Employment and employee benefits in Russian Federation: overview

25.02.2013

Practical Law Company

A Q&A guide to employment and employee benefits law in the Russian Federation.

The Q&A gives a high level overview of the key practical issues including: permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; pensions; intellectual property; restraint of trade agreements and proposals for reform.


Scope of employment regulation

  1. Do the main laws that regulate the employment relationship apply to:
  • Foreign nationals working in your jurisdiction?
  • Nationals of your jurisdiction working abroad?

Russian employment legislation consists of documents (legislative Acts) adopted at the federal level (that of the Russian Federation (RF)) and documents adopted at the local level (RF constituent units). The constituent units are free to determine certain aspects of the employment legislation within their terms of reference. However, overall employment legislation in Russia is quite centralised and harmonised. The Russian Labour Code, dated 30 December 2001, No. 197-FZ (as amended) (Labour Code) is the main document covering employment legislation in Russia. The constituent units of the RF usually adopt certain rules that, for example, regulate payment terms for those who work in the North or equivalent regions or that introduce additional days off. The legislation of the RF constituent units cannot run counter to the rules of the federal legislation and should be aimed exclusively at improving employees' working conditions.

Russian labour legislation applies to relations actually existing within the RF. The rules established by the labour legislation also apply to labour relations with foreign citizens and stateless persons working in Russia or for Russian employers. Generally, however, they do not apply to labour relations with Russian citizens outside the jurisdiction of Russia and within that of other states, except for:

  • Russian citizens working for Russian Diplomatic bodies in other jurisdictions.
  • Employees instructed by Russian employers to leave Russia on a business or other work-related trip abroad.
  • If labour relationships actually exist within the RF, the Russian labour legislation is applied and a choice of other law is not enforceable.

The main law regulating the rights of foreign citizens (in addition to the Labour Code) is Law on the Legal Status of Foreign Citizens in the RF, dated 25 July 2002, No. 115-FZ.

Under the Labour Code, regulation of relations with a foreign party is limited to general proposals. Yet there are restrictions on foreign persons in relation to specific occupations. In particular, foreign citizens may not:

  • Be civil servants, judges, public prosecutors, investigators, notaries public, customs officials, or patent attorneys.
  • Be members of flight crews of civil or experimental aircraft or ships.
  • Engage in commercial fishery and harvesting of other water animals and plants in Russian water bodies.

Laws applicable to nationals working abroad

Russian citizens in other states may work on the basis of:

  • An employment contract concluded with the foreign employer. In this case, the applicable law will be determined on the basis of bilateral treaties in the given sphere and, in their absence, in accordance with the legislation of the host state.
  • A Russian employment contract concluded with the Russian employer if the Russian citizen was instructed by his/her employer to leave Russia for a business or work-related trip, as well as Russian citizens working for Russian diplomatic bodies in other jurisdictions.

 
Restrictions on managers and directors

2. Are there any restrictions on who can be a manager or company director?

Age restrictions
There are no specific age restrictions established for managers and directors of Russian commercial entities. The Labour Code establishes a general restriction on entering into employment contracts until the age of 16 years (though in certain cases, it is possible to enter into employment earlier).

Nationality restrictions
No specific citizenship restrictions are established for managers or directors of Russian commercial entities (except for a general requirement for foreign citizens to obtain work authorisation documents prior to commencing work in Russia).

 
Recruitment

3. Are any grants or incentives available for employing people? Do any filings need to be made when employing people?

Grants or incentives
There are a number of programmes at the federal and regional levels aimed at promoting employment.

For example, at the federal level, Resolution of the Government of the Russian Federation dated 26 December 2011 No. 1146 provides for grants for implementing additional measures to promote employment of people with disabilities, parents bringing up disabled children, and parents of big families.

Filings
Certain types of filings (notifications) are required concerning the employment of foreign citizens in Russia.

 
Permission to work

4. What prior approvals do foreign nationals require to work in your country?

Work visa
Procedure for obtaining approval. All foreign citizens, except for citizens of Ukraine, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Moldova, Uzbekistan, Armenia and Azerbaijan, require a work visa to work in Russia (in addition to the work permit). To obtain a work visa, the applicant must have a work visa invitation issued by the Federal Immigration Service on behalf and at the request of the Russian host party.

The actual purpose of entry by foreign citizens into the RF should correspond to the type of visa issued to them. In other words, for example, it is wrong for a foreign citizen to work in Russia and, at the same time, travel under a business visa. A business visa is normally issued to a foreign citizen 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 citizen to work in Russia under either an employment or civil law contract.

A three-month, single-entry work visa is issued to the applicant at the Russian consulate abroad and is subsequently converted into a multi-entry visa by the Russian immigration authorities after a foreign citizen arrives in Russia on the basis of that visa. Such multi-entry visas are issued to foreign citizens for the same validity period as their work permit issued by the Federal Immigration Service (UFMS) (up to a maximum duration of one year) and may subsequently be extended.

For the engagement of a foreign citizen as a highly-qualified specialist (HQS), a multi-entry work visa is issued for this category from the very beginning (at the Russian consulate abroad) for a period of up to three years with subsequent extension.

In order for an HQS to enter Russia to participate in negotiations with the prospective employer and obtain a work permit and invitation for a work visa once agreement on employment terms is reached, a special business visa can be obtained, which is then annulled once the work visa is obtained. This business visa is issued for a period of up to 30 days. In this case, the employee must have a written proposal from the potential employer or customer (client) to come to the RF to participate in negotiations.

Cost. The state duty for a visa invitation is RUB500, and the fee for obtaining the visa is RUB1,000 (as at 1 August 2012, US$1 was about RUB32.2).

Time frame. A business visa or a work visa is issued within 20 days.

Work permits
All foreign citizens require a work permit to work in the RF and the employer company must have permission to employ foreign citizens (employment permit) (when applicable). The procedure for obtaining employment and work permits depends on which of the following three categories applies to the foreign citizen:

  • Highly qualified employees.
  • Foreign employees that arrive on a visa.
  • Foreign employees that do not need a visa.

Procedure for obtaining approval. The following procedures apply to each of the three categories of foreign citizen:

Highly qualified employees. This procedure is applicable to foreign employees earning over RUB2 million a year for their work in the RF. Highly qualified employees may be hired by Russian commercial and scientific organisations, professional educational and healthcare institutions, and other organisations engaged in scientific, technical and innovative activities, R&D, and testing in areas of priority for Russia, as well as branches of foreign legal entities in Russia.

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 (for example, confirmation of provision of additional health insurance, payment of minimum salary established to the HQS, and so on).

Foreign employees that arrive on a visa. Permits are issued on the basis of an established quota for issuing entry invitations to those foreign citizens to work in Russia. This quota is approved annually by the government. Manpower requests should be filed before 1 May of the year preceding that during which the foreign citizen is expected to be employed, except for non-quota positions established annually by the government (for example, for 2012 these are general directors of Russian companies, heads of branches and so on).

The employer must obtain a permit to engage foreign manpower and then a personal work permit (plastic card) for each foreign citizen employed. Once the personal work permit is obtained, an employment contract may be concluded with the foreign citizen.

When a foreign citizen enters the country, the employer must notify the territorial division of the Federal Immigration Service of his/her arrival within seven working days. The last step is to notify the Tax Authority and certain other authorities that a foreign citizen requiring a visa to enter the country has been engaged.

Foreign employees that do not need a visa. Foreign citizens arriving in Russia without a visa (citizens of Ukraine, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Moldova, Uzbekistan, Armenia and Azerbaijan) only need a work permit (except for Belarus citizens), which is issued to them for work at a specific facility. The employer needs only to notify the Federal Immigration Service that an employment contract has been concluded with such an employee, along with the Tax Authority and Federal Labour and Employment Service. The employer company does not need permission to employ this category of employee but it should also observe the quota requirement (where applicable).

Cost. The following costs apply to each of the three categories of foreign citizen:

Highly qualified employees. The state duty for obtaining a work permit is RUB2,000.

Foreign employees that arrive on a visa. The state duty for obtaining a permit to engage foreign manpower is RUB6,000 (per individual) and the charge for each individual's personal work permit is RUB2,000.

Foreign employees that do not need a visa. The state duty for issue of a work permit is RUB2,000.

Time frame. The following time frames apply to each of the three categories of foreign citizen:

Highly qualified employees. A work permit is issued within 14 working days for a term of up to three years.

Foreign employees that arrive on a visa. The total time required to issue a work permit is an average of three-and-a-half to four months.

Foreign employees that do not need a visa. A work permit is issued within ten working days.

 
Regulation of the employment relationship

5. How is the employment relationship governed and regulated?

Written employment contract

Under the Labour Code, an employment contract must always be in writing. Verbal agreements are not allowed. The employment contract should be prepared in two originals, both signed by both parties, one original each to be retained by the employer and the employee. 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.

If an employment contract is not drawn up in writing, it is still considered to valid if the employee is actually admitted to work by the employer. In this case, the employer should draw up a written employment contract within three days of the employee's admission to work. If this is not done, the employer may be held liable for violation of the labour laws. Article 5.27 of the Code of the Administrative Offences establishes administrative penalties, including:

  • Fines of between RUB30,000 to RUB50,000, which may be imposed on companies, or suspension of the company's operations for a period of up to 90 days.
  • Fines of between RUB1,000 to RUB5,000, which may be imposed on the company's officers. An officer's repeat administrative offence is punishable by professional disqualification for a period of one to three years.

The Labour Code has a minimum content requirement for any employment contract, including:

  • Names and details of the employee and the employer.
  • The employee's job function and start date.
  • The employee's place of work. If the employee is hired to work for the company's branch or representative office or other detached structural unit located in another area, the location of that unit should be indicated.
  • Job function (for example, position on the staffing schedule, occupation, trade including indication of qualifications and the specific type of work the employee is to perform).
  • Date of commencement of work or, if a fixed-term contract is concluded, the effective term and the grounds for concluding a fixed-term employment contract.
  • The terms of remuneration (including the base salary (official salary) rate of the employee, extra payments, mark-ups and incentives).
  • Working hours and leisure time.
  • Compensation for demanding work and for handling hazardous materials and/or working under hazardous conditions, if the employee is hired to perform work under such conditions, including indication of the working condition characteristics at the workplace.
  • Terms and conditions defining, where necessary, the nature of the work (mobile, travelling, en route, or other kind of work).
  • Provisions on mandatory social insurance for the employee.
  • Other terms and conditions contained in the labour legislation and other regulatory legal Acts containing labour law provisions.

Failure to include the requisite provisions in the employment contract does not mean it is invalid or that the provisions do not apply. It means that the employment contract should be supplemented with the missing provisions when it is legally considered.

Labour laws establish specific minimum employment terms that should be observed when drawing up an employment contract. These include:

  • Minimum salaries set by the government (including local government).
  • Limits on working hours and minimum weekly rest breaks.
  • Annual leave (in addition to 14 days of public holidays).
  • Mandatory guarantees established for individuals working in Northern and equivalent regions.

In addition to the mandatory provisions, it is also allowed to include other provisions provided that they are not detrimental to the employee's conditions of service in comparison with the minimum guarantees established by the Labour Code, other applicable laws and regulations.

Implied terms
Some of the terms mentioned above are implied by the Russian labour legislation, such as working hours, minimum vacation, non-working days, and so on.

Collective agreements
The employer must create conditions providing for the activities of workers' representatives. However, it is not mandatory for employers to 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?

The employer can unilaterally change the agreed terms and conditions of employment (apart from the employee's job function) in a very limited number of cases, provided that the reasons for the change are connected with organisational or technological working conditions. The employer should notify the employee two months in advance of any changes and follow the legal formalities established by the Labour Code.


Minimum wage

7. Is there a national (or regional) minimum wage?

Russian labour law sets a legislatively guaranteed minimum monthly wage for an unskilled worker working the full number of set hours and performing simple jobs under normal working conditions. The minimum monthly wage (RUB4,611 starting from 1 June 2011) is established for the entire territory of the RF and must not be less than the subsistence minimum (Federal law of the RF, dated 1 June 2011, No. 106-FZ).

There are also regional trilateral agreements between workers' representatives, workers and executive authorities, which can set higher guarantees for workers in the given constituent entity (region) or sector. There is an agreement dated 30 November 2011 "On the Minimum Wage in Moscow for 2012" between the Moscow government, the Moscow Trades Union Associations and the Moscow Employers' Associations, which sets a minimum salary for full-time employees in Moscow of RUB11,700 (starting from 1 July 2012).

Restrictions on working time

8. Are there restrictions on working hours?

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 number of hours for certain categories of employee (for example, employees under 18 years of age, certain categories of disabled person, and so on).

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.

As a general rule, an employer must have the employee's written consent to work overtime. The following categories of employee cannot be engaged in overtime work:

  • Pregnant women.
  • Employees under the age of 18.
  • Other categories of employee set by the Labour Code and other federal laws.

Disabled persons and women who have children aged under three years' old may be instructed to work overtime only if:

  • They agree in writing to do so.
  • There are no medical restrictions (owing to their state of health) on them doing overtime.
  • In addition, employees in these categories should be notified of their right to refuse to work overtime.

Rest breaks
An employee is entitled to rest breaks during a normal working day of not less than 30 minutes and not more than two hours, as well as weekly rest breaks (weekends). The time period for rest breaks is governed by the employer's internal labour regulations.

Shift workers
Shift work (work on two, three or four shifts) is introduced when the duration of the production process exceeds the permitted duration of daily work, as well as with the purpose of making more effective use of, and increasing the output of, products and services rendered. Each group of employees working on shifts should perform the work within the established working hours in accordance with the shift schedule.

Employees should be familiarised with the shift schedule at least one month before it comes into effect. Working two shifts in a row is not allowed.

 
Holiday entitlement

9. Is there a minimum holiday entitlement?

Minimum holiday entitlement
Under Article 114 of the Labour Code, employees are entitled to a minimum of 28 calendar days' annual leave, retaining their position and average salary. Certain categories of employee are entitled to extended annual leave, for example, up to 31 calendar days for employees working irregular hours. The Labour Code also envisages additional paid leave for employees:

  • Working under harmful and/or hazardous working conditions.
  • Doing a job of a special nature.
  • Working in the North or equivalent regions.

Public holidays
The public holidays in Russia are as follows:

1 to 6 and 8 of January (New Year Holidays).

7 January (Christmas).

23 February (Defender of the Fatherland Day).

8 March (International Women's Day).

1 May (Spring and Labour Day).

9 May (Victory Day).

12 June (Russia Day).

4 November (National Unity Day).

 
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 for the whole period of illness confirmed by the relevant medical documents (for example, sick-leave certificate).

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 doctor's note when they return to work (recover), as this legally releases the employee from work and entitles them to temporary disability benefit. The doctor's note is issued by a medical institution, the content and format being approved by the state healthcare 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 funds the employee's sickness.

From 2011, sick pay for periods of temporary disability is based on the average salary of the employee over the previous two years (instead of one year, as was previously the case). The amount of sick pay that can be recovered from the state varies depending on how long the employee has been employed:

  • Where employed for eight years, 100% of the average salary is paid.
  • Where employed for between five to eight years, 80% of the average salary is paid.
  • Where employed for less than five years, 60% of the average salary is paid.
  • When calculating the average salary amounts, there is a maximum limit of RUB512,000 per year.

 
Statutory rights of parents and carers

11. What are the statutory rights of employees who are:

  • Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?
  • Carers (including those of disabled children and adult dependants)?

Maternity rights
Female employees are entitled to maternity leave before and after childbirth. 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 state social insurance benefit in the amount set by law.

Pregnant women cannot be dismissed on the employer's initiative (including cases of pregnant female misconduct, and failure to perform or duly perform employment duties), except in the case of the employer's liquidation. Additionally, pregnant women cannot be:

  • Sent by an employer on business trips.
  • Instructed to work:
  • overtime;
  • during nights;
  • weekends;
  • public holidays.

Women with children under three years of age, single mothers with children under 14 years of age (or disabled children under 18 years of age) and single fathers cannot be dismissed on the employer's initiative, except in the case of:

  • The employer's liquidation.
  • Repeat non-fulfilment or improper fulfilment by the employee of his/her employment duties.
  • A single gross violation of the employee's job functions (absence from the workplace for more than four hours in a row, appearing at work under the influence of alcohol, and so on).
  • Disclosure of protected (confidential) information and similar actions.

Paternity rights
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:

  • Childcare leave is granted until the child reaches the age of three. During this leave, the father can apply to work a shorter working week.
  • An adoptive father can take 70 calendar days' leave at the time of the adoption following the birth of the child (or 110 calendar days if two or more children are adopted), as well as leave to care for an adopted child (if desired) until the child is three years old.
  • Single fathers with children under five years of age can only be employed to do night work, overtime, work on days off and public holidays and be sent on business trips with their written consent.
  • There are restrictions on employers dismissing single fathers with a child under three years of age on their own initiative.
  • The right to four additional paid holiday days per month to care for disabled children.

Surrogacy
Where the surrogate mother gives her written consent to a married couple to be registered as legal parents of the 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 the child and at least 70 calendar days of paid maternity leave after the birth of the child.

Adoption rights
Employees who adopt children are entitled to leave (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 is granted to one of the spouses, at their discretion. Women who adopt a child have the option of taking maternity leave for the 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.

Parental rights
There is a general right to leave for the purpose of caring for a child under three years of age at the request of the mother/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 specific grounds).

Carers' rights
A carer is defined as a person who cares for a sick member of their family (which is confirmed by a medical certificate). Various guarantees are provided to carers, and they cannot be forced to do the following without their written consent:

  • Take a business trip.
  • Work overtime.
  • Work nightshifts.
  • Work during a holiday period.

 
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?

Benefits created
Continuous employment does not itself create any benefits for employees, unless there are benefits provided by the individual employer or by a collective bargaining agreement.

Consequences of a transfer of employee
The Labour Code does not provide for automatic transfer. Even so, where there is a reorganisation of a legal entity (such as merger, split up or spin off), labour relations with employees are not terminated.

The Labour Code envisages a transfer of the employee from one employer to another (given a relevant agreement between the employers). In this case, an employee to be transferred cannot be refused employment by the new employer (within a certain period) and the new employer cannot establish a probation period for that employee.

 
Temporary and agency workers

13. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees?

Temporary workers
The labour legislation applies to temporary and seasonal workers hired by companies. Special regulations exist in relation to specific matters, such as the lack of a probation period where the hire period is less than two months. A fixed-term contract can be executed in a very limited number of cases, for example, to perform the functions of the absent employee, with company directors, auxiliary employees, and so on.

Employees working under a fixed-term employment contract enjoy the same privileges as those working under a contract with an unlimited term. Fixed-term contracts are terminated on the same grounds as those with employees working under a contract with an unlimited term (except for the expiry of the fixed term contract).

Agency workers
Labour relations do not arise for a company using agency workers on the basis of a civil law contract. Such 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. The provisions of the company's collective bargaining agreement do not, therefore, apply to civil law contract workers.

 
Data protection

14. What data protection rights do employees have?

Generally, personal data processing issues are regulated by Federal Law On Personal Data No. 152-FZ, dated 27 July 2006.

Chapter 14 of the Labour Code provides for the protection of employee personal data. The employer (and its representatives) must observe the following general requirements when processing employee personal data:

Employee personal data can be processed exclusively to:

  • ensure observation of the law and other regulatory and legal Acts;
  • assist employees in obtaining employment, training and promotion;
  • ensure employee personal security;
  • control the quantity and quality of work performed;
  • ensure the safety of property.

When determining the volume and contents of the processed employee personal data, the employer must be guided by the Constitution of the RF, the Labour Code and other federal laws.

All employee personal data should be obtained directly from the employee. If the employee personal data can only be obtained from a third party, the employee must be notified of this in advance, and their relevant written consent must be obtained. The employer must inform the employee of the goals, expected sources of and methods for obtaining personal data, as well as of the nature of the expected personal data and the consequences of the employee's refusal to give written consent to obtain the personal data.

The employer cannot obtain and process employee personal data concerning their political, religious and other convictions and private life. In cases directly associated with employment issues, the employer may obtain and process information on the private life of employees only with their personal consent.

The employer cannot obtain and process employee personal data regarding their membership of public associations or their trade union activities, except in cases specified by law.

The employer must ensure protection of employee personal data against illegal use or loss.

Employees and their representatives must sign that they have read and understood the employer's documents setting out the procedure for processing employee personal data, as well as their rights and duties in this sphere.

The transfer of employee personal data to any third party generally requires:

  • The employee's prior written consent.
  • Regulations on the processing of personal data approved by the employer and signed by the employee.
  • The personal data to be transferred only within a single organisation by employees authorised to process personal data in view of their official duties.

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 employment 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 on the basis of:

Gender.

Race.

Colour.

Nationality.

Language.

Ethnic origin.

Property status.

Social and occupational position.

Age.

Place of residence.

Religion.

Political affiliation.

Membership or non-membership of public associations.

Any other circumstances not related to the professional characteristics of the employee.

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:

  • Contains guarantees with respect to conclusion of an employment contract.
  • Prohibits unjustified refusal to execute an employment contract.
  • Prohibits any discrimination when an employment contract is finally concluded.

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 subject to discrimination 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 Code).

Protection from harassment
There are no national laws prohibiting harassment in employment but the general rule established by the Labour Code is that employees are guaranteed protection of their dignity by the employer during the period of employment.

Whistleblowers

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. Even so, employees whose rights have been infringed are entitled to take evidence of all violations to:

  • Court.
  • The Labour Inspectorate.
  • The Prosecutor's Office.

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:

  • Mutual agreement.
  • On the employee's/employer's initiative.
  • Expiry of the contract.
  • Other specific grounds.

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:

  • The employer's liquidation.
  • Redundancy.
  • Numerous failures by the employee to fulfil official duties without good reason, provided a reprimand has been issued.
  • Gross misconduct.
  • Unauthorised disclosure of confidential information.
  • Other rarely used grounds.
  • In general, under the current legislation, dismissal is not feasible without prior notice being served on the employee.
  • The employee can terminate the employment on his/her own initiative by providing the employer with two weeks' prior written notice (for directors, one month's notice). The indicated notice periods cannot be extended in the individual employment contracts.

Notice periods
Dismissal is feasible without notice for the following reasons:

  • Repeat failure by the employee to perform official duties without valid reason, provided disciplinary measures have been taken against the employee.

A single case of gross violation of official duties by the employee, including:

  • absence from work;
  • appearance at work under the influence of alcohol, drugs or other intoxicants;
  • disclosure of a secret protected by law that became known in the course of official duties;
  • theft (including petty), waste or intentional destruction of or damage to someone else's property at the workplace, as established by an administrative body/court;
  • disregard for the labour protection rules, provided the violation has grave consequences or is known to have had such consequences.

These cases can still be subject to any internal works investigation.

For other cases, the Labour Code provides for various notice periods, for example:

  • Two weeks' notice in the case of employee resignation.
  • Two months' notice in the event of redundancy or liquidation of the company.
  • Three days' notice in the case of expiry of the contract.

Severance payments
The severance payment rate 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:

  • Failure to conform to the standards of the job held or work fulfilled as a result of the employee's health precluding them from continuing to perform specific job duties.
  • The employee is called up for military service or assigned to alternative civilian service in place of military service.
  • Reinstatement at work of the employee that previously held the employee's position.
  • The employee's refusal to relocate when the employer moves to another locality.
  • Severance pay of one month's average earnings is paid to employees in the event of termination due to redundancy or liquidation.
  • In the event of termination due to mutual agreement, the amount of severance is usually established in the termination agreement.

Procedural requirements for dismissal
Termination of employment is made formal by an order (instruction) of an employer.

In all cases, the date of termination is the last day of the employee's employment, except for cases when the employee has not actually been working but their job (position) was retained by them in compliance with the current Labour Code or another federal law.

On the day of termination, the employer must hand over the employee's work record book. Salary, together with compensation for unused vacation (and other remunerations, if any) must also be paid out on the last working day. An entry must be made in the work record book concerning the grounds and reasons for the termination, strictly in compliance with the wording set out in the Labour Code or other federal law, and with reference to its relevant Article, part of Article, or clause.

 
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:

  • As a general rule, the employee cannot be dismissed by the employer if the employee suffers from a temporary disability or while the employee is on vacation.
  • The legislation prohibits dismissal of protected employees (see below, Protected employees).
  • Article 77 of the Labour Code stipulates an exhaustive list of cases when an employment contract can be terminated.
  • Employees have the right to challenge the dismissal in court or file a complaint to the State Prosecutor's Office or Labour Inspectorate.

Protected employees

In general, employment contracts cannot be cancelled on the employer's initiative for:

  • Pregnant women (except for cases where the company has gone into liquidation).

Women with children under three years of age, single mothers who have children under 14 years of age (or disabled children under 18 years old) and single fathers cannot be dismissed on the employer's initiative, except in the case of:

  • the employer’s liquidation;
  • repeat failure by the employee to fulfil or duly fulfil of his/her employment duties;
  • a single gross violation of the employee's job functions (absence from the workplace for more than four hours in a row, appearing at work under the influence of alcohol, and so on);
  • disclosure of protected (confidential) information, or a similar action.
  • Other persons who bring up children without a mother.

 
Redundancy/layoff

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 elimination of the position itself or a number of employees who occupy those positions from the company's staffing schedule. Effectively, the position is eliminated and the employees occupying that position are dismissed.

Procedural requirements
If the redundancy involves dismissals on a large scale, the employer must inform the elected body of the primary trade union organisation in writing at least three months in advance (two-months' notification in the event of non-mass lay offs). 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 within the same periods.

The employer must then give two months' notice to each employee (three months' notice if the employee works in the North) and offer them suitable alternative employment. If there is no such suitable alternative or the employee rejects these offers, the employment is deemed terminated.

Redundancy/layoff pay
An employee is entitled to a salary due to them as of the termination date, compensation for any unused holiday and one month average salary as a severance pay. An employee is also entitled to average salary in the second and third months (in exceptional circumstances) after employment termination, provided they have not been re-employed. However, the one-month severance payment made on the termination is offset against these amounts.

 
Employee representation and consultation

20. 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)?

Management representation
The main form of participation by employees in the management of the organisation is through the employees' representative body's opinion on 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 management decisions on any major transactions to have employee approval. Employees' representatives are entitled to receive information from the employer 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.

Consultation
Russian law requires the employer to consult with the employees' representative body on issues concerning the adoption of internal local Acts containing labour law rules, for example, policy on remuneration and incentives or internal labour regulations. The opinion of the employees' representative body must also be heard in the event of a dismissal of employees who are the members of the representative body when staff reduction is contemplated.

Major transactions
The labour legislation does not state that management decisions concerning major transactions require employee approval and there is no duty to consult with employees. Employees' representatives are, however, entitled to receive information from the employer concerning issues directly affecting the employees' rights, including information on reorganisation and liquidation of the organisation and 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).

 
21. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?

Remedies
Where an employer fails to fulfil 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. If an employee is dismissed without considering the opinion of the employees' representative body, provided that consideration was required by Russian law, the employee will most likely be reinstated.

Employee action
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 be cause for a collective dispute, which could result in employees taking strike action.

 
Consequences of a business transfer

22. 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.

 
Employer and parent company liability

23. Are there any circumstances in which:

  • An employer can be liable for the acts of its employees?
  • A parent company can be liable for the acts of a subsidiary company's employees?

Employer liability
Generally, under Article 1068 of the Civil Code, the employer must compensate for damage caused by its employees to third parties in performing their job (functions) under a labour/civil law contract. For example, if the employer provides an 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.

The employer is also liable for any damage it causes to its employees.

Parent company liability
A parent company is not liable for the actions of employees of subsidiary companies.

 
Health and safety obligations

24. What are an employer's obligations regarding the health and safety of its employees?

A substantial number of occupational safety regulatory Acts and employer obligations apply to the company's activities. Among these are requirements to:

  • Provide safe working conditions at each workplace.
  • Not to allow people to work unless they have undergone due training, instruction and medical examinations.
  • Take steps to prevent accidents, protect the life and health of employees.
  • Provide first aid to accident victims.
  • All employees must be familiar with the labour protection rules.
  • Violation of the labour safety requirements can result not only in serious consequences for the victims of an accident, but the guilty officers or employees can also be held administratively or criminally liable.

Taxation of employment income

25. What is the basis of taxation of employment income for:

  • Foreign nationals working in your jurisdiction?
  • Nationals of your jurisdiction working abroad?

Foreign nationals
Income derived by non-residents from Russian sources is subject to personal income tax (PIT) at a rate of 30%. An individual is treated as non-resident if they have spent fewer than 183 days in Russia during 12 consecutive months. As soon as the individual obtains tax resident status, their income is subject to PIT at a rate of 13%.

Labour income derived by highly-qualified foreign specialists (HQS) is subject to reduced PIT at a rate of 13% irrespective of their tax resident status. This reduced tax rate is not applicable to other income derived by the HQS from Russian sources unless they have obtained tax resident status.

Generally, PIT on salary should be withheld by the employer from the employee's salary. In this case, the employee has no further obligation to file tax returns. PIT on other income from Russian sources should, however, be paid by the individual personally and they are responsible for duly filing the tax returns.

Nationals working abroad
As a general rule, the income received by a Russian tax resident from sources abroad is subject to PIT at a rate of 13% (Article 228, Tax Code).

A Russian non-resident for tax purposes receiving income from sources abroad is not subject to PIT (Article 228, Tax Code).

 
26. What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?

Rate of taxation on employment income
Income derived by non-residents from Russian sources is subject to 30% PIT. An individual is treated as non-resident if they have spent fewer than 183 days in Russia during 12 consecutive months. As soon as the individual obtains tax resident status, their income is subject to 13% PIT.

Labour income derived by highly-qualified foreign specialists (HQS) is subject to reduced PIT at a rate of 13% irrespective of their tax resident status. This reduced tax rate is not applicable to other income derived by the HQS from Russian sources unless they have obtained tax resident status.

Generally, PIT on salary should be withheld by the employer from the employee's salary. In this case, the employee has no further obligation to file tax returns. PIT on other income from Russian sources should, however, be paid by the individual personally and they are responsible for duly filing the tax returns.

Social security contributions
Labour income derived by a foreign individual who is present in Russia on a temporary basis is not subject to social contributions, other than payments to the Russian pension fund. Labour income derived by an HQS or a foreign "ordinary" employee who works in Russia under an employment contract concluded for less than six months is not subject to any social contributions (including contributions to the Russian pension fund).

Salary and related remuneration of a foreign employee that are subject to social contributions to the Russian pension fund should be taxed at a rate of 22% on an amount of up to US$17,000 and 10% on the excess (as at 1 August 2012, US$1 was about EUR0.8). In contrast to PIT, social contributions should be paid by the employer without withholding the relevant amounts from the employee's salary and related remuneration (that is, over and above the salary and related remuneration).

In addition to the social contributions outlined above, the employer should pay mandatory accident insurance payments for its foreign employees (applicable for all foreign employees, including HQS). The rate of accident insurance payments depends on the type of the employer's activity (for example, the insurance rate is established at 0.2% for office work).

Pensions

State pensions

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 to the national pension fund.

The insurance contribution rates for 2012 are as follows:

  • 26% into the Pension Fund.
  • 2.9% into the Social Insurance Fund.
  • 5.1% into the federal and territorial obligatory Medical Insurance Funds.

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 up of 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 government support.

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):

  • Pension contributions paid by an employer under non-state pension agreements concluded with a duly licensed Russian non-state pension fund.
  • Insurance contributions for compulsory pension insurance paid by the employer in accordance with Russian Federation legislation.
  • The cumulative component of the retirement pension.

State pensions, work pensions and additional social payments to pensions paid to an individual under the Russian pension laws are not subject to personal income tax (Article 217, Tax Code).

Pensions paid under non-state pension agreements concluded by individuals to 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 the standard tax rate (Article 213.1(2), Tax Code) (see Question 26, Rate of taxation on employment income).

Monthly amount of the government pension
The average pension is about RUB8,000 per month.

Supplementary pensions

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:

  • Is linked to the employee's salary?
  • Is linked to employer and/or employee contributions and investment return on those contributions?

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 by both 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?

Regulatory body
The Ministry of Public Health and Social Development and the Federal Service for the Financial Markets are the federal executive authorities exercising control and supervision in the insurance (insurance business) sphere.

Regulatory framework
The federal executive authorities control and oversee the operation of supplementary pension schemes, enact regulatory and legal Acts, approve typical insurance regulations for pension schemes, license the activities of Non-Pension Funds, and consider complaints and claims by individuals 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:

  • Co-financing contributions to pension savings plans made as part of the government support programme (clause 38, Article 217, Tax Code).
  • Employer contributions of no more than RUB12,000 annually per employee in whose favour these contributions are made (clause 39, Article 217, Tax Code).
  • Employer contributions paid for an insured person within RUB12,000 per annum for each employee are not subject to social fund 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 who are working abroad?
  • Employees of a foreign subsidiary company?

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.

 
Bonuses
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:

  • Heavy, harmful and hazardous working conditions.
  • Work in areas with special climatic conditions.
  • Night work.
  • Work on days off and public holidays.
  • Work performed that requires different qualifications.
  • Combining occupations.

The employer is entitled to establish various staff incentive schemes for itself, including the payment of bonuses dependant 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 post-employment restrictive covenants?

Restriction of activities
The employer can include these provisions in the employment contract but they will have only a declarative function. Russian laws do not establish any limitations for employees on performing activities that compete with an employer's activities. Non-compete provisions are not enforceable under Russian law as the Constitution of the Russian Federation establishes the right of free disposal of one's capacity to work, and the Civil Code also establishes freedom of contract (for example, for companies offering employment). An employee's obligation not to compete may not be enforced by a court. An employee also has the right to have a secondary job (that is, to work concurrently for another employer). Employers generally may not restrict an employee from doing this, except in the case of a CEO.

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 freedom of entrepreneurial activity. "Non-compete" and "non-solicitation" provisions are therefore 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 for damage if 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 employment legislation. The business community, 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-orientated.

At the same time, supporters of employees' rights are arguing against these modernising amendments to the Labour Code, lobbying for their conservative employee-orientated ideas in employment (for example, prohibition of outsourcing, an increase in the powers of state authorities to intervene in employment matters, imposition of new sanctions for violation of employee rights, and so on). This latter trend is likely to prevail.

 

Contact details

For all issues related to publications, news and press releases, please contact:

Ksenia Soboleva

Head of PR and Communications

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