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Russia – Employer of Record

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Country Introduction – Russia

As the world’s largest country, Russia occupies one-tenth of all the land on Earth. It spans 11 time zones across two continents (Europe and Asia) and has shores on three oceans (the Atlantic, Pacific and Arctic Ocean). The Russian landscape varies from sandy and frozen desserts, tall mountains to giant marshes. Much of Russia is made up of rolling, treeless plains called “steppes”. The region of Siberia, which occupies three-quarters of Russia, is dominated by sprawling pine forests called “taigas”.

Population: roughly 142 million people (2020)
Capital: Moscow with 12.5 mio inhabitants and Russia’s largest city.
Name: Russian Federation
Government: Semi-presidential federation
President: Vladimir Putin
Official Language: Russian
Literacy: More than 99% can read and write.
Religion: Russian-Orthodox 20%, Muslim 15%, Christians 2%
Currency: 1 Ruble = 100 Kopeka
National Holiday: 12 June (Russia Day)
History: The Russian Federation was created on 25 December 1991
National symbols: National anthem, coat of arms and national flag (white – blue – red).

Contract of Employment 

The Russian Labour Code governs the relationship between employees and employers of all types. This means that parties to an employment relationship cannot contract differently from what is imposed by this Labour Code.

It is legally required to put a strong employment contract in place in Russia, in the local language. An employee works under an employment agreement and performs their employment duties on a regular basis for regular remuneration (that is, a salary) on behalf and under the control of an employer. Employees are entitled to statutory guarantees provided under employment legislation.

Employment contracts can be concluded for an indefinite period or for a fixed term not exceeding five years. The duration of civil law contracts is not limited. Fixed-term employment contracts can only be concluded in cases provided for by the Labour Code or federal laws. Fixed-term employment contracts entered into in cases other than those set out in the Labour Code will be regarded by the courts as concluded for an indefinite term.

Probation Period 

Maximum 3 months.

Paid Leave

Employees are entitled to 28 calendar days’ minimum paid holiday. Some employees have longer minimum paid holiday entitlements (for example, employees under 18 (31 days) and teachers (42 or 56 days)). Additionally, certain employees are entitled to additional paid holiday during a year, including:

–  Employees working in the Far North and equivalent regions.
–  Employees working in hazardous and dangerous conditions.
–  Employees with irregular working hours.

Collective bargaining agreements or internal regulations can increase the statutory duration of paid holiday leave.

Working hours

Fixed duration of the working week in Russia is 40 hours, some categories of employees are entitled to a reduced working week. Overtime work must not exceed four hours per employee for two days in a row and 120 hours in a year. The employer must arrange for an exact record to be kept of the overtime worked by each employee.

Overtime work is not prohibited, but generally requires the employee’s consent and additional payment. Certain categories of employees (pregnant employees) cannot be engaged in overtime work.

Maternity/Paternity Leave

There are two types of maternity leave in Russia: pregnancy and childbirth leave start 70 calendar days (84 in the case of a multiple pregnancy) before childbirth and lasts 70 calendar days (86 in case of birth complications and 110 in case of a multiple birth) after childbirth, with payment of the state-funded allowance in the amount set by law.

This leave can be taken by the mother, father or any other relative or guardian who actually takes care of the child. The state allowance is envisaged for the period until the child is 1.5 years old.

Sick Leave

Employees can take sick leave in the event of illness or injury. Sick leave can also be granted to an employee taking care of a sick child or sick relative. Employees do not receive their regular salary during sick leave.

For periods of sick leave (to be confirmed by a medical certificate), an allowance is paid to the employee instead of salary; the allowance is paid at the expense of the Social Insurance Fund, with the exception of the first three days, which are paid for by the employer.

The amount of the temporary disability allowance depends on the length of service of the insured person and may be 60%, 80% or 100% of the average wage on which insurance premiums are calculated (but cannot exceed the legal maximum).

Russian law does not operate a separate concept of ‘disability leave’, which is instead handled as a succession of ordinary sick leave until the employee recovers or is qualified as permanently disabled.

Public Holidays

There are at least 14 days of public holidays in Russia. Public holidays are not included in the minimum paid annual holiday entitlement.

Termination of the Contract 

The employee may unilaterally terminate the employment contract by a giving the employer a notice in writing. The notice period is two weeks, while for executives this is one month.

Unilateral termination from the employers’ side is often extremely difficult. Dismissal on the ground of redundancy, poor health, insufficient qualifications and competency entail differing burdens of proof and notification. Satisfying the rules and regulations that govern this process can be both time-consuming and costly for the company. This makes that in practice, circumstances permitting, dismissal in most cases is done by mutual agreement, where both parties agree on the terms and conditions of the dismissal.

Pension Fund

An employee working for a continuous period of at least 15 years for an employer that duly pays contributions to the Pension Fund of the Russian Federation is entitled to a pension. This requirement is applied cumulatively with an age requirement (65 years for men and 60 years for women). An employee retains their period of continuous employment on any type of transfer to a new entity or on a change of employer.

Severance Pay

Severance payments depend on the grounds for termination.

Employees terminated due to liquidation or redundancy are entitled to a severance payment equal to their average monthly wage. Additionally, the employer must pay the dismissed employee their average monthly salary during the period they are looking for a new job (but for no longer than two months from the date of termination).

In exceptional cases, an employee can receive their average monthly salary for a third month following the date of termination, based on a decision of the Employment Agency (if the employee addressed that body within two weeks of dismissal and was not employed).

An employment agreement or a collective bargaining agreement can provide for a higher severance pay. The average monthly salary of an employee used for the calculation of the severance payment is based on the payments made under the employer’s remuneration plan (including salaries and bonuses). All payments accrued for the previous 12 calendar months are divided by the number of actual working days during that period and multiplied by the number of days in the relevant month.

Employees are entitled to a severance payment equal to two weeks’ average earnings if they (among other things):

1. Are called up for military service or assigned to an equivalent alternative civilian service.
2. Reject a transfer to another locality in connection with the employer’s relocation.

The average daily wage of an employee used for the calculation of this severance payment is calculated by taking all payments accrued for the previous 12 calendar months and dividing them by the number of actual working days in that period.

Chief executive officers (CEOs) of a company and members of the management board who are dismissed without cause by a decision of the company’s authorised body are entitled to a severance payment equivalent to at least three average monthly salaries. This severance payment is limited to three average monthly salaries for CEOs and members of the management board of certain state-owned companies.

Health Insurance

All Russian citizens have a right to free medical services. Russian employers pay insurance premiums to the Obligatory Health Insurance Fund, which finances the obligatory health insurance for all nationals, from birth.

Employers also pay premiums to the Social Insurance Fund to cover the risk of industrial accidents. Companies may provide additional medical coverage to employees for the term of employment; sometimes this coverage is extended to family members.

Personal Income Tax

The basic rate for personal income tax is 13% (income up to 5mio RUB) / 15% (income over 5mio RUB) for residents and 30% for non-residents. An employer as a tax agent shall calculate the personal income tax, withhold it from the employee and transfer to the budget. Taxes are deducted from the employee’s salary and remitted to the authorities on a monthly basis. Personal income tax is paid on the date of the salary transferring to the employees.

For more information read here Federal Tax Service of Russia

Social Security Contributions

Social contributions in Russia are the sole responsibility of the employer.

Employer contributions cover obligatory pension, medical and social insurance. On a voluntary basis, additional pension contributions may be paid by individuals or by their employers (e.g., as a part of a social package) to non-state funds or insurance companies. The tax authorities are responsible for administering social contributions.

Social contributions must be accrued on payments made to individuals in the context of employment relations and civil contracts for the performance of work or the rendering of services (except for individual entrepreneurs), and copyright agreements. Generally, the tax base includes remuneration and most benefits provided to employees.

Workplace Accident Insurance 

In addition to the aforementioned social security contributions, all employers are required to pay insurance contributions against workplace accidents and occupational illness. Contributions are assessed on all payments to individuals under employment agreements. Notably, employment income payable to foreign nationals is not exempt from these contributions.

Employment of Foreign Nationals

All foreign citizens require a work permit to work in the Russian Federation and the employer company must have permission to employ foreign citizens (employment permit). Generally, there are two types of work permits for foreign nationals:

1.  Standard work permit

Standard work permits for foreign nationals are issued in compliance with an annual quota system and then distributed between businesses which have applied for the right to employ foreigners. This time-consuming process requires that the company state the number of employees they plan to hire and to specify the nationality of that employee up to a year in advance. Standard work permits require that the process be completed yearly, with the laws governing the process subject to frequent change.

2.  Highly Qualified Specialist (HQS) work permits

Russian companies may employ highly qualified foreign specialists for 3 years with the possibility of extending their contract. This category of employees is also exempt from government-imposed quotas. The only criterion is that the employee must be paid a gross salary of at least 2 million rubles per year. The process of obtaining this work permit is simplified and less time consuming. Highly qualified employees must be registered with the Tax Authority. Employers must notify the Federal Immigration Service of Russia of registration of highly qualified employees with the Tax Authority within 30 days of receiving the work permit. Employers of highly qualified employees also have various reporting requirements, including the submission of specific documents to the Federal Immigration Service.

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