Russian employment law and work permits for expatriates

As of 1 February 2002 a new Labour Code of the Russian Federation came into force. The new Labour Code replaced the previous Labour Code, which was adopted 30 years ago when the Soviet state was the only employer and concepts such as entrepreneurship and private property were largely unknown in Russia.

The new Labour Code deals with the following principal issues: the rights and obligations of employees and employers; trade unions and their regulation; the procedure for making, amending and terminating employment contracts; salary payments; the State as employer; and, the procedure for dealing with employment disputes.

Employment Contracts

Russian law distinguishes between an employment contract, which is subject to the Labour Code, and a civil law contract between an organisation and an individual for the provision of services. For the purposes of this chapter, we will be dealing with the former unless otherwise stated.

Employment agreements should be made in writing although the Labour Code provides that an employee who starts working without a written agreement is nevertheless to be treated as an employee to whom all the provisions of the Labour Code will apply.

Employment agreements may be concluded:

• for an indefinite period of time; or

• for a fixed period of time (but not exceeding five years).

The application of fixed term contracts is generally limited to work requiring fixed term employment (i.e. to replace a sick employee, for fixed term projects, etc), but the new Labour Code specifically extended the possibility of fixed term employment contracts for directors and deputy directors of legal entities, chief accountants, retired persons and employees working outside Russia.

A probation period of up to three months may be specified although this maximum limit can be extended to six months for certain executive staff including directors, managers and chief accountants. Three days prior to the expiration of the probation period both the employer and the employee have to notify each other in writing of the termination of the contract. Moreover, the employer should indicate reasons for the termination.

The new Labour Code provides a list of mandatory provisions, which should be included in the Employment Agreement and sets out a list of documents that an employer may request from an employee at the time of hiring.

Working Hours and Holidays

The statutory working week may not exceed 40 hours. Despite this, the Labour Code does envisage extra hours, being worked and the procedure for this is strictly regulated. Thus, employees are required to agree in writing to work overtime and cannot work more than 4 extra hours on any two consecutive working days and the total number of hours overtime cannot exceed 120 hours per year. Overtime pay is set at time and a half for the first two hours and double time for each subsequent hour.

The minimum statutory paid holiday entitlement is 28 calendar days although longer periods are possible by agreement. Compensation for unused holidays will only apply to those holiday days in excess of 28. Finally, note that an employee is generally only entitled to holiday after serving a minimum of six months in the firm, though a shorter period may be agreed upon by the parties. Vacations may be divided into several periods but one part per year may not be less than 14 consecutive days. The Code provides for mandatory extra vacations for employees working in certain industries and for those with no fixed working hours.

Minimum Statutory Wage and Currency Control Issues

The minimum salary must be no less than the minimum subsistence level established by the federal legislation (currently the minimum subsistence level is approximately US $80 per quarter, although legislation sets out a minimum salary level of US $20 per month). The Labour Code provides that a salary must be paid at least twice a month although it does not specify whether these payments should be of equal amounts. Salaries should be paid in Russian roubles by bank transfer to the employee’s account or in cash. Payment in foreign currency is not permitted although salary levels may be fixed in foreign currency or by reference to a foreign currency amount. Some banks offer payment schemes, which allow employees to convert rouble salary payments into dollar deposits or even, in the case of representative office employees, to receive dollar salary payments on employees’ credit cards. Salaries may be a fixed amount per month or may be linked to performance. Any changes to salary should be notified to the employee at least two months in advance of the change coming into effect and the change should be agreed in writing. Employers who pay late may face fines on the due but unpaid amount for each day the payment of wages is delayed. If wages are delayed for more than 15 days, employees may stop working until the wages are paid in full.

Termination of Employment Agreement

An employment agreement may be terminated with the mutual consent of the employer and the employee; at the initiative of one or other party; or upon the effluxion of time.

If it was entered into for an indefinite period of time, an employee may terminate his employment agreement by giving two weeks notice to the employer. Any longer period of notice required by the employer and specified in the agreement will not be capable of enforcement. Post-termination restrictive covenants are also largely unenforceable.

An employer’s ability to terminate an employee’s contract of employment is severely limited by the Labour Code. The grounds for termination include:-

• Liquidation of the employer
• Redundancy (for specific economic or technical reasons)
• Lack of qualification (this does not extend to poor performance) or poor health of the employee
• Repeated and systematic breach of duty after disciplinary action has already been taken
• Absence from work for more than four hours without a valid reason
• Intoxication (alcohol or drug): this must be medically verified
• Committing theft at the work place and the theft having been confirmed by the court or an appropriate state authority
• Unauthorised disclosure of confidential information

Employment contracts with members of the executive body of a legal entity may also be terminated in accordance with the grounds provided in those contracts.

The change of ownership of a legal entity may not result in the termination of its employees’ labour contracts. The new owner may however, terminate the employment contracts of the head of the company, his deputies and the chief accountant within three months of the change of ownership.

In each case care must be taken to comply with the strict procedural requirements of the Labour Code and due regard given to the priority rights granted to certain groups of employees. For example, the employment pregnant women and women with young children may only be terminated if the employer is to be liquidated. Working students, war veterans and employees with more than two dependants have priority to remain employed in cases of redundancy. Decisions must be carefully documented and, in certain cases, an employee should be offered alternative employment within the organisation. Compensation for dismissal will be payable in an amount equal to between two weeks and five months salary. Compensation for any untaken holiday is also to be paid.

If the provisions of the Labour Code are not followed when dismissing an employee or employees then the employee may bring legal proceedings. Among the various rulings that the court can give is that of reinstatement, a ruling which is not uncommon.

Data Protection

An employer is obliged to protect the personal data of employees which is in his possession and may disclose such data to third persons only with the prior written consent of the employee. The employer must also develop internal procedures for safeguarding employees’ personal data and notify each employee of such internal procedures.

Work permits for expatriates

Russian companies that wish to employ foreign labour in Russia must apply for a general permit to do so. General permits are issued by the regional divisions of the Federal Migration Service and are valid for one year; they may be extended on request. For each individual foreign national, a Russian company requires a "Confirmation" of the right to work which is, in effect, a personal work permit. Certain categories of employees are not covered by these requirements, including employees of foreign embassies, scientists and artists working in institutions established in accordance with international agreements, journalists accredited in Russia, ships crew and students on study internships.

As work permits are not issued centrally by the Ministry of Ethnic and Migration Policy, the exact terms and conditions thereof tend to vary from region to region. In Moscow, for example, the processing of a work permit usually takes between 2-4 months.

The procedure of obtaining a work permit in Moscow for a foreign employee can be split into three stages:

1. Initially the authorisation of the local employment authorities must be obtained. In Moscow this authority is a local branch of the Employment Board, which is responsible for issuing opinions on whether it is reasonable for a Russian employer to hire foreign nationals. It performs a formal check to confirm whether there are any Russian citizens with the same educational background and work experience as the foreign national who has been proposed for a specific position.

2. The second stage is for an employer to obtain a permit to employ foreign nationals. This permit is issued by the Federal Migration Service. The applicant must attach its constitutional documents to the application.

3. The last stage is to obtain a work permit for the employee. The work permit is issued by the Migration Department of the Ministry for the Internal Affairs of the Russian Federation.

Personal accreditation of foreign employees of representative offices

Individuals employed by the representative offices of foreign companies may apply to the registration body where the representative office is accredited for their own personal accreditation. For example, the State Registration Chamber will accredit a representative office and usually will allow that representative office to accredit up to five individuals. On application this number may be increased.

Personal accreditation confirms the official status of a representative office’s employee and allows an accredited person to obtain a visa with less difficulty than a non-accredited person. Family members of employees may also be granted personal accreditation. The validity of the personal accreditation is linked to the term of accreditation of the representative office, so the personal accreditation may be extended only after the accreditation of the representative office of a foreign company has been extended.

Visas

As well as a personal work permit or personal accreditation, a foreign employee may require a visa to enter, remain in and leave Russia.

Registrations with the Ministry of Interior

Foreign employees of Russian companies and their representative offices in Russia must register with the Department for Visas and Registrations of the Ministry of Interior ("UVIR"). Foreign nationals visiting Russia must register their passports and visa with the UVIR within 3 days of arriving in Russia. If the foreigner is staying at a hotel, the hotel will usually organise registration with UVIR, but not, then registration is still required. UVIR will place a stamp in the visa to confirm registration. A foreign national without this stamp is likely to encounter difficulty with the militia and other authorities.

For further information please contact David Griston at: [email protected]