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Job in Russia without Fear

Job in Russia without Fear

21.05.2010 — Analysis

It is common knowledge that "Russian-style business" and "European-style business" are very different things, causing often misunderstanding between Russian entrepreneurs and their foreign partners. "RusBusinessNews" is launching a joint project, together with the international law firm "Hedman Partners Attorneys-at-Law", which is aimed to introduce foreign entrepreneurs who are interested in doing business in Russia to the most problematic issues of the Russian business legislation and its application in practice. 

The theme "To Russia with Hedman Partners" starts with the interview given by Olga Lashkul, a senior lawyer of the Hedman Partners office in Ekaterinburg, discussing nuances of the Russian migration laws, which quite recently have undergone a dramatic change.

- Olga, what is your opinion about the changes that have taken place within the last years? Have they made Russia more accessible to foreign visitors - travelling for pleasure, to see their friends, or for business, to work?

- Speaking about changes that have taken place since the Soviet Union dissolution, when the state strictly supervised migration of the citizens and arrivals from other countries, undoubtedly, the Russian migration policy has made a sizeable leap towards liberalization. Over 2002-2008, the number of international migrant workers, both foreign and domestic, increased five times in Russia, reaching the total number of 2 million people.

2007 is notable for crucial reforms. This turnabout was, by all means, justified. Similar to many Western countries, Russia witnesses substantial natural decline in the population and, as a result, in the working-age population. Most of the European countries took care of their problem long ago, having opened their borders to migrants who are the main contributors to the population growth.

According to the World Bank, the Russian economy will need more than 12 million immigrants during the next two decades to offset the natural decline in the population. Therefore, such "openness" is, among other things, a shotgun solution. 

- The world economic crisis tightened restrictions imposed by many countries in terms of immigration laws reinforcing the policy of protectionism. Did Russia act in tune with them?

- Our country is no exception in this respect. Having encountered the crisis, the government took the reverse turn aimed at tightening migration restrictions. In 2010, as compared to the previous year, the quota for eligible migrant workers was reduced more than two times. I think it is a convincing example of protectionist measures. The number of work permits for 2010 will total 1,944,356 against 3,976,747 permits issued last year in Russia.

The highest requirement in foreign labor is demonstrated in the mining, construction and erection as well as in construction and repair sectors; the demand is also high for executive positions at institutions, organizations, companies and their structural subdivisions as well as for unskilled labor. The lowest demand is for sales personnel and merchandize promoters. In the retail sector, the quota for foreign labor falls down to 0%. 

Whether these measures have beneficial or adverse effect is difficult to say. On the one hand, the government's attempts to lend support to Russian citizens during the crisis are evident. However, in practice the situation takes a twisted turn: the legal migration is transforming into the illegal form; migrant workers withdraw in the "shadows".

- As we have touched on the shady employment, can you say if it is easy for foreign employees and their employers to meet all the requirements of the applicable Russian laws and how far the process is bureaucratized?

These requirements are stringent; however, they can be met. Similar to most of the administrative procedures in Russia, this process is still heavily bureaucratized and extremely time-consuming. Obtaining work permits includes several stages and can take quite a long time. We recommend that in order to optimize time and labor resources employers should resort to professional services of the companies that are competent in these issues.

First of all, note that the procedure for work permit approval can be different, depending on the visa required by a migrant employee. If the visa is required, the employee has to go through two stages to obtain a work permit: first, the company must obtain a permit for engagement and employment of foreign employees, and only then it can apply for a work permit for a particular foreign resident. 

Residents of the countries that have visa-free entry agreements with Russia go through streamlined procedures. In this case, the procedure is of notification, rather than of administrative nature. However, both cases are subject to quotas that are established for every year. 

- Is there any leeway in the migration laws pertaining to highly skilled employees coming to Russia?

 - Just quite recently - on May 20th the President of Russia signed the approval for the amendments to the Law "Concerning the legal status of foreign citizens in the Russian Federation" that significantly simplifies the procedure for work permit required by this category.

First, to receive a residence permit, professional workers will not have to live within the Russian territory during one year. The residence permit can be issued for the period up to 5 years (both for the employee and his family), depending on the contract made with the employer. Second, the most important amendment specifies that the employers who engage highly qualified personnel will not be restricted by the established quotas and they will not have to receive a permit for employment of foreign workers. However, the employer will be responsible for compulsory health insurance of such workers.

Besides, the provision has been made for the criteria, based on which an employee can be qualified as highly skilled: the employee must be a foreign citizen who has work experience, skills or achievements in the subject field, and the annual remuneration for work must be minimum 2 million rubles.

The income of a foreign citizen will be taxed at a 13% rate, which is equal to the rate set for the citizens of the Russian Federation. In comparison with many European countries, this rate is quite low. 

- The required remuneration is quite sizeable...

At first sight, it is; however, the law stipulates that the Russian government has the right to reduce the required size of the wages for such foreign citizens, depending on the priorities of the Russian economy.

Furthermore, it should be pointed out that according to the research performed by the British bank HSBC, highly skilled specialists working in Russia receive the world's highest income - 30% of such employees receive in Russia more than 250 thousand dollars a year. 

- Can you specify if all the requirements and restrictions also apply to foreign executives?

- Quotas for employment of foreign workers do not apply to general directors of joint stock companies, associations, enterprises, etc., chairpersons of management boards and their deputies, directors of affiliates, factories, departments and some other executives, provided that these positions are included in the payroll schedule of an organization.

- What are the consequences of the non-fulfillment of the requirements set by the RF migration legislation?

Non-compliance with the requirements involves penalties and deportation from the Russian Federation. The foreign citizen will have to pay a penalty that can be as high as 5 thousand rubles per each fact of violation. Note that at the same time administrative liability applies to the host party (an entity or individual). The violation of the documentation regulations and non-fulfillment of obligations pertaining to the migration registration can cost them a penalty of 500 thousand rubles.

Every year, Russian authorities conduct operations known as "Illegal Alien" - these operations help to detect foreign citizens who stay or work illegally in our country. Two operations are scheduled for 2010. Last year, the amount of administrative penalties for violation of the migration laws exceeded 9 million US dollars. 

- What are prospects for the RF migration legislation, in your opinion?

- I think that the legislation will develop with focus on employment of specialists who have professions that are seen as priority for the country's economy. Furthermore, the country still experiences a shortage in unskilled workers. This shortage is most likely to be covered through immigrants who comprise comparatively cheap labor force. At the same time, we should not rely on complete elimination of migration controls. If the intricate economic situation remains unchanged, all the quotas are going to stay in place. Civil penalties for violations can even become tighter. At the same time, in the context of the global economic integration of Russia and improvement of investment appeal of the country, all administrative procedures must be absolutely transparent and completed within the established terms.


Hedman Partners Attorneys-at-law is an international law firm founded in 1975. The head office is located in Helsinki. The company has its own offices in Ekaterinburg, St. Petersburg and Tallinn; the Hedman Group has partner companies in Riga and Vilnius.

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