The Challenges of Russian Payroll: Part II

The previous blog in this series highlighted the opportunities – and difficulties – organizations are likely to face when establishing operations in Russia. This entry will focus on navigating the country’s complex labor laws.

Russia boasts a modern labor code developed in line with the standards of the International Labour Organization. Still, there are several areas of the code that may be difficult for foreign organizations to understand, and failure to comply with its standards and regulations can have serious repercussions. Some violations, such as arrears in pay to workers, may even be considered a crime under the country’s criminal code. For any company considering expanding its business into the country and leveraging the Russian workforce, it is crucial to understand and abide by these rules.

Among the most important of Russia’s labor regulations are the following:

  • Employment Contracts – Written employment contracts must be issued for and signed by each employee and include statuary required clauses. Additionally, all employment contracts must be for an infinite period, aside from rare exceptions in which substitute employees, CEOs or chief accountants are granted fixed-term employment contracts.
  • Payments – All payments to employees in Russia must be made in rubles, with no exception for foreign nationals. Salaries and wages must be paid no less the once every half-month.
  • Average Earnings - Labor regulations are verbose about average earnings – an average pay calculated on the basis of a 12- or 24-month period for some state social benefits. These earnings are to be paid during periods of vacations, sick leave or business trips, with the goal of protecting employees’ pay during these instances.
  • Work time arrangements – As with much of the world, the Russian workweek lasts from Monday to Friday, with an 8-hour work day. Overtime work compensation is paid at a rate of 1.5 times for the first two hours and 2 times the rate for additional hours.
  • Vacations – All employees in Russia are entitled to an uninterrupted 28 calendar day vacation each year. The timing of the vacation is set by the employer, with certain exceptions for pregnant women and their husbands and for minors.
  • HR Documents – Companies will be required to draw up blueprints for a number of areas, such as employment order, attendance sheets, bonus orders and payroll register, which must be signed by both employer and employee. Labor disputes can be common in Russia, and without proper documents, courts are likely to rule in favor of the employee.

By understanding the intricacies of Russia’s labor codes, organizations can ensure they pay their employees fairly and protect themselves against potential disputes. But complying with these rules is only part of the process of hiring labor in Russia. There is still another major component influencing payroll in Russia: taxation. Stay tuned for the next blog post in this series which will address the most important issues regarding taxation when hiring employees in Russia.

Comments are closed.