The main document regulating labour relations between the employee and employer is the Labour Code of the Russian Federation. The Labour Code establishes an important provision ensuring employees' rights. According to this provision, employment contracts may not worsen the position of employees as compared to labour legislation, a collective agreement or agreements.


Employment Contract

Employment is subject to the labour legislation of the Russian Federation, other legal acts of the Russian Federation containing labour regulations including local acts adopted by the employer), the employer's collective agreement (if any) and direct employment contracts with the employee.
Employees shall enjoy the rights and benefits stipulated by Russian labour legislation. In addition to these rights, Russian labour legislation also governs types of employment contracts and conditions of their conclusion, amendment and termination.

Employee Rights

Russian labour legislation provides certain guarantees for employees. The current Labour Code and other labour law regulations stipulate the following:
• standard working hours are not to exceed 40 hours per week;
• limited overtime is permitted for certain categories of employees under certain circumstances, not exceeding four hours in two successive days and 120 hours per year;
• an employer is not permitted to demand that an employee perform functions beyond those set out in his employment contract unless business circumstances require that this is done, in which case the employer has the right to transfer the employee to a position in a different line of work for a period not exceeding one month. Following his written consent, the employee may be assigned to a job which requires lower qualifications;
• employees are entitled to twelve paid public holidays and an annual leave of 28 calendar days. For some categories of employees, the minimum annual leave established by legislation may exceed 28 calendar days;
• employees are entitled to sick leave benefits. Such benefits are based on an employee's wages and vary between 60% to 100% of the wage amount, depending on his length of insurable service, but may not exceed RUB 18,720 per month;
• women are entitled to maternity leave for 70 calendar days (84 days for multiple births) prior to childbirth and 70 calendar days (86 days in the case of birth complications, and 110 for multiple births) after childbirth. Maternity leave is granted together with social insurance benefit paid out in the amount established by statutory legislation. Regardless of the employment period with a specific company, a woman is entitled to annual paid vacation which may be taken either before or immediately after the maternity leave, as well as leave up until the child's third birthday. During the period of baby care leave until the child reaches one and a half years of age, the woman is paid social insurance benefit. Fathers, grandparents and other relatives are entitled to baby care leave under certain circumstances; and
• employees have the right to organise trade unions and participate in the management of the company. The primary trade union represents the interests of employees in dealings with the employer, ensures that the terms of the collective agreement are being complied with and participates in the resolution of labour disputes in accordance with statutory legislation.

Severance Pay

The current Labour Code of the Russian Federation requires that severance pay, equal to at least two weeks' average earnings, be provided when an employment contract is terminated due to the following reasons:
• an employee refuses to be transferred to another line of work in accordance with a medical certificate issued pursuant to the legislation or if such a position is not available at the current place of employment;
• an employee is considered to be unable to work pursuant to a medical certificate issued in accordance with the legislation;
• an employee refuses to continue work due to a unilateral change of the labor agreement conditions made by the employer (such a change is only possible in exceptional cases);
• an employee is drafted into military service or alternative civil service which replaces military service;
• an employee refuses to transfer to a different location with the employer;
• an employee who previously held the position is reinstated.
In the event that the employment contract is terminated in connection with a violation of the conditions of its conclusion, which arises through no fault of the employee and if such a violation prevents the continuation of work, severance pay is paid to the employee in the amount of one average monthly wage.
In the event that an organisation is liquidated, or staff are made redundant, the Labour Code of the Russian Federation also stipulates that a severance allowance is paid in the amount equivalent to one average monthly wage (severance pay for employees employed on a seasonal basis is paid in the amount of two weeks' average salary).
In addition, the employee also receives his average monthly wage during the job placement period, but for no longer than two months from the dismissal date (taking into account severance pay).
Under exceptional circumstances, the average monthly wage continues to be paid to the dismissed employee over the course of the third month from the date of dismissal, in accordance with a decision of the state employment services agency, provided that the employee applied to the agency within two weeks of the date of dismissal and the agency has failed to place him in a job.
The employee must be given written notice of his dismissal at least two months before the company's liquidation or staff reduction.
An employment contract or a collective agreement may stipulate other reasons for paying a severance allowance and may establish higher rates of severance pay.

Workbook. Work Permit

Russian labour legislation requires that a work book be kept for each employee who has worked for at least five days at an organisation, if this work is the employee's main employment. This is the main document reflecting information about the employee's employment activities and level of seniority.
Pursuant to Federal Law #115-FZ of 25 July 2002 'On The Legal Status of Foreigners in the Russian Federation', a foreigner staying in the Russian Federation on a temporary basis can only be employed in the Russian Federation if he has a work permit (except certain categories of staff listed in the Law). An employer can employ and use such foreign staff only on the basis of a special license for employing foreign staff obtained in accordance with the established procedure.
The procedure for obtaining work permits is currently regulated by the Rules governing the issuance of documents confirming the right of foreigners to work in the Russian Federation on a temporary basis approved by Resolution of the Government of the Russian Federation #681 of 15 November 2006. In accordance with the above statutory regulations, in order to be employed or perform work or services in the Russian Federation, a foreign national staying in the Russian Federation on a temporary basis must obtain a work permit through the employer (or customer for the respective work or services) on the basis of a license for employing foreign staff. This procedure is also applicable to foreigners registered as individual entrepreneurs in the Russian Federation. Licenses for employing foreign staff are issued by the Federal Migration Service accountable to the Ministry of Internal Affairs on the basis of an employer's application. Work permits are issued to foreigners by the relevant regional authority of the Federal Migration Service, as requested by the corresponding employer or the customer for work or services, within the quota established by the Government of the Russian Federation.

Period of Employment Contract

Employment contracts may be concluded for an indefinite period, or a fixed period not exceeding five years, unless otherwise established by the Labour Code or other federal legislation. Fixed-term contracts can be concluded in the cases stipulated by legislation, when labour relations cannot be established for an indefinite period due to the nature of the forthcoming work or the conditions for its fulfillment. The Labour Code stipulates that fixed-term employment contracts can be concluded with the company's chief executives, deputy executives and chief accountants.
In order to assess the suitability of an employee for the work assigned to him, the parties concluding an employment contract may agree to establish a probation period. Unless otherwise stipulated by federal legislation the probation period may not exceed 3 months, or 6 months for the organisation's chief executives and their deputies, chief accountants and their deputies, heads of branches, representative offices and other separate structural divisions of the organisation. If the outcome of the probation period is not satisfactory, the employee may be discharged during the probation period regardless of the opinion of the trade union and without severance pay. Once the probation period ends, the employee may only be dismissed in accordance with the general procedure.

Termination of Labour Contracts

Grounds for terminating employment contracts under Russian labour legislation include:
• agreement of the parties;
• expiration of the term of the employment contract, unless the labour relations actually continue and neither of the parties has demanded their termination;
• termination of the employment contract on the initiative of the employee (see below);
• transfer of the employee at his request, or with his consent, to another employer or an elective position;
• the employee's refusal to continue working in connection with a change in the company's ownership, the organisation's jurisdiction (subordination) or its reorganisation;
• the employee's refusal to continue working in connection with a change in the fundamental conditions of the employment contract;
• the employee's refusal to be transferred to another line of work necessary in accordance with a medical certificate issued pursuant to the legislation or absence of such a line at the present place of employment;
• the employee's refusal to move to another location with the employer;
• the onset of circumstances established by the Labour Code, which are beyond the parties' control; and
• violation of the rules for concluding employment contracts established by the Labour Code, or other federal legislation, if this violation excludes the possibility to continue work.
The employment contract may also be terminated on other grounds, as established by the Labour Code and other federal legislation.
An employee may terminate an employment contract by submitting written notice to the employer at least two weeks in advance.
An employer may terminate an employment contract under the following circumstances:
• the organisation is liquidated or the organisation's staff are made redundant;
• the employee is unsuitable for the position occupied or work to be fulfilled;
• an employee, who has already been reprimanded, repeatedly fails to carry out work-related duties without a valid reason;
• an employee commits a single gross violation of his work related responsibilities (is absent from work, attends work under the influence of alcohol, drugs or other form of intoxication, as well as other cases stipulated by the Labour Code);
• a single gross violation of his work related duties by the organisation's (branch's, representative office's) chief executive or his deputy;
• an employee with financial responsibilities is guilty of misconduct which gives grounds for the employer to lose trust in the employee; and
• an employee carrying out an educational function is guilty of immoral conduct.
The employment contract may also be terminated on the initiative of the employer on other grounds, as established by the Labour Code and other federal legislation.
An employment contract may not be terminated on the initiative of the employer (unless the organisation is liquidated or an individual entrepreneur terminates his activities) during the period of an employee's temporary inability to work and during his holiday period.
Russian law stipulates that employment contracts with the following categories of employees cannot be terminated on the initiative of the employer: pregnant women or women with children under the age of three, single women with children under the age of 14 or with disabled children under the age of 18, as well as with other employees who bring up such children without a mother (except in cases established by the Labour Code).

Compensation Issues

In the Russian Federation, salaries are normally paid in roubles. However, in accordance with collective agreements or employment contracts upon an employee's written request, labour may also be remunerated in other forms as long as they do not contradict legislation of the Russian Federation and international treaties of the Russian Federation. The percentage of remuneration which is made in non-monetary form may not exceed 20% of an employee's total salary.
The use of foreign currency cash for direct payment by resident employers to Russian employees is prohibited in the Russian Federation.
However, Russian citizens employed by non-residents (foreign companies) may receive foreign currency by transfer to a currency account opened by the employee with an authorised Russian bank (i.e. a bank which has a general license issued by the Central Bank of the Russian Federation authorising it to perform foreign currency operations).

Minimum Statutory Monthly Wage

Under federal legislation, a minimum statutory monthly wage is established in the Russian Federation. The minimum statutory monthly wage is used not only to regulate wages, compensation and other payments made under labour legislation, but also to calculate taxes, levies, penalties and other payments.
As of 01 January 2009, the minimum statutory monthly wage amounts to RUB 4,330. This amount is established in Federal Law #91-FZ of 24 June 2008.
It should be noted that the minimum statutory monthly wage in the amount stated above is used only to calculate:
• labour remuneration; and
• allowances for temporary inability to work.
For all other purposes, such as the calculation of taxes, levies, penalties, liabilities under civil transactions, etc., a minimum statutory monthly wage in the amount of RUB 100 is applied.

Payment of Per Diem Allowances to Staff Sent on Business Trips

In accordance with current labour legislation of the Russian Federation, the amount of per diem is stipulated by a collective agreement or the company's internal regulations regardless of the type of its ownership and activity. A resident employer may pay per diem allowances to staff in roubles and for the business trips abroad in foreign currency as well. In this regard it should be taken into account that as of 01 January 2009 Federal Law #158-FZ of 22 July 2008 cancelled limitation of per diem allowance established earlier for the purposes of calculating profits tax base. Thus, currently per diem allowance paid to the employees is deducted by the employer for profits tax purposes. However, per diem allowances paid to employees within the limits established in accordance with the Tax Code of the Russian Federation are not included in their taxable income.