Russia, a country spanning Eastern Europe and Northern Asia, is the largest globally, marking its area covering 17 million square kilometers.
With two of its cities being the largest and second-largest cities in the world – Moscow (capital of Russia) and St. Petersburg, both are known to be economic hubs and the country’s cultural capitals.
Being a growing economy of $4.328 trillion GDP, Russia is ranked sixth-largest in terms of PPP and ninth-largest with a population of 146.2 million individuals residing in the country. The country ranks 3rd for its expenditure on education among the Organisation for Economic Co-operation and Development (OECD) member and partner countries.
Russians are known to be skilled, especially in the sectors that include Education, Medicine, IT, Retail, and tourism, contributing to the rising Russian GDP. Besides being capable, it is an excellent indicator that about 50.3% of the Russian population has tertiary education.
What makes it ideal for employers to expand their global team to Russia is the cost of living and lower wages which averages about USD 172 to USD 277. When deciding the pay scale for your Russian employees, an aspect to consider is that the cost of living in Russia is 61% lower than in Singapore and 77% lower than in the United States.
The huge availability of English-speaking talent in these cities like Moscow, St. Petersburg, Novosibirsk, Nizhny Novgorod, and Kazan are also known to have great colleges like Lomonosov Moscow State University, Saint Petersburg State Polytechnic University, and Moscow Institute of Physics and Technology; hiring graduates from these universities is a plus. These cities also have high economic activity with business and tech hubs.
Although it is relatively easy to grow your business in Russia considering a skilled and educated population pool, employers must be aware of Russia’s local tax compliances, benefits, and payroll aspects.
Here is where a Russian PEO or an Employer of Record can help. Multiplier’s Russian PEO solution acts as your co-employer for your Russian employees. We assume responsibility for all your HR operations in Russia – onboarding, payroll, compliance management, employment contracts – while you focus on business matters in the country.
Why Use a Russian PEO?
While employing is an essential aspect of growing your business, a few industries call for stringent work regulations for specific categories of employees. An example of such an industry and class of employees would be laborers working for a manufacturing plant.
Russia’s labor codes and employment laws effectively protect employees/workers’ rights while preserving employers’ rights and legitimate interests of business expansion. Therefore, the employment law applies to all companies – national or foreign, and all the employees regardless of their citizenship.
Though understanding the labor laws are relatively straightforward, compliance is an area that requires assistance when looking for international talent.
In case you are starting your business or are looking to hire talent to expand your business, there is a need to understand all the details of taxes, employment contracts, compliance, and matters related to the labor code.
Russian PEO Costs
Usually, PEOs charge based on two pricing models – fixed and variable. A PEO based on the fixed pricing model charges a transparent fee ranging between $200 – $1000 per employee per month.
Multiplier is one such PEO solution. Our costs to onboard employees via or Russian PEO start from $200 per employee per month. The final price depends on the complexity of employment laws of the employee’s jurisdiction.
Our prices ensure that you get the most out of your employee spending. Every employee hired through our PEO also receives HR support, benefits management, and a live dashboard to track workforce spending in real-time.
How to Hire in Russia
Technology is a boom in today’s generation, especially post-covid-19 – more doors have opened to global employment opportunities for employees and employers.
While entering Russia to expand your business, one of the gray areas would be aspects like the hiring process and where to hire from, the local labor law requirements, payroll, taxation, and compliance.
Partnering with a Russian PEO like Multiplier can help navigate the unfamiliar areas that require professional assistance. Multiplier is APAC’s #1 PEO and EOR, assisting global brands in gaining a competitive edge in the region. Book a demo to understand how Multiplier efficiently handles your global HR operations while you focus on the growth aspect of your business.
However, if you are looking at a DIY method, below are a few tips and details you may want to keep in mind while expanding your business in Russia and complying with local laws.
Russian Employment Contracts
The Russian employment contract is a written agreement between an employer and an employee. It should be individually concluded in written format with every employee as per law as stated by Article 67 of the Russian Labor Code.
Article 72 states that all work contracts amends need to be conducted in writing.
The employment contract will specify compensation, benefits, work schedule, leave policies, probation period, termination guidelines, overtime pay, etc.
The contracts are usually made for an indefinite period unless specified.
Employee’s labor books are mandatory as per the Russian Legislation, which has compulsory requirements to be updated from time to time by the employer. The labor books include essential details like the total number of working years that play a vital role in the state’s pension after retirement.
This is one of the significant reasons why a Russian PEO or an Employer of Record can help. Our Russian PEO solution acts as your co-employer for your Russian employees and assumes responsibility for all your HR operations in Russia. Multiplier creates and sends the employment contract and related documents to your employee in Russia to review and sign after you onboard them to your team.
The work schedule in Russia is set at eight hours per day, across five days a week – 40 hours per week.
Employers must have at least 30 minutes of rest break each day as per law, which is usually extended to an hour by many companies to maintain uniformity.
If you require your employee to do overtime at any stage due to work tasks , there are overtime charges, which depend on every hour . For the first two hours, the hourly salary to be paid is 150%, and for the next two hours, 200%.
- First Two Hours: 150%
- Next Two Hours: 200%
Russian law does not permit exceeding 4 hours of overtime in two consecutive days. The annual overtime permit is 120 hours.
Since the employees get 14 holidays and weekends during a year, if you require them to work on public holidays and weekends, it is mandatory to pay them 200% of their daily pay rate.
The minimum monthly wage, when employed in Russia, is RUB 12,792 as of the year 2021. One key factor to keep in mind is that the minimum wage differs based on different areas, cities, or regions.
Keeping the minimum wages aside, the employers can also pay bonuses or a higher pay scale depending on the level of experience, qualifications, and if the employee meets the criteria at the time of hiring. However, there are no strict guidelines on how much each employee is to be paid for the employers’ requirements while hiring the right talent.
Major prevalent job titles in Russia include customer service representatives, software engineers, software developers, data scientists, project managers, sales representatives, and UX designers.
At the same time, several new job titles have come up due to the attraction of remote work across the world.
Employment benefits in Russia
Employment benefits are key if, as an employer, you are looking to retain your employees with your organization for an extended period.
These may include benefits such as leaves, vacation policies, maternity leaves, sick leaves, healthcare insurance, and any additional benefits you may want to provide to appreciate the time and hard work.
With a platform that enables you to provide all the leave and insurance benefits, keep track of your employees’ leaves, generate contracts, and undertake the Russian PEO while you expand your presence in the country – Multiplier ensures your PEO and EOR requirements are in check.
Leaves and Vacation
Any employee onboard from Russia can avail of 28 calendar days as a part of their annual paid leave. If the leaves are unused during a particular year, the pending leaves can be rolled over to the subsequent years without any limitations.
Monetary compensation is to be provided to the employee if there are any unused leaves at the time of termination.
The vacation leaves should be made available after six months of service.
Additional Paid leaves would be granted if:
- Nature of work is harmful to health
- Working conditions are hazardous
- Irregular working hours
- Work is based out of Northern regions of Russia (climates are colder and harsher)
As every country has its public holidays, Russia follows a set of public holidays that you may want to consider (the public holidays is as of 2021) –
- New Year – January 1 till January 6
- Christmas in Russia – January 7
- Orthodox Christmas Day – January 7
- Russian New Year – January 8,
- Defender of the Fatherland Day – February 24
- International Women’s Day – March 8
- Labor Day – May 3
- Victory Day – May 21
- Russia Day – June 12
- Unity Day – November 4
However, there are 14 public holidays and the weekends that the employers give.
Maternity Leave and Childcare Leave
Maternity leave: Being a country that has one of the largest skilled workforces, Russia offers paid leaves for both male and female employees for the weeks preceding and moving forward after pregnancy.
Two kinds of maternity/paternity leaves offered in Russia are:
Pregnancy and childbirth leave
The permissible maternity leave is 140 days of paid maternity leave. However, the classification of 140 days is as below:
- Seventy calendar days and 84 days if it is a case of multiple pregnancies, like twins or triplets before childbirth.
- The leaves would also last 70 calendar days after childbirth, and if there are birth complications, it would last 110 days after delivery and 86 days if multiple pregnancies.
The allowance would be 100% of the average monthly salary.
The childcare leave is granted or can last until the child reaches the age of 3 years old. This leave applies to both mother and father of the child. However, the state allowance may permit the childcare leave until the child reaches the age of 1.5 years.
However, only one of the parents can avail of this facility and work part-time or full-time, depending on which mode the employee opts.
The leave compensation allowance when availing maternity leave would be 40% of their average monthly income.
Additional benefits that employers could prefer providing their employees could involve:
- Acceptance of working part-time as per request,
- Not dismissing them at the time of employee liquidation (keeping the Covid-19 pandemic in light),
- Not requiring them to work overtime at night,
- Weekends off, or
- Not asking them to work on public holidays
When availing maternity leave, the allowance granted to women is from the Social Insurance Fund. This corresponds to 100% of the average salary of the employee’s past two years of service, and the maximum allowance is determined every year in RUB.
Availing sick leaves in the event of sickness or an injury is acceptable and is granted to the employees in need. If a sick child or immediate relative is sick, the employee can also avail of the leave.
Though many countries make it mandatory for employers to grant paid sick leaves, employees do not receive their regular salary during this period in Russia.
However, they receive a temporary incapacity allowance paid from the Social Insurance Fund of the Russian Federation. The assistance excludes the initial three days of interim disability period of the employee availing the sick leave and is compensated by their employer.
A key aspect to note in availing the amount while taking sick leave is that it depends on the length of service that the employee has served. Based on the employee’s tenure in the company, paid sick leaves can vary from 60% to 100% of the employee’s average salary over the past two years. This amount cannot exceed RUB 2,301 on a single working day.
Therefore, the compensation of the amount is as below:
- For the first three days: the contributor is the employer
- From the 4th day onwards: the contribution is from the Social Insurance Fund.
Insurance and Social Security
Insurance and Social Security is an obligatory system by the Russian Federation. Employers need to pay insurance premiums set by Russian law as soon as the employment contract commences.
The premiums are calculated as per the salary of the employee and must be in any of the below as mandated by law:
- Pension Fund: 22%, and 10% if amount exceeds RUB 1,465,000 in a given year
- Social Insurance Fund: 2.9% with an amount of RUB 966,000 in a given year
- Medical Insurance Fund: 5.1%
- Accident Insurance: 0.2% to 8.5% depending on which sector the organization functions.
A few benefits that are not mandated by law but are non-taxable allowances expected by the employees.
These additional benefits could include internet allowances, phone and telecom allowances, equipment expenses, transportation allowance, meal vouchers, gym memberships. Additional days of annual leave, bonus schemes, and well-being programs.
Such additional leaves help in overall productivity in work provided by the employees and ensure that the services offered by them are on an efficient side while maintaining a healthy relationship between the employer and the employee – and speak volumes about the work culture of your remote team.
While maintaining a healthy balance between the interests of the employer and the employee is essential, there are a few aspects to reconsider while terminating an employee. Termination can only be done on a strict list that involves the following reasons:
- Termination on the grounds of mutual agreement,
- Employer/employee’s initiative,
- The contract signed has expired.
- Other specific grounds
Suppose the employer wishes to terminate the services of an employee. In that case, it could be for the following reasons:
- Employer’s liquidation – if the termination occurs due to the employer’s liquidation, one month of the employee’s average salary is mandatory when looking for a new job.
- Failure to fulfill duties without good reasons if prior notices have been given,
- Misconduct at the workplace which includes misbehavior and/or sexual harassment
- Unauthorized disclosure of confidential information
Though it is not essential to have a probation period in place when hiring Russians, it is standard to have a probation period for regular and full-time employees to have a minimum of 3 months as their probation period.
However, if you hire an executive who holds a position of authority like CEO, CFO, branch head, etc., the probation period can be extended to 6 months.
Taxes in Russia
Understanding employment law in Russia can be challenging because the rules and being compliant are complex and subject to frequent change.
Consequently, this may place a significant burden on your HR and payroll staff when they have enough to deal with in helping your company’s Russian operation be established.
This is why a global PEO managed services provider can be a tremendous asset. Multiplier’s Russian PEO can help you make sense of all the tax regulations and ensure seamless compliance right from the start.
In Russia, the employer must withhold the income tax at 13% per annum for residents having an income less than or equal to 5 million RUB and 15% if income is more than 5 million RUB. In comparison, non-residents are taxed at 30% per annum. Non-residents could take a test to qualify for the standard resident rate if they lived in the country for more than six consecutive months in a year.
Certain earnings or income are not subject to income tax, including maternity and social security payments, insurance contributions, and pension contributions by the employee. While employees do not make social security contributions from their salary, employers ensure 30% of their earnings cover pensions, medical insurance, and social insurance.
Business earnings can also be exempt, considering detailed supporting documents are provided while filing paperwork at the time. The corporate tax in Russia is currently at 20% per annum.
Income tax computation is as below:
|Less than or equal to RUB 5 million (Residents of Russia)||Individual||13%|
|More than RUB 5 million (Residents of Russia)||Individual||15%|
|Non-Residents of Russia||Individual||30%|
|Corporate Tax||Corporate companies||20%|
With Multiplier’s PEO/EOR solution, treading into a new market is as seamless as confidently ice-skating.
We can help you onboard your preferred candidate, handle HR issues and payroll, and ensure compliance with local laws. By partnering with our EOR in Russia, you avoid the hassle of setting up a foreign branch or subsidiary.
Once you have chosen your desired talent, start generating and customizing employment contracts for them in a few clicks and manage the workforce from a single platform. You can also pay thousands of employees in Russian Roubles with a single click.
Hire and expand using the best SaaS-based PEO service in Russia. Contact us to grow your business today.