The regulation of employment in Russia is governed by the Labor Code of the Russian Federation which applies equally and must be complied with by both executives and employees. Russian labor laws apply to foreign nationals and foreign businesses in Russia in the same manner as domestic entities. Typically, an employment agreement governed by a foreign law will be disregarded in the Russian court, where the Code prevails. Making employment decisions in Russia must be made with full compliance to the Labor Code, as all regulations related to minimum guarantees, employment benefits and compensation supersedes any agreement between the employer and employee. The employee-sided nature of Russian labour legislation makes employment in Russia complex.
For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Russia.
There are several key areas to be aware of within Russia’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resource department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
The most prevalent form of employment contract in Russia is a simple written employment agreement in Russian, which outlines the basic terms and conditions of the employment relationship between the employee and the employer. The contract must include:
Generally, these contracts are specified for an indefinite period of time, unless a fixed-term agreement of up to 5 years is entered into under specific condition under Article 59 of the Labor Code.
It must be noted that any terms in the employment contract that worsens the position of the employee than if they were under the mandatory minimum guarantees, benefits and compensation under the Labor Code will be rendered invalid.
|Medical Leave ?||
Employees may take sick leave provided they present a medical certificate to an employer when they return to work. In the event of an employee’s illness, injury or a sick family member, sick leave compensation is required at varying levels depending on the situation. Occupational injuries or sickness provide the employee with 100% of the employee’s average earnings in the preceding two years. All sickness compensation, however, is capped at RUR415,000, or US$12,700. An employer is only required to pay sick leave compensation for the first three days of sick leave, where further sick days are payable from the Russian State Social Insurance Fund, funded by the employer’s mandatory contributions as a percentage of employee salary.
|Severance / Redundancy Pay ?||
In the condition of an employer-terminated agreement as a result of redundancy or liquidation, two months’ notice is given along with a two months’ salary severance payment to the employee. The employer bears the burden that the redundancy or liquidation was driven by business factors, and not with the motive of dismissing select employees.
As Russian employment laws on compensation are employee sided, Russian employers prefer to negotiate a settlement amount usually from two to three months’ salary for regular employees and up to six months for senior executives.
|Termination of Employment ?||
Termination by Employee
Termination of the employment agreement may be carried out by providing two weeks’ written notice to the employer, which is a basic right under the Labor Code that cannot be overridden by contractual terms. With the consent of the employer, termination may occur within the two weeks’ notice, and it may also be withdrawn by the employee given that the employer has not legally entered into another employment agreement in this time for that position. If the two weeks’ notice has expired and termination has not occurred, the employment agreement may continue if the employee chooses not to terminate.
Termination by Employer
Only upon specific grounds specified in Article 81 of the Labor Code may the employer terminate an employment agreement. These conditions typically apply to most employees except for CEOs and executives with contractual terms in their agreements, which include:
Employees who are sick, on vacation or are pregnant may not be terminated except in the circumstance of the company’s liquidation.
An employer must comply with the detailed procedure of employment termination under the Labor Code, or it will be invalid by a court. Disputes may be heard in courts of general jurisdiction or commercial courts, where the former is typically used for general situations; however it is unclear which court is chosen for CEOs and executives and is highly circumstantial. Employees may be entitled to reinstatement at work, salary compensation for their absence, and compensation for moral harm, depending on each case at the judgment of the Russian courts.
Employment laws in Russia is unique in that the employee’s employment history is recorded in a “labour book” (trudovaya knizhka), which extend to foreign employees as well. The book contains records of employment, positions, dates of joining and termination, and disciplinary sanctions from the employee’s first employment up to retirement. The employer is required to keep records and updated information on each employee’s labour book with full disclosure of appropriate employment information for any employment exceeding 5 days.
It is in the employee’s interest to keep their labour book “clean” by avoiding any disciplinary sanctions or termination for reasons that will make future employment difficult. This feature of Russian employment gives the employer some bargaining power as a negotiation tool for termination agreements.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Russia. For companies which intend to employ their staff directly through their incorporated Russian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Russia.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Russia.
The Shield GEO solution is an attractive alternative where
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Russia
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Russia
– the company needs help with tax, employment, immigration and payroll compliance in Russia
Shield GEO can contract directly with the company to employ and payroll their staff in Russia. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.
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