Best Lawyers for Outsourcing in Russia

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Lawyer
  • Recognized Since: 2022
  • Location:
    Moscow, Russia
  • Practice Areas:
    Outsourcing

  • Recognized Since: Ones to Watch Since:
  • Location:
  • Practice Areas:

Recognition by Best Lawyers is based entirely on peer review. Our methodology is designed to capture, as accurately as possible, the consensus opinion of leading lawyers about the professional abilities of their colleagues within the same geographical area and legal practice area.

Best Lawyers employs a sophisticated, conscientious, rational, and transparent survey process designed to elicit meaningful and substantive evaluations of the quality of legal services. Our belief has always been that the quality of a peer review survey is directly related to the quality of the voters.

Practice Area Definition

Outsourcing Definition

General regulations

The outsourcing relations in Russia are regulated by the Labor Code (Article 56.1 and Chapter 53.1) and the Federal Law No. 116-FZ “On Amendments to Certain Legal Acts of the Russian Federation” of May 5, 2014, which entered into force on January 1, 2016. Before that outsourcing arrangements were not clearly defined in Russia’s labour and civil laws (although they were recognized for tax reporting and payment purposes). Up to date Russian law does not make any difference for various categories of the staff leasing relations (such as outsourcing, outstaffing, and secondment). The legislation only defines (for the first time in Russian employment law history) the staff leasing in general: “leased labour” provided under an “agreement for provision of the labour of workers (personnel)”.
 
The general regulatory principle set out by Article 56.1 of the Labor Code is that the “leased labour” is generally prohibited save for the specific cases. 

Note, however, that the law does not prohibit the employers from purchasing of different services from the third party providers. I.e. it is generally prohibited to use leased labor, but the outsourcing structures based on the services contracts are not prohibited (provided for that they are duly structured and do not provide for the direct staff leasing).

Permissible cases of outsourcing

The main and the only well-regulated permitted case is outsourcing made by “private employment agencies” (PEA). PEA is a company the main activity of which is provision of personnel to the third parties. Please note that the Law provides for a limited number of situations where PEA will be entitled to administer secondment arrangements with employers. For instance, PEA are entitled second their employees to legal entities only in order to perform duties of their absent employees or in case to perform works related to temporary expansion of production. In addition, the law prohibits a secondment to certain dangerous-category workplaces. Any company can be recognized as having dangerous workplaces, for instance in case of lack of lighting or stressful conditions of work. 

In other cases outsourcing is permitted only between a restricted scope of entities, particularly: (i) outsourcing of personnel to affiliates; (ii) outsourcing of personnel to the joint-stock companies by their shareholders, provided that the shareholders agreement is made; and (iii) outsourcing of personnel between parties to shareholders agreements in joint-stock companies. The general terms of and procedures for such permitted outsourcing arrangements going forward will be set out in a further separate new law, which has appeared only in a draft form. However, in absence of the law, use of outsourcing in these cases creates risks for companies.

The law also provides for cases when secondment is not permitted explicitly, in particular for replacement of employees participating in strike, for working in the event of recipient's downtime, bankruptcy, or if the recipient makes mass cutting of personnel, etc. 
The law states that the recipient company is subsequently liable for the salary and other payments due to the secondee from the actual employer.
 
Risks and liability

The key inevitable risk arising from use of outsourcing in Russia is that based on the employee’s claim the court may treat relations between the employee and the recipient company as employment relations. This will lead to the necessity for the recipient company to hire the employee, provide all the guarantees and benefits, and pay salary. However, the practice of Russian courts in such cases is not very deep and in general the courts do not like taking the decisions in such cases in favour of employees.
Also, certain penalties for general violations of the employment legislations and non-signing of the employment agreement may be applicable under the Code on Administrative Offences.  

Five Stones Consulting

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General regulations

The outsourcing relations in Russia are regulated by the Labor Code (Article 56.1 and Chapter 53.1) and the Federal Law No. 116-FZ “On Amendments to Certain Legal Acts of the Russian Federation” of May 5, 2014, which entered into force on January 1, 2016. Before that outsourcing arrangements were not clearly defined in Russia’s labour and civil laws (although they were recognized for tax reporting and payment purposes). Up to date Russian law does not make any difference for various categories of the staff leasing relations (such as outsourcing, outstaffing, and secondment). The legislation only defines (for the first time in Russian employment law history) the staff leasing in general: “leased labour” provided under an “agreement for provision of the labour of workers (personnel)”.
 
The general regulatory principle set out by Article 56.1 of the Labor Code is that the “leased labour” is generally prohibited save for the specific cases. 

Note, however, that the law does not prohibit the employers from purchasing of different services from the third party providers. I.e. it is generally prohibited to use leased labor, but the outsourcing structures based on the services contracts are not prohibited (provided for that they are duly structured and do not provide for the direct staff leasing).

Permissible cases of outsourcing

The main and the only well-regulated permitted case is outsourcing made by “private employment agencies” (PEA). PEA is a company the main activity of which is provision of personnel to the third parties. Please note that the Law provides for a limited number of situations where PEA will be entitled to administer secondment arrangements with employers. For instance, PEA are entitled second their employees to legal entities only in order to perform duties of their absent employees or in case to perform works related to temporary expansion of production. In addition, the law prohibits a secondment to certain dangerous-category workplaces. Any company can be recognized as having dangerous workplaces, for instance in case of lack of lighting or stressful conditions of work. 

In other cases outsourcing is permitted only between a restricted scope of entities, particularly: (i) outsourcing of personnel to affiliates; (ii) outsourcing of personnel to the joint-stock companies by their shareholders, provided that the shareholders agreement is made; and (iii) outsourcing of personnel between parties to shareholders agreements in joint-stock companies. The general terms of and procedures for such permitted outsourcing arrangements going forward will be set out in a further separate new law, which has appeared only in a draft form. However, in absence of the law, use of outsourcing in these cases creates risks for companies.

The law also provides for cases when secondment is not permitted explicitly, in particular for replacement of employees participating in strike, for working in the event of recipient's downtime, bankruptcy, or if the recipient makes mass cutting of personnel, etc. 
The law states that the recipient company is subsequently liable for the salary and other payments due to the secondee from the actual employer.
 
Risks and liability

The key inevitable risk arising from use of outsourcing in Russia is that based on the employee’s claim the court may treat relations between the employee and the recipient company as employment relations. This will lead to the necessity for the recipient company to hire the employee, provide all the guarantees and benefits, and pay salary. However, the practice of Russian courts in such cases is not very deep and in general the courts do not like taking the decisions in such cases in favour of employees.
Also, certain penalties for general violations of the employment legislations and non-signing of the employment agreement may be applicable under the Code on Administrative Offences.