Some Practical Aspects of Hiring Foreign Citizens in Russia

Hiring foreign citizens has become a real challenge. Even companies that make every honest effort to comply with the myriad formalities will inevitably encounter some difficulty in the voluminous paperwork, convoluted endorsements and approvals processes and other red tape involved for foreigners to lawfully enter and work in Russia. The situation is aggravated by constant changes in the procedures and rules for hiring foreigners. The migration laws were changed fundamentally in 2007, with work permit procedures simplified -- but only for citizens of the so-called near abroad, meaning neighboring countries that share visa-free travel arrangements with Russia. Citizens of the near abroad can be hired in Russia on the basis of personal work permits alone -- there is no requirement for the employer to obtain a permit to employ foreign residents, as it is still required for hiring foreign citizens from other countries "far abroad." Another innovation was the new migration tracking system requiring foreigners to register at their place of sojourn, which continues to create headaches for employers. These are only a few of the multitude of changes -- and these are complemented by substantial increases in the fines for migration-related violations. An employer-legal entity violating migration rules can pay a fine of up to 800,000 rubles for violation of migration procedures in relation to just one employee.

This article addresses one of the most common problems encountered by companies that want to employ foreigners in Russia.

To hire foreign employees (this concept includes not only hiring a foreigner onto a company's payroll, but also contracting with a foreigner for services), you will need to comply with many formalities. But before you start, will need to think about how many foreign employees you want to hire, what countries they will be from, and what positions you want them to fill. Under the current migration regulations, employers who are planning to begin or continue employment relations with foreign citizens (independent of their country of origin) in the next year are required to complete and file a standard application form for a foreign hiring quota with the appropriate government office (this varies from region to region), before May 1 of the current year (except for the positions which do not fall within the quota requirements -- those approved by an order of Labor and Social Development Ministry (No.355n, July 25, 2008) for 2008. Failing to file the said application in time may lead to the denial of any application for a permit to employ foreign residents in respective year. Sometimes (depending on the market situation in the concrete region) respective government office may increase quota, but one could hardly hope for this in the beginning of the year taking into account the absence of any previous information about increasing quota. Very often the need to hire a foreign citizen arises abruptly and it is nearly impossible to fit in the terms prescribed by aforementioned quota rules ... so sometimes the employer might feel forced into various questionable practices, sometimes even breaking the law, to get the specialist on the job: the consequences from stalling the project would completely outweigh any potential penalties (usually fines) for migration-related offenses. There are certainly risks involved in these situations, not the least of which is that the foreign citizen could be administratively expelled from Russia -- but until some regulatory clarity is introduced, there seems to be no alternative to the status quo. One popular solution in these situations is for the company to get a business visa for the foreign employee, as a stopgap measure until the proper permits can be obtained. This is, of course, against the law, because the foreign citizen's purpose of stay in Russia is supposed to match the type of visa issued. Another consideration here is that under a new rule effective October 2007, even holders of multi-entry business visas are not allowed to stay in Russia for more than 90 days out of any 180-day period, so this type of visa doesn't solve the problem.

If you have been fortunate and finally gathered all the paperwork, and your foreign employee has arrived in Russia, the time has come to formalize the employment relationship under Russian law. It's one matter if you intend to sign an employment contract with the individual in Russia; it's another matter entirely if the individual already has a contract in place with the foreign company that sent him or her to work for the hosting Russian company (which often happens when personnel from "far abroad" companies are seconded to Russian subsidiaries). Let's examine each of these scenarios.

A frequently encountered issue here is the term of the foreign worker's contract. Under the Labor Code, each and every provision of labor law applicable in the Russian Federation extends to employment relationships involving foreign citizens, unless otherwise provided by international treaty of the Russian Federation. Under labor law, most employment contracts are open-ended. The law lists all the grounds on which an employment contract may be limited in term. No reference is made in any federal law to any special grounds for limiting the terms of foreigners' employment contracts in particular. However, many Russian officials are adamant that the term of any employment contract with a foreign citizen must correspond to the term of the individual's work permit (maximum one year). Although there are sound legal arguments against this position, as a practical matter it is usually recommended to limit the term of any employment contract with a foreign citizen to one year, thereby removing at least one potential point of contention with the authorities.

The situation is more complicated yet when the foreign employee already has an employment contract with a foreign company. Often, employees on the payroll of a foreign company abroad are dispatched to work on assignment at a Russian subsidiary. This "secondment" arrangement is always problematic, because the very concept itself is not regulated under Russian law. Secondment arrangements are often treated with skepticism or even ignored by the Russian authorities -- including the migration authorities who issue work permits for foreigners, and the courts.

The migration authorities have been simply refusing to accept personnel secondment contracts, and insist on seeing either an employment contract or a civil contract. Moreover, they insist that the parties to the contract be the foreign employee and the hosting Russian company -- which is in fact not the individual's employer. One scheme that employers use in this situation is to sign a nominal employment contract between the foreign employee and the Russian host company, strictly as a formality to satisfy the migration authorities. While technically this achieves compliance, in fact it creates a situation where the Russian company is forced to assume the title of employer, which it really is not.

Although no legislative solution to these problems seems forthcoming, at least we can hope to learn from experience.