In accordance with the Labour Code, an employer can be an individual or a legal entity. In instances established by federal law, the employer may be an entity which has been vested with the right to conclude employment contracts. Representative offices and branches are not considered employers.
Union activity is regulated in accordance with the Federal Law on Professional Unions, their Rights and Guarantees of Activities. After the collapse of the Soviet Union in 1991 and the formation of a market economy during the 1990s, the role of trade unions decreased significantly. Today, unions in Russia are becoming more active and wielding more power on employers. Under the Labour Code, the employer should take the opinion of the trade union into account when adopting certain internal regulations (i.e., internal policies) or dismissing trade union members.
Employer-employee relations are governed by the Labour Code of the Russian Federation (which came into force on 1 February 2002) and other special laws. In 2006, the Labour Code was significantly amended, primarily to correct wording ambiguities. The Labour Code establishes that employment relations of all employees working in Russia shall be governed by Russian legislation (regardless of their citizenship or status, or that of their employers, unless otherwise stipulated by an international agreement of the Russian Federation).
The law provides employees with minimum guarantees which cannot be worsened or limited by any
employment contract. Any provision in an employment contract which deteriorates the position of the employee will not be enforceable.
The Labour Code heavily regulates employer/employee relations. There are safeguards to protect employees against dismissal or termination of their employment contract by the employer (prior notice, severance allowances), a harmful working environment and excessive working hours. Employment legislation makes it very difficult for the employer to dismiss an employee on disciplinary grounds.
Wages and salaries
Salary must be paid in Russian roubles twice a month as specified by the work regulations of an organization, a collective bargaining agreement or an employment contract. Salaries may not be lower than the minimum monthly salary established by Russian legislation. The minimum monthly salary is regularly adjusted. Currently, the statutory minimum monthly salary (including for foreign nationals) is RUB 2,300 per month (approximately USD 90) as of 1 September 2007.
A written employment contract setting out the terms of employment must be concluded with each employee and shall be drawn up in two copies, each of which shall be signed by the parties. The employer shall be obliged to draw up a written employment contract with the employee no later than
three business days from the day on which he is actually admitted for work. The Labour Code (Article 57) establishes mandatory requirements for the content of the employment contract. As a general rule, employment contracts are concluded for an indefinite period. A fixed-term employment contract may also be concluded, but it cannot be concluded for more than five years, and only in those circumstances specifically provided for by the Labour Code. Moreover, recent court practice shows that the employer must prove and substantiate the reasons for a fixed-term employment contract in the event of any dispute. Otherwise, the employment contract shall be deemed to have been concluded for an indefinite term.
Under Russian employment law, job duties and obligations should be defined in the employment contract. This is very important, since an employee cannot subsequently be required to perform tasks outside the scope of duties described in the employment contract.
In accordance with Russian employment law, employers are required to issue an internal order each time an employee is hired, transferred to a new job, granted a vacation, disciplined or dismissed, among other situations. Moreover, employers should adopt a certain set of internal regulations compliant with Russian law.
• Employers are required to keep a record of all time worked by each employee, including overtime.
• The standard working week in Russia is 40 hours over a five-or six-day week. For certain categories of employees, the number of working hours should be reduced.
• Law strictly defines limits and rates for overtime and holiday/ weekend work.
• On the eve of public holidays, the working day should be one hour shorter.
All employees are entitled to a minimum of 28 calendar days of annual paid leave. Normally, vacation entitlement is granted to employees after they have worked at a company for six months continuously.
The Labour Code requires that employees plan their annual vacation by December of the preceding year.
The Labour Code further requires that employees notify their employers in writing at least two weeks before any vacation commences. An employee's vacation allowance should be paid to the employee at least three days before vacation is due to start.
It is prohibited to impose, directly or indirectly, any restrictions or privileges on the basis of gender, race, skin colour, nationality, language, origin, material, social and employment status, place of residence (including whether or not a person is registered at his place of residence or place of stay) or other circumstances not related to the business qualities of employees, except in instances provided for by federal law. Any discrimination in the establishment and adjustment of salary rates and other conditions of payment for labour are prohibited.
Termination of employment
An employer may terminate employment only on the specific grounds provided in the Labour Code and other federal laws. Employers must strictly comply with specific procedures and documentary requirements provided by the Labour Code when terminating employment for any reason. The Labour Code gives additional protection to specific categories of employees, including minors, female employees, employees with children, trade union members, and various other categories. An employee must give two weeks' notice of resignation. Because of the detailed and varied termination requirements, legal advice should be sought before dismissing an employee.
Social and health security covers pensions, unemployment, maternity and child benefits, illness and
other social services.
Employees currently do not pay Russian social taxes — employers make all contributions.
Russian social taxes were substantially reduced from 1 January 2001. Currently, companies pay the following on employee compensation:
• Unified Social Tax (UST) is comprised of numerous elements, including the Social Fund, the federal budget, and various medical funds (federal and territorial). UST is generally levied on employees' and contractors' total remuneration at regressive rates starting at 26% for low income employees, down to 2% for high income employees. UST is allocated across these elements in varying proportions in accordance with the status/income level of the individual.
• Obligatory Pension Insurance (OPI) contributions also accrue on employees' and contractors' total remuneration at regressive rates, depending on the cumulative remuneration; the amount of this contribution is effectively credited against the federal budget portion of UST.
• Mandatory Accident Insurance (AI) against work-related accidents. Rates vary from 0.2% to 8.5%, depending on the level of professional risk associated with the employer's activity.
Here are some key points to consider:
• Special conditions for foreign nationals were abolished in 2003. All components of the Unified
Social Tax must now be paid on expatriates' remuneration.
• OPI contributions only apply for Russian citizens or foreign nationals permanently residing in Russia (for example, with a residence permit). The total amount of social taxes payable on compensation of a foreign national who is temporarily staying in Russia is, however, not reduced by this exemption from OPI contributions; rather, the amount due to OPI is redistributed across the various components of UST.
• Income paid to contractors is exempt from the Social Fund portion of the Unified Social Tax and so effectively reduces the amount of UST payable.
Accident Insurance (AI) is not payable if the civil contract does not stipulate accident insurance coverage.
It is possible to find accommodation in Moscow that conforms to Western standards. There are many apartments or houses which can be rented or bought by expatriates to suit their needs. Foreign employees can bring their families to live in Russia. Accompanying family members can obtain Russian visas on the basis of their spouse's employment. There are also schools which cater to children of expatriate employees.
Restrictions on employment
There are no restrictions on the number of foreign employees in a company or on how long they can be employed in Russia, except in the case of representative offices and branches of foreign companies, which are subject to quotas established by the immigration bodies. There are some limits to the types of activities foreign employees can carry out in Russia (e.g., a foreign individual cannot work in public service, as pilots in command in civil aviation, etc.).
Fiscal registration number
There is no requirement to obtain a fiscal registration number for a foreign employee.
There is no requirement to obtain residence permits for foreign personnel to work in Russia. Foreign employees are authorized to stay and work in the Russian Federation for as long as their work visa is valid.
According to the current Russian legislation, all expatriate employees have the right to work in Russia if they hold individual work permits. An employer is entitled to employ foreign employees only if it holds an employment permit (i.e., permission to employ foreign personnel). Employers must obtain an employment permit prior to applying for individual work permits for their foreign employees. Employment and work permits are generally issued for one year and for a particular region. Please note that this procedure does not apply to foreign nationals permanently residing in Russia on a residence permit or several categories of foreign employees engaged, for instance, in assembling technical equipment delivered to Russia. The Russian immigration authorities (Federal Migration Service) refuse to issue employment and work permits on the basis of secondment agreements. Only a direct employment contract governed by Russian labour law between an employer and an employee can be the basis for obtaining both employment and work permits. Once a foreign employee obtains his/her individual work permit, he/she will be entitled to stay and work in Russia only on the basis of a work visa. The FMS have become more stringent in checking that foreigners' visas comply with the purpose of stay in Russia. A business visa is issued specifically for the purpose of conducting negotiations, concluding or extending business contracts, or participating in auctions, exhibitions and other business events. Failure to comply with immigration rules could bring fines of up to RUB 800,000 (approximately USD 31,000) per foreign employee.