Engaging foreign employees in Russia

Compliance with local employment and migration laws remains an area of increasing interest to Russian regulatory authorities. Consequently, international companies operating in Russia should pay attention to the employment and migration aspects of their local business activities.

Below we highlight some features of Russian migration laws in the context of the present economic climate.

For the purposes of this article, a procedure applicable to employees from CIS countries is not covered.

General

While Russian and non-Russian personnel are to be treated equally from an employment law perspective, a company intending to use foreign personnel in Russia should brace itself for the Russian bureaucratic migration regime. In particular, Russian migration laws require both the company and the foreign employee to obtain special permits from the relevant migration authorities (representative offices and branches of foreign companies are also subject to this requirement). 

Under Russian migration laws, there are two procedures for the employment of foreign personnel:

• the standard procedure for employment of foreign personnel; and
• the simplified procedure for employment of a highly qualified specialist (an ‘HQS’).

Standard procedure

Russia’s migration policy is based on the principle that the employment of Russian citizens should be prioritised. For this reason, the number of foreign citizens who may be employed in Russia at any one time is limited by quotas. The standard procedure is rather time consuming and it can be roughly divided into the following key steps:

• Firstly, a company files an application for a determination as to the number of foreign employees it may employ, or quota, with a competent regional authority. Such application should be filed by 1 May each year for the purposes of determining the quota for the subsequent year. The quotas are finally approved by the Russian government and allocated among the regions.
• Secondly, the company informs the employment centre of job vacancies assigned for foreign employees. An application to employ a foreign employee may be rejected by the employment centre if it finds an adequately qualified Russian citizen available to perform the same job. 
• Thirdly, the company applies to the Federal Migration Service or its regional bodies for a permit to engage foreign employees (hiring permission). This document allows a company to employ a particular number of foreign employees and includes, among other things, information about particular jobs and regions where employment of foreign employees is allowed. It is valid for a period of one year and can be reissued upon the company’s application.
• Finally, a company should obtain an individual work permit for each employee. To obtain a work permit, a foreign citizen is required to undergo a medical examination and submit certain documents. An individual work permit is issued for one year.

In addition, each foreign employee must receive an employment visa which is granted for up to a period not exceeding the work permit term. The company must notify a number of state authorities of the engagement of a foreign employee. Foreign employees are required to register with Russian migration authorities within seven business days following their arrival in Russia. It should be noted that as a general rule, a foreign employee is not allowed to work outside a particular region. However, foreign employees can be sent on business trips to other regions for up to ten days per year or, if the employment agreement provides for work of an itinerant nature, up to 60 days per year.

This is only a high-level description of the standard procedure and it is worth noting that each of the key steps includes additional obstacles. In practice, the standard procedure generally takes three or four months depending on the region. State duty costs for the standard procedure amount to RUB 9,500 (approximately US$300).

Simplified procedure for an HQS

On 1 July 2010, the concept of a ‘Highly Qualified Specialist’ was introduced into Russian migration laws consistent with a trend towards simplifying the relatively document heavy and bureaucratic standard procedure.

To qualify for the HQS status, a person must be an experienced specialist with skills or achievements in a specific area (which is a more formal requirement), earning at least:

• for scientists or lecturers proposed to be employed by scientific institutions, state academies or higher education institutions and persons proposed to be employed by residents of certain types of special economic zones, RUB 1m (approximately US$32,300) per year;
• for persons proposed to be employed by residents of technology development special economic zones, RUB 700,000 (approximately US$22,600); and 
• for anyone else, RUB 2m (approximately US$64,600) per year.

The requirement as to the minimum yearly salary does not apply to people invited to work on the special Skolkovo project approved by the Russian government.

There is a simplified quota-free one-step application procedure for hiring HQSs (with some exceptions (specified below) depending on the nature of the company). Advantages enjoyed by HQSs can be summarised as follows:

• their employers are not required to obtain hiring permissions;
• invitations and work permits issued to an HQS’s family members will not count towards quotas that limit the issue of these documents;
• they enjoy an accelerated procedure for obtaining work permits (14 business days);
• the maximum term for a work permit and employment visa for them is three years (both documents may be extended when their term expires);
• their work permits allow them to work in multiple Russian regions;
• they and members of their families are required to register with Russian migration authorities only after expiration of 90 days following their arrival in Russia;
• they and their families can get a Permanent Residence Permit  (vid na zhitelstvo) without having to live in Russia for a year (a Permanent Residence Permit will instead be issued for the term of the HQS’s work permit);
• they benefit from a favourable tax rate of 13 per cent, compared to 30 per cent for other non-residents (however, it works only when an HQS earns more than RUB 2m salary per year under their current employment agreement); and
• generally, an HQS can be sent on business trips for up to 30 days per year. If the employment agreement provides for an itinerant nature of the work, the term of business trips is not limited at all.

To employ an HQS, an employer, whether a Russian company or an accredited branch of a foreign company (as opposed to representative offices of foreign companies which are not permitted to use this procedure), has to file an application with the Federal Migration Service or its regional bodies. Permission is usually granted automatically if all formal requirements are met. The list of grounds for refusal is very limited and not discretionary. State duty costs for the simplified procedure amount to RUB 2,500 (approximately US$80).

Liability

Failure to comply with the procedures for employment of foreign personnel may lead to the imposition of an administrative fine on the company in the amount of up to RUB 800,000 (approximately US$25,700). Violations include hiring foreigners without having hiring permission or an individual work permit and failing to notify competent authorities of the employment of a foreign employee.

Summary

To sum up, the Russian government is constantly taking steps to improve current Russian migration laws in recognition that this is a prerequisite for further development of the Russian economy. A good example of this is the simplified procedure for employment of an HQS which is relatively new and is an especially advantageous option for employers. However, despite this change, Russian migration laws still remain a challenge for both employers and foreign employees.

This article first appared in May 2013 issue of the IBA Immigration and Nationality Law Committee newsletter.