Skuad.

Work Permits in Russia

There is no concept of a work permit and all foreign individuals need to have a valid work visa to join employment anywhere in Russia.

Payroll and Taxes in Russia

To set up payroll in Russia, you need to be knowledgeable on the prevailing laws of the country. Being aware of your employee profile will allow you to understand which act you need to refer to.

Taxation is also a necessary component when it comes to employment and income. Here also, working with an EOR will save time, money, and costs allowing you to focus on your business priorities.

Taxation in Russia

In Russia, pensions, medical care, personal income tax, and employer’s insurance contributions are all administered via funds with ambiguous laws. This complicates the entire payroll and tax compliance practices.

• Income tax is withheld by the employer at a flat rate of 13%
• Non-resident Russians are taxed at 30% of their income in Russia (can qualify for standard resident rate by passing the residency test, if they have lived in the country for 6 months).
• Maternity and social security payments, insurance, and pension contributions are not subject to income tax
• Employees are not required to make social security contributions from their own earnings; employers make these contributions that amount to 30% of the salary.

Bonuses

In Russia, performance-based bonuses are popular, and some employers even offer a 13th-month bonus. 

Some firms offer additional incentives to employees who have valuable skills or who they want to keep for other reasons, such as tuition reimbursement, private health insurance, or programs for the employee's children.

Incorporation: How to set up a Subsidiary in Russia

All international businesses have to set up a limited liability company to start business in Russia. The process is as follows:

• Register with the Trade Register and the Federal Tax Service
• Open a Russian Bank Account - Mandatory for paying employees and other needs
• Deposit minimum share capital of 10,000 roubles per shareholders (up to 50 shareholders)
• Receive Approval as a legal entity

The process normally takes 4-6 weeks and after which companies need to be registered with the Pension Fund, Social Insurance Fund, and Statistics Fund.

Professional Employer Organization (PEO)

A PEO enters into a joint employment relationship with an organization, wherein it starts leasing employees to the employer. This allows the PEO to share and manage a multitude of employee-related responsibilities and liabilities. This allows a company to outsource its HR functions to the PEO.

While EOR only puts a percentage of employees & business on its payroll, a PEO puts all the employees on its payroll and takes responsibility for all HR-related functions. This is one of the major differences between a PEO and an EOR.

Nonetheless, all final decisions are made by the partnering organization when working with the PEO. While this can be beneficial when it comes to reviewing tiny details,  it can be time-consuming for an organization that is amid an expansion.

Skuad's EOR solution is a good way to expand your business in Russia without setting up a separate entity. Our solutions help you to stay focused on your business and leave all business compliances, payroll processing and complete management work to us. Connect with Skuad to know more.

Conclusion: What Gives Skuad’s Russia EOR Solutions an Edge?

The most important part of business expansion and setting up a remote team is about being knowledgeable on the local laws and how they are going to shape the employment process. Several factors ranging from – different employment types, distinct state laws, setting up payrolls, understanding the prevailing taxation laws to understanding the Russian negotiation process can hold back and prolong the business expansion process.

That being said, instead of setting up a new commercial entity and getting immersed in understanding the nuances of the prevailing laws. It is easier to partner with an EOR that will take care of your HR needs. The EOR can ensure the HR practices are in consonance with the local legal system and there is no room for lapses or deviations.

Skuad’s unified employment platform can make it easy and simple to hire exceptional talent in Russia. This notwithstanding, we can also help manage your payroll, and help your company remain compliant with prevailing laws and taxation on a single unified employment platform.

Contact Skuad today and give your business the much-needed boost.