Practical Law Company
SCOPE OF EMPLOYMENT REGULATION
1. Do the main laws that regulate the employment relationship apply to:
Employment legislation is regulated by the Russian Federation (RF) and its constituent units. The constituent units are free to determine certain aspects of employment legislation within the sphere of their competence. However, overall employment legislation in Russia is reasonably centralised and harmonised. The Labour Code as of 30 December 2001, No. 197-FZ is the main document regulating employment legislation in Russia. The constituent units of the RF usually adopt certain rules that, for example, regulate bonuses for those who work in the Northern regions of the country with harsh climate conditions or introduce additional days off. The RF constituent units’ legislation cannot violate norms of the federal legislation and can be aimed exclusively at improving employees’ working conditions.
Within the RF, the rules established by the labour legislation also apply to labour relations with foreign nationals and stateless persons. However, generally they do not apply to labour relations with Russian nationals outside the Russian jurisdiction and within the jurisdiction of other states.
Laws applicable to foreign nationals
The main law regulating the rights of foreign nationals is the Law on the Legal Status of Foreign Citizens in the RF of 25 July 2002 No. 115 FZ.
Under the Labour Code, regulation of relations with a foreign party is limited to general proposals. However, there are restrictions on foreign persons in relation to specific occupations. In particular, foreign nationals cannot:
(Federal Law “On the Legal Status of Foreign Citizens in the RF”, Water Code of the RF and so on.)
Laws applicable to nationals working abroad
Russian nationals in other states may work on the basis of:
RESTRICTIONS ON MANAGERS AND DIRECTORS
2. Are there any restrictions on who can be a manager or company director?
Under Article 3 of the Labour Code, no-one can be restricted in their rights and liberties, or gain any advantages, as a result of
There is also a general rule that no-one should be limited as a result of other circumstances that are not connected with their professional qualities.
There are therefore no age or nationality restrictions for managers or company directors.
See above, Age restrictions.
3. Are any grants or incentives available for employing people? If so, please give details.
There are a number of programmes at federal and regional level aimed at promoting employment.
For example, at federal level, the Resolution of the Government of the Russian Federation on 14 December 2009 No. 1011 provides for grants to implement additional measures to promote the employmentof people with disabilities, parents bringing up disabled children, and parents with many children.
In Moscow, the Resolution of the Moscow government on 26 January 2010 No. 60 On Approval of the Programme for additional measures to reduce tensions on the labour market in Moscow in 2010, aims to reduce the negative social and economic consequences of possible dismissals and prevent the growth of unemployment in the city. To achieve this, the Resolution provides for vocational training of workers threatened with dismissal and public works projects to provide additional employment.
PERMISSION TO WORK
4. What prior approvals do foreign nationals require to work in your country?
Procedure for obtaining approval. All foreign nationals, except for foreign nationals from Ukraine, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Moldova, Uzbekistan, Armenia and Azerbaijan, require a visa to enter the RF. To obtain a visa, the applicant must have an invitation to enter the RF, issued by the Federal Immigration Service. On the basis of such invitations the following ordinary types of visa are issued:
The actual purpose of entry by foreign nationals into the RF should correspond to the type of visas issued to them.
A business visa is issued to a foreign national coming to the RF for business purposes (negotiations, participation in conferences,
meetings to discuss commercial goals and so on). A business visa does not permit a foreign national to work in Russia under either an employment or civil law contract.
To obtain a business visa, the host company must have a business invitation letter issued by the local Administration of the Federal Immigration Service (UFMS) at the host company’s place of business. A business visa is then issued by a Russian consulate abroad. An ordinary business visa can be either a single- or a double-entry visa issued for a period of up to three months, or a multiple-entry visa valid for up to one year. For foreign nationals, however, the maximum period of stay in the RF allowed on a multiple-entry business visa is determined by the relevant state authorities at the time when the visa is issued, but is no longer than 90 days in any 180-day period.
A highly qualified employee is entitled to receive a business visa for a period of up to 30 days to participate in negotiation with a
potential employer or customer (client) to conclude an employment or civil law contract. In this case the employee must have a written proposal from the potential employer or customer (client) to come into the RF to participate in negotiations. The employee must guarantee their financial ability to live in Russia, and leave Russia when the term of their business visa expires.
To work in the RF, foreign nationals must obtain a work visa, together with a work permit (see below, Permits).
A three-month, single-entry work visa is issued to the applicant at the Russian consulate abroad and is subsequently extended by the UFMS in Russia. The applicant uses this visa to enter the RF in order to obtain a work permit. A foreign national who enters Russia on a business visa must leave Russia once in order to obtain a work visa. The foreign national does not need to leave the RF to renew the work visa with the same employer.
Multiple-entry visas are issued to foreign nationals for the same validity period as their work permit issued by the UFMS and can subsequently be extended.
Where the employer’s application to engage a foreign national as a highly qualified specialist is approved, the business visa for a
highly qualified specialist is annulled and the employee receives a work visa for a term of employment or civil law contract, though this cannot be issued for a period longer than three years since the foreign national came to Russia. A work visa can be extended for three years for each successive visa.
Cost. The state duty for obtaining a business/work visa is RUB500 (as at 1 August 2011, RUB1 was about US$0.04).
Time frame. A business visa or a work visa is issued within 20 days.
All foreign nationals require a work permit to work in the RF, and the procedure for obtaining the work permit depends on which of the following three categories the foreign national falls into:
Procedure for obtaining approval. The following procedures apply to each of the three categories of foreign nationals:
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, which must be notified to the Federal Immigration Service.
The employer must obtain a permit to engage foreign manpower, and then a personal work permit (plastic card) for each foreign national employed. Once the personal work permit is obtained, an employment contract can be concluded
with the foreign national.
When a foreign national enters the country, the employer must submit a notification of their arrival within seven
working days to the territorial division of the Federal Immigration Service. The last step is to notify the Tax Authority that a foreign national requiring a visa to enter the country has been engaged.
Cost. The following costs apply to each of the three categories of foreign nationals:
Time frame. The following time frames apply to each of the three categories of foreign nationals:
REGULATION OF THE EMPLOYMENT RELATIONSHIP
5. How is the employment relationship governed and regulated?
Written employment contract
Under Article 67 of the Labour Code, two copies of the employment contract must be drawn up in writing, each to be
signed by the parties. One copy of the employment contract is given to the employee, the other remains with the employer.
Receipt by the employee of a copy of the employment contract must be confirmed by the employee’s signature on the copy of the employment contract kept by the employer.
An employment contract not drawn up in writing is considered to be concluded if an employee is admitted to work with the knowledge, or on the order of, an employer or its representative. If an employee is actually admitted to work, the employer must draw up an employment contract with the employee in writing within a maximum of three working days from the day the employee is actually admitted to work. If this is not done the employer can be liable for violation of the labour and occupational safety legislation. Article 5.27 of the Code of the Administrative Offences provides administrative penalties, including fines of between RUB30,000 to RUB50,000 which can be imposed on companies, the suspension of operations for up to 90 days; and fines of between RUB500 to RUB5,000 which can be imposed on officials. An officer’s repeat administrative offence is punishable by professional disqualification for a period of one to three years.
The following essential information must be included in the employment contract:
However, the lack of any statutory information in the employment contract does not make it invalid. In this case the employment
contract must have the missing information added to it.
A provision can be made in an employment contract for additional terms that do not adversely affect the employee’s situation in
comparison with those established by the labour legislation and other regulatory and legal acts containing labour law rules, a collective bargaining agreement, other agreements or local normative acts.
Some of the terms mentioned above are implied by the Russian labour legislation, for example, work function, working hours and leisure hours (Articles 57, 91 and 106, Labour Code).
The employer must create conditions providing for the activities of workers’ representatives. However, it is not mandatory that employers conclude collective bargaining agreements. In practice, this depends on the trade union’s level of influence. Many organisations do not have collective bargaining agreements in place.
6. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment?
An employer can unilaterally change the terms and conditions of employment (but not the employee’s position) in a limited number of cases, provided the reasons for the change are connected with the organisational or technological conditions of labour. The employer must notify the employee two months in advance of any changes and follow the other legal formalities contained in Article 74 of the Labour Code.
An employer cannot change an employee’s position without the employee’s written consent.
7. Is there a national (or regional) minimum wage?
Russian labour law sets a legislatively guaranteed minimum monthly wage for an unskilled worker who works the full number
of set hours performing simple jobs under normal working conditions. The minimum monthly wage (RUB4,611) is established
for the entire territory of the RF and must not be less than the subsistence minimum.
There are also trilateral agreements between workers’ representatives, workers and executive authorities, which can set higher guarantees for workers in the given constituent entity (region) or sector. The agreement of 2 December 2010 “On the Minimum Wage in Moscow in 2011” between the Moscow government, the Moscow Trades Union Associations and the Moscow Employers’ Associations have set a minimum wage of RUB10,400, which increases to RUB10,900 from 1 September 2011.
RESTRICTIONS ON WORKING TIME
8. Are there restrictions on working hours?
Under Article 91 of the Labour Code, a standard working week must not exceed 40 hours. The Labour Code and other federal laws specify a reduced work schedule for a number of categories of employee.
Article 99 of the Labour Code states that 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.
Generally, an employer must have the employee’s written consent agreeing to work overtime. Overtime is prohibited for the following:
Disabled persons and women who have children aged under three can be made to work overtime only if:
In this case, disabled persons and women with children under the age of three should be notified of their right to refuse to work overtime, and that their written consent to work overtime is required.
An employee is entitled to rest breaks during a normal working day of not less than 30 minutes and not more than two hours. The time period for rest breaks is governed by the employer’s internal labour regulations.
Under Article 94 of the Labour Code, working hours (for a day shift) cannot usually exceed eight hours. Under Article 96 of the Labour Code, a night shift includes working hours from 10.00 pm to 6.00 am. A night shift is usually one hour shorter than a day shift.
9. Is there a minimum holiday entitlement?
Minimum holiday entitlement
Under Article 114 of the Labour Code, employees are entitled to 28 calendar days’ annual leave, while retaining their position and average earnings. Certain categories of employees are entitled to extended basic leave, for example, up to 31 calendar days for employees working non-standard hours. The Labour Code also envisages additional paid leave for employees:
The public holidays are as follows:
ILLNESS AND INJURY OF EMPLOYEES
10. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Can an employer recover any of the cost from the government?
Entitlement to time off
Employees have the right to time off in the case of illness or injury under Article 183 of the Labour Code.
Entitlement to paid time off
Under Article 183, the employer must pay temporary disability benefit to an employee. An employee who falls sick must provide the employer with a sick leave certificate when they return to work (recover), as this legally releases the employee from work and entitles them to temporary disability benefit. The sick leave certificate is issued by a medical institution, with the content and format approved by the state health care authorities.
Recovery of sick pay from the state From 2011 the employer pays the first three days of sick pay at its own expense. After the three-day period the Social Insurance Fund pays sick pay.
From 2011 sick pay for periods of temporary disability is based on the average salary of the employee during the past two years (instead of the one year it was previously calculated against). The amount of sick pay that can be recovered from the state varies depending on how long the employee has been employed:
When calculating the average salary amounts, there are maximum limits of RUB415,000 per year, and RUB1,136.90 per day.
STATUTORY RIGHTS OF PARENTS AND CARERS
11. What are the statutory rights of employees who are:
Female employees are entitled to maternity leave, before and after childbirth, under Article 255 of the Labour Code. They are entitled to 70 calendar days (84 days in the case of a multiple pregnancy) before the birth and 70 calendar days (86 days in the case of complications with the birth and 110 days in the case of a multiple pregnancy) following childbirth, with payment of the state social insurance benefit in the amount set by law.
From 2011 payment for maternity leave is based on the average salary of the employee during the past two years (instead of the
one year it was previously calculated against). Average daily salary is calculated by dividing the salary of the employee during the past two years by 730. However, the maximum salary payment cannot exceed RUB415,000 per year.
It is not permitted for the employer to terminate, on its own initiative, employment contracts with women with children under
three years old, or single mothers with a child up to 14 years old (or up to 18 years old for a disabled child).
The Labour Code specifically determines that the guarantees and benefits granted to women in connection with maternity
also apply to fathers bringing up children without a mother and guardians of minors.
The following benefits and guarantees are established for single fathers:
Where the surrogate mother gives her written consent to a married couple to be registered as legal parents of a child, the surrogate mother is deprived of all rights to the child. The surrogate mother is entitled to at least 70 calendar days of paid maternity leave prior to the birth of a child and at least 70 calendar days of paid maternity leave after the birth of the child.
Employees who adopt children are entitled to a leave period (beginning from the adoption date) of up to 70 calendar days from the birth of the adopted child (in the case of the adoption of two or more children, 110 calendar days from their birth). If the employee wishes, they can be granted childcare leave until the child (or children) is three years old. In the event of adoption of a child (or children) by both spouses, the leave period is granted to one of the spouses, at their discretion. Women who adopt a child have the option of taking maternity leave for a period beginning from the adoption date for up to 70 calendar days (if adopting two or more children at the same time, up to 110 calendar days) from their date of birth.
There is a general right to leave to care for a child under three years old at the request of amother/ father/ grandmother/ grandfather caring for the child.
An employer cannot terminate, on its own initiative, employment contracts with an employee who is bringing up a child under 14
years old (or 18 years old if the child is disabled) without either a mother or a father (with the exception of dismissal on certain
A carer is defined as a person who cares for a sick member of their family who is under a medical certificate. Various guarantees are provided to carers, and they cannot be forced to do the following without their written consent:
CONTINUOUS PERIODS OF EMPLOYMENT
12. Does a period of continuous employment create any benefits for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer?
Continuous employment does not itself create any benefits for employees, unless there are benefits provided by an individual
employer or by a collective bargaining agreement.
Consequences of a transfer of employee
The Labour Code does not provide for automatic transfer. However, for reorganisations of a legal entity (for example, merger, split up or spin off) labour relations with employees are not terminated.
TEMPORARY AND AGENCY WORKERS
13. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees?
Labour legislation applies to temporary and seasonal workers hired by companies. Special regulations exists in relation to specific matters, for example, the lack of a probation period where the hire period is under two months.
Labour relations do not arise for a company using temporary workers provided by an agency. Agency workers are not entitled to any benefits or incentives established within the company unless they can prove in court that an actual employment relationship arose between themselves and the company. Therefore, the provisions of the client company’s collective bargaining agreement do not apply to agency workers.
14. What data protection rights do employees have?
Generally, personnel data processing issues are regulated by the Federal Law On Personal Data No. 152-FZ of 27 July 2006.
Chapter 14 of the Labour Code provides for the protection of employee personal data. Employees’ personal data is protected
under Article 86 of the Labour Code, and an employer (and its representatives) must observe the following general requirements
when processing employee personal data:
The transfer of employee personal data to any third party generally requires:
Information on an employee’s state of health must not be requested unless it is vital in order to determine whether the employee can perform specific official duties. The employer must also warn persons obtaining employee personal data of the information’s confidentiality and the fact that it can only be used for the purposes for which it was provided. The obtaining party
must confirm that this rule is observed.
DISCRIMINATION AND HARASSMENT
15. What protection do employees have from discrimination or harassment, and on what grounds?
Protection from discrimination
Any discrimination in employment relations is prohibited under Articles 2 and 3 of the Labour Code, and Articles 19 and 37 of
the Constitution of the RF. Under these provisions, all employees enjoy equal opportunities in the exercise of their employment
rights. No restrictions can be placed on employment rights or freedoms, and no advantages can be awarded, based on:
However, it is not discriminatory if certain differences, exceptions, preferences and restrictions of employees’ rights due to requirements relevant to a specific type of work are provided for by federal law, or result from special government protection of persons in need of special protection from a social and legal standpoint.
Article 64 of the Labour Code:
Article 132 of the Labour Code prohibits any discrimination in connection with the establishment and modification of the
amount and terms of remuneration.
Persons who believe they have been discriminated against can contact bodies of the Federal Labour Inspectorate and/or go to
court seeking redress for breached rights, reimbursement of damages, and reparation for emotional harm (Article 3, Labour
Protection from harassment
There are no national laws prohibiting harassment in employment, but the general rule established by the Labour Code is that an
employee is guaranteed protection of their dignity by the employer during the period of employment.
16. Do whistleblowers have any protection?
The law does not regulate any internal investigation procedure on the basis of information provided by employees within the company. However, employees whose rights have been infringed are entitled to take evidence of all violations to:
DISMISSAL OF EMPLOYEES
17. What rights do employees have when their employment contract is terminated?
An employment contract can only be terminated in accordance with a strict list of general reasons, including (Article 77, Labour
The most commonly used are mutual agreement (which can be realised at any time) and on the employee’s/employer’s initiative.
Employment can only be terminated on the employer’s initiative for certain reasons, including:
In general, under the current legislation, dismissal is not feasible without prior notice (see below, Notice periods).
A fixed-term employment contract should be terminated upon expiry of its effective term. The employee should be warned in
writing of the termination of their employment contract due to the expiry of its effective term at least three calendar days before
their dismissal, except for the cases set in the Labour Code.
Dismissal is feasible without notice for the following reasons:
These cases can still be subject to any internal works investigation.
The rate of severance payment depends on the reasons for the termination and generally amounts to an average month’s wage.
Severance pay of two weeks’ average earnings is paid to employees in the event of cancellation of an employment contract for the following reasons:
Procedural requirements for dismissal
18. What protection do employees have against dismissal? Are there any specific categories of protected employees?
Protection against dismissal
Russian law provides rules protecting employees against dismissal, including:
Article 77 of the Labour Code stipulates an exhaustive list of the cases where an employment contract can be terminated.
In general, employment contracts cannot be cancelled on the employer’s initiative for (Article 261, Labour Code):
19. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs?
Definition of redundancy/layoff
The Labour Code does not define these terms. Redundancy/ layoff means the elimination of the position itself or a number of employees who occupy those positions from the staffing schedule.Effectively, the position is eliminated and the employees occupying that position are dismissed.
If the redundancy involves a large-scale dismissal, the employer must inform the elected body of the primary trades union
organisation in writing at least three months in advance (paragraph 1, Article 82, Labour Code). The criteria for large-scale dismissal are provided in the industry sector and/or territorial agreements. In addition, the employer must notify the local employment centre of the forthcoming redundancies.
The employer must then give two months’ notice to each employee and offer them suitable alternative employment. If there is no
such suitable alternative or the employee rejects these offers, the employment is deemed terminated.
An employee is entitled to compensation for any unused holiday and one month average salary compensation together
with payment of average salary in the second and third months after employment termination, provided they have not been reemployed (Articles 178 and 180, Labour Code).
TAXATION OF EMPLOYMENT INCOME
20. What is the basis of taxation of employment income for:
The employer must calculate and pay the following taxes:
Contributions to social funds are assessed and payable by the employer at fixed rates based on the employee’s salary, and must be calculated and paid by the employer separately in respect of each fund.
Nationals working abroad
As a general rule, the income received by a Russian tax resident from sources abroad are subject to personal income tax at a rate of 13 % (Article 228, Tax Code).
A Russian non-tax resident receiving income from sources abroad is not subject to personal income tax (Article 228, Tax Code).
21. What is the rate of taxation on employment income? Are any other taxes or social security contributions levied on employers and/or employees?
Generally, for Russian tax residents and highly qualified individuals the standard rate of personal income tax is 13% (Article
224(1)(3), Tax Code), whilst non-residents pay income tax at a rate of 30% (Article 224(3), Tax Code). Certain types of income can be subject to a 35% rate regardless of the residency status.
To qualify as a Russian tax resident an individual must spend at least 183 days in the jurisdiction in any 12 consecutive calendar months.
To be recognised as a highly qualified individual a foreign national must receive a salary of not less than RUB2 million during one
year (Article 13.2, Federal law On the Legal Status of Foreign Citizens in the RF).
Social security contributions
Social funds contributions payable by the employer (other than statutory accidental insurance fund) are levied at the cumulative
rate of 34% for income not exceeding RUB463,000. Reduced rates and exemptions are applicable to some categories of
employers and under some special tax regimes.
The income of foreign citizens who are in Russia on a temporary stay is not subject to social funds contributions.
Statutory accidental insurance rates are dependent on the industry and vary from 0.2% of salary for many office-type
professions to 8.5% for some mining industries.
EMPLOYER AND PARENT COMPANY LIABILITY
22. Are there any circumstances in which:
Generally, under Article 1068 of the Civil Code, the employer must indemnify for damage caused by its employee in performing their job (functions) under a labour/civil law contract on the employer’s instructions. For example, if the employer provides the employee with a corporate (company) car and the employee causes damage to a third party by breaking the traffic rules, the employer is administratively, criminally and civilly liable for the damage.
Parent company liability
A parent company is not liable for the actions of employees of subsidiary companies.
HEALTH AND SAFETY OBLIGATIONS
23. What are an employer’s obligations regarding the health and safety of its employees?
A substantial number of regulatory Acts and employer’s obligations in occupational safety apply to the company’s activities. Among these are the requirements to:
All employees must be familiarised with the labour protection rules.
Violation of the labour safety requirements can result in not only serious consequences for the victims, but also the imposition of
administrative or criminal liability on the guilty parties.
EMPLOYEE REPRESENTATION AND CONSULTATION
24. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?
The main form of participation by employees in the management of the organisation is in the employees’ representative body’s
opinion on the adoption of local regulatory Acts. The employer is required to take into consideration the opinion of the employees’ representative body if over 50% of the employees are members (Article 53, Labour code).
The labour legislation does not require that management decisions on any major transactions must have employee approval. Employees’ representatives are entitled to receive from the employer information about reorganisation and liquidation of the organisation and also to make proposals on the given matters to the management bodies.
The employer does not, however, have any obligation to act on proposals from employees’ representatives.
Russian law requires the employees’ representative body to consult with the employer on issues concerning the adoption of
internal local acts containing rules of labour law, for example, policy on remuneration and incentives or internal labour regulations. The opinion of the employees’ representative body must also be heard in the case of the dismissal of an employee who is a member of the representative body, or where staff reduction is contemplated, or where an employee is accused of misconduct.
The labour legislation does not require that management decisions concerning major transactions must have employee approval,
and there is no duty to consult with employees. Employees’ representatives are entitled, however, to receive information
concerning issues directly affecting the employees’ rights from the employer, including information on reorganisation and liquidation of the organisation, and the introduction of technological changes entailing changes to the employees’ working conditions. Employees’ representatives are also entitled to make proposals on these matters to the management bodies (though the employer does not have any obligation to act on these proposals).
25. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?
Where an employer fails to comply with its consultation duties, employees are entitled to ask the Labour Inspectorate, or the
court, to determine whether the employer’s actions are illegal. Under Russian law, local Acts adopted without considering the
opinion of the employees’ representative body are invalid. Where an employee is dismissed without considering the opinion of
the employees’ representative body, if that consideration was required by Russian law, the employee can be reinstated.
Failure by the employer to discharge its obligations to agree local regulatory Acts with the employees’ representative body or to
discharge other obligations established by the Labour Code or the collective bargaining agreement can lead to a collective dispute, which can result in employees taking strike action.
CONSEQUENCES OF A BUSINESS TRANSFER
26. Is there any statutory protection of employees on a business transfer?
Automatic transfer of employees
Business transfers of employees are covered by the Labour Code, which does not provide for automatic transfer. Transfer of employees is subject to their written consent. In addition, there are no requirements in relation to the employment conditions provided by the new employer. However, it is assumed that the conditions will not be worse than those provided by the former employer.
In the event of reorganisation of a company (merger, absorption, spilt up of legal entities), labour relations with employees transfer automatically to the new entity, on the same conditions, together with all the former rights and obligations. No formal termination of labour relations is required.
Protection against dismissal
Where there is a change in the owner of an organisation’s assets, staff redundancies and cuts in staff numbers are permitted only
after state registration of the title transfer.
Harmonisation of employment terms
There are no provisions relating to harmonisation of employment terms on a business transfer in the RF.
27. Do employers and/or employees make pension contributions to the government in your jurisdiction?
Contributions paid to the government
All employees are entitled to a state pension. Pension contributions are included in the social security contributions that must
be paid into the national pension fund.
The insurance contribution rates for 2011 are as follows:
The retirement age entitling an employee to a pension is 60 years for men and 55 years for women, provided pension contributions have been made for a minimum of five years. Under the current legislation, the retirement pension consists of an insurance and a cumulative component.
The cumulative part of the retirement pension is financed from the amount accumulated in the special section of the individual’s
personal account. Individuals are able to select either the Pension Fund of the Russian Federation or Non-State Pension Funds
as the insurer for the cumulative part of their pensions.
The insurance part of the retirement pension is made from the contributions paid by employers.
In addition, a state pension co-financing programme operates on the basis of the Federal Law of 30 April 2008 On Additional Insurance Contributions to the Cumulative Component of Employment Pensions and State Support for Accumulation of Pension Savings.
Under the programme, the government supports the accumulation of pension savings. Individuals who make additional contributions to the cumulative component of their employment pensions between 1 October 2008 and 1 October 2013 will be entitled to receive government support. In the current calendar year, the right to obtain government support is granted to insured persons who pay additional insurance contributions into the cumulative component of retirement pensions of at least RUB2,000 during the previous calendar year.
Government support extends for ten years from the year in which the person pays the additional insurance contribution. The
amount of that support depends on the amount of additional contributions made by individuals over the past calendar year, but
generally does not exceed RUB12,000 a year.
Employers can also participate in the programme as third parties and decide to pay employer contributions in favour of insured
persons who make additional insurance contributions into the cumulative component of retirement pensions.
Taxation of contributions
Under the Russian Tax Code, the following are not included in the personal income tax base (Article 213.1, Tax Code):
The state pensions, labour pensions and social additional payments to pensions paid to an individual under the Russian pension laws are not subject to personal income tax (Article 217, Tax Code).
The pensions paid under non-state pension agreements concluded by individual duly licensed Russian non-state pension
funds on their own behalf are also not subject to personal income tax (Article 213.1, Tax Code).
Pensions paid by a non-state pension fund in accordance with an agreement concluded with an employer, for the benefit of the employee, are subject to personal income tax at standard tax rate (Article 213.1(2), Tax Code) (see Question 21, Income tax).
Monthly amount of the government pension
The average pension is about RUB8,000 per month.
28. Is it common (or compulsory) for employers to provide access, or contribute, to supplementary pension schemes for their employees? Do these schemes provide pensions, the value of which:
Linked to the employee’s salary
The value of pensions is not directly linked to the employee’s salary. Under Russian law the contribution rate is equal for all
employees, and does not depend on salary.
Linked to employer and/or employee contributions
Employers can arrange supplementary pension schemes for their employees through either group pension insurance or supplementary pension funds. This is not, however, a common practice in Russia.
In both cases, the additional pension contributions can be made both by employers and employees. The amount and procedure for making the contributions depend on the terms of the insurance agreement or the pension fund conditions.
29. Is there a regulatory body that oversees the operation of supplementary pension schemes?
The Ministry of Public Health and Social Development and the Federal Service on Financial Markets are the federal executive
authorities for exercising control and supervision in the insurance (insurance business) sphere.
The federal executive authorities control and oversee the operation of supplementary pension schemes, enact normative legal acts, approve typical insurance regulations for pensions schemes, license the activities of Non-Pensions Funds, and consider the complaints and claims of citizens and legal entities, among other things.
Tax on pensions
30. Are any tax reliefs available on contributions to supplementary pension schemes (by the employer and employees)?
Tax relief on employer contributions
For personal income tax purposes, an employee’s income does not include:
Employer contributions paid for an insured person within RUB12,000 per annum for each employee are not subject to
social funds employer contributions. In addition, these contributions are not included in the corporate profit tax base, provided
they do not exceed 12% of the total payroll.
Tax relief on employee contributions
Additional insurance contributions paid by an individual as actual expenditures for the cumulative component of the retirement
pension are included in the social tax rebate for personal income tax purposes. The social tax rebate ceiling is RUB120,000
(clause 2, Article 219, Tax Code).
31. Is there any legal protection of employees’ pension rights on a business transfer?
Automatic transfer of pension rights
Supplementary pension rights do not transfer automatically in the event of a business transfer. A corporate restructuring by merger or acquisition does result in the transfer of supplementary pension rights together with other rights and obligations acquired by the merged legal entity.
Depending on the model of the supplementary pension programme (pension insurance or pension fund) and the terms and
conditions of the agreement between the employer and the provider, employees can receive accumulated sums in the event of
employment termination as a result of a business transfer, or participate in the programme on their own.
32. Can the following participate in a pension scheme established by a parent company in your jurisdiction:
Employees working abroad
Employees of a Russian company temporarily working abroad can participate in a pension scheme established by the company
provided they remain on the company payroll. If there are no formal employment relations between the company and the
employee, the employee cannot participate in a pension scheme established by the company.
Employees of a foreign subsidiary company
Employees of a foreign subsidiary company cannot participate in a pension scheme established by a parent company in Russia.
33. Is there any protection provided for pension scheme benefits where the sponsoring employer becomes insolvent? If so, who provides the protection, and how does this operate?
There is no additional protection provided for pension scheme benefits where the sponsoring employer becomes insolvent.
34. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded?
Under Article 135 of the Labour Code, incentive systems, including salary mark-ups, are set by the employer.
Mark-ups include payments to employees of a compensatory nature, connected with the work regime and working conditions. Mark-ups are set for employees working under unusual conditions. The amounts are determined by the effective labour legislation, collective bargaining agreements or employment contracts, with mark-ups paid for:
The employer is entitled to establish various staff incentive schemes for itself, including the payment of bonuses depending
on the results achieved by both the company and the individual employee. Any bonuses paid to employees must be for work
performed. Discrimination in setting bonus systems is prohibited.
INTELLECTUAL PROPERTY (IP)
35. If employees create IP rights in the course of their employment, who owns the rights?
Russian law (Part IV, Civil Code) regulating intellectual property (IP) has specific provisions on all IP items created by employees in the course of employment. The copyright to IP created in connection with employment in the employee’s main job passes to the employer. The employee’s personal rights remain unaffected.
RESTRAINT OF TRADE
36. Is it possible to restrict an employee’s activities during employment and after termination? If so, in what
circumstances can this be done? Must an employer continue to pay the former employee while they are subject to postemployment restrictive covenants?
Restriction of activities
An employee’s obligation not to compete cannot be enforced by a court, since that enforcement would violate the constitutional
right of every person to work. An employee also has the right to have a secondary job (that is, to work concurrently for another
employer). Employers generally cannot restrict an employee from doing this, except in the case of a general director.
Post-employment restrictive covenants
Russian law does not allow the imposition of any restrictions or bans regarding competitive activities on termination of the employment contract. The Constitution provides for the freedom of entrepreneurial activity. Therefore “non-compete” and “nonsolicitation” provisions are not enforceable in Russia.
The company can, however, oblige the employee not to disclose confidential information on termination of the employment contract. In this case the employer is entitled to claim reimbursement of damages, where the obligation is not met.
PROPOSALS FOR REFORM
37. Are there any proposals to reform employment law or pensions law in your jurisdiction?
At the present time there are two main trends in reforming of employment legislation. The business society, represented by
the members of the Russian union of industrialists and entrepreneurs, prepared significant amendments to the Labour Code with
the aim of making it more modern and business-oriented.
At the same time supporters of employees’ rights are arguing against these modernising amendments to the Labour Code,
lobbying their conservative employee-oriented ideas in employment (for example, the prohibition of outsourcing, an increase in the powers of state authorities to intervene in employment matters, the imposition of new sanctions for violation of employees’ rights, and so on). This latter trend is likely to prevail.