Some time ago, provision of personnel was a very widespread and successful business practice on the Russian labor market, allowing the transfer of some employees working in one company to another legal entity. In Russia, the most common name for such service is outstaffing, or staffing, or provision of personnel. In practice, this meant that an outstaffing company hires employees and pays out their salaries, however all the working assignments, management and communications are carried out by a client company. Staffing providers used to receive a certain fee for this kind of service (normally a fixed rate of general disbursements to employees).
This method had been helping companies to reduce risks in the matters of employment liabilities and state control over the implementation of labor law regulations. Russian legislation was not prepared for that kind of relationship between a client company, outstaffing provider, and employees. In fact, a client company hardly had any obligations to employees or state authorities. This uncertainty was also exploited by unscrupulous service providers, which usually disappeared from the market after some time or right after claims from government structures or employees arose.
Russian state executive bodies were limited in their capabilities to protect employees’ rights and secure state interests (in other words, to ensure the timely and full payment of taxes and other payments related to labor law regulations). In the Labor Code, there was neither any definition of staffing, nor its prohibition.
Legislators understood that they needed to limit any possible abuse of the current legal regulations (or prevent any opportunity to exploit their total absence), as well as to create a stable environment for the development of healthy business relationships. After some time they finally found a solution and new legislative changes came into effect on January 1, 2016. The Labor Code introduced a new term, “loaned labor”, and immediately banned it by the same article (Article 56).
This however doesn’t mean that staffing is not possible in Russia. Now, the Labor Code allows conclusion of a contract on “provision of employees (personnel)”, and introduces the concept of “private employment agencies” (Chapter 53.1).
The peculiarities of staffing, allowed by Russian law:
- Provision of personnel is allowed on a temporary basis only (the maximum term of a contract with a private employment agency is up to 9 months).
- Private employment agencies must obtain state accreditation in order to provide staffing services.
- Besides private employment agencies, in exceptional cases, other legal entities, including foreign organizations, may provide employees (personnel).
Awara was officially accredited by the Federal Labor and Employment Service to offer services of temporary personnel provision. If you require staffing services for your Russian business, have a look at what we can offer.