PEO Russia

World Bank Ease of Doing Business Ranking

• DB Rank – 28
• DB Score – 78.2

Rankings on Doing Business topics – Russian Federation

Topic Scores

Global PEO in Russia

Russia, as a Professional Employer Organization (PEO) country, presents unique opportunities and challenges for businesses looking to expand into the Russian market. With its vast geographical expanse and abundant natural resources, Russia offers immense potential for growth and investment. However, its business landscape can be complex, requiring a deep understanding of local laws, regulations, and cultural norms. PEO services in Russia play a crucial role in helping companies navigate the intricacies of employment and labor regulations, easing the burden of HR management, and ensuring compliance with local requirements. Despite challenges, Russia’s highly skilled and educated workforce, particularly in industries like technology and engineering, provides a valuable resource for companies seeking specialized talent. Furthermore, with a growing consumer market and increasing urbanization, Russia continues to be an attractive destination for businesses looking to broaden their global footprint. Partnering with a reliable PEO can prove to be a strategic advantage, enabling companies to overcome barriers and capitalize on the vast potential that Russia has to offer.

What Is a PEO?

A PEO, or Professional Employer Organization, is a company that provides a range of HR and payroll services to small and medium-sized businesses. These services can include employee benefits, payroll, compliance with labor laws, and recruiting and training.

PEOs work by entering into a co-employment agreement with the businesses they serve. In this arrangement, the PEO becomes the employer of record for the business’s employees, taking on responsibilities such as payroll, tax withholding, and employee benefits. The business, however, retains control over its day-to-day operations and the supervision of its employees.

PEOs can help businesses streamline their HR and payroll processes, reduce costs, and free up time and resources to focus on their core business activities. They can also provide access to a range of benefits and resources that small businesses may not be able to afford or manage on their own.

PEOs are also understood as employer of record / EOR at times.

Russia – Country Overview

Russia has the largest landmass of all countries in the world and boasts natural resources worth $75 trillion, according to World Bank estimates. Ever since the privatization of Russia’s energy and defense-related sectors in the 1990s, the country has taken giant strides when it comes to growth. The GDP of Russia is 4.0 trillion (PPP). Revenues from oil, natural gas, and energy drive the Russian economy. Foreign trade is important as the total value of imports and exports is equal to 46.7% of GDP.

Capital City

Moscow

Currency

Russian Ruble

Principal Language

Russian

Government

Federal Semi-presidential Republic

Employment Contracts in Russia

Individual labor contracts are mandatory under the Russian labor law. They are either for a specific period but not more than 5 years (known as the fixed-term contract), or last for an indeterminate period.

Working Hours in Russia

A standard workweek usually is not more than 40 hours. The Labor Code does not state a standard workday. It specifies shorter standard workweeks for some types of employees:

• For employees below the age of 16: 24 hours a week
• For employees in the age group 16 to 18 years: 35 hours a week
• For employees with disabilities: 35 hours in a week, and
• For employees working in unhealthy, hazardous or dangerous settings: 36 hours a week.

Employees in these categories have their work time reduced without any pay deduction. When an employee is working part-time for other reasons, however, pay is calculated pro rata based on the actual working time.

The Labor Code does not mandate specific days of the week to be days off, but notes that Sunday is a common day off and that in the case of 5-day workweeks, the 2 days off are usually consecutive.

Work time for employees in Russia cannot be more than 40 hours per week. In some circumstances, working time is more restrictive.

Additionally, the total hours per workday cannot be more than 7 hours for workers less than 18 years old or 5 hours for workers less than 16 years old. The workday cannot be more than 8 hours in a day for workers employed in hazardous or unsafe environments.

Overtime

Overtime pay is stipulated by the law as 1.5 times the normal rate of pay for the first 2 hours more than standard working hours and 2 times the normal rate of pay for all working hours beyond that. Overtime cannot be more than 4 hours in a span of 2 days or 120 hours during a year for an employee. Collective bargaining agreements can also specify compensation payable for overtime work.

Employees need to give written consent to perform overtime work. Employees helping handicapped children aged 18 or less are also entitled to these benefits.

Employee Leave in Russia

Holidays

Employees get the following paid federal holidays every year:

• Jan. 1-2: New Year Holidays
• Jan. 7: Christmas
• Feb. 23: Day of the Defender of the Fatherland
• March 8: International Women’s Day
• May 1-2: Spring and Labor Day
• May 9: Victory Day
• June 12: Day of Russia
• Nov. 4: National Unity Day

If a holiday occurs on a weekend or any other non-workday, then the paid day off is shifted to the workday that follows the holiday. While working on federal holidays is not allowed, workers may still need to work in some organizations that are continuously operational. Employees who work on holidays get double pay or an additional day off.

Annual Leave

Russian workers are entitled to paid leave for 28 calendar days annually. Workers in unsafe or harmful occupations may get additional leave. Employers can also provide additional leave to workers based on an employment contract or agreement. During the first 6 months of employment, leaves are subject to employers’ discretion and approval.

Some types of paid leaves are guaranteed with no consideration of the time since employment commenced. These include adoptive leave, maternity leave, and leave for workers under the age of 18.

Child Care Leave

Employers need to allow employees 4 days of vacation per month on account of additional responsibility related to parenting disabled children aged less than 18.

Sick Child Leave

Employees get paid leave to look after a sick child, from 7 up to 60 days, varying on the basis of the child’s age and some other criteria. Payment for this leave comes from the Social Insurance Fund, and the amount varies based on the term of insurance and amount of contributions to the fund.

Maternity Leave

Expecting mothers can take up to 70 calendar days’ leave before childbirth and up to 70 calendar days post-childbirth. Employees receive payment for the leave by the Social Insurance Fund with compensation based on averaged monthly salary during the last 12 months, but the amount cannot be higher than 15,000 rubles. Maternity leave can be taken in part or fully by a child’s father, grandparents, any relative or guardian.

Family Leave

Employees are entitled to paid leave — up to 7 calendar days for one instance of sickness, and up to 30 calendar days during a year – to look after a sick family member. Social Insurance Fund pays for Family leave in the same proportion as sick leave.

Paid leave

• There are at least 8 paid holidays in Russia. 
• Employees get 28 paid days off per year, which they are eligible for after 6 months of employment. 
• Employers must provide 3 days of paid sick leave.
• Additional leave types include maternity, paternity, surrogacy, and unpaid leave —  maternity leave is for 140 days and is paid by the social insurance fund. 

Taxation

Tax and employer contributions in Russia

• Russian residents are taxed at 13% for income tax.
• Non-residents are taxed at 30% — non-residents can take a residency test after 6 months and request the resident rate if they pass. 
• Employees do not contribute to the social security fund, but employers must contribute 30% of each employee’s salary. Typically the employer must pay:

• 22% – Pension Fund of the Russian Federation.
• 2.9% – Social Insurance Fund of the Russian Federation.
• 5.1% – Federal Compulsory Medical Insurance Fund.

Employee Benefits in Russia

Social insurance contributions are levied based on all employee wages paid by employers, as defined frequently by employment agreements. All social insurance plans specify thresholds on which the contributions are calculated. The Russian Federation has three types of obligatory pension insurance (OPI) plans, which provide a range of benefits for workers:

• Social Insurance Benefit
  Employers contribute 22% of payroll. Reduced rates of insurance contributions apply to employers of specific categories. The maximum annual income to calculate contributions are 1,021,000 rubles plus 10% of payroll above this amount in the case of employers in general categories.
• Old-Age Pension (Social Assistance)
  All employees get coverage under the Russia’s pension system. The qualifying age for an old-age pension is 65 years for men and 60 years for women. Benefits are adjusted based on changes in the inflation rate.
• Survivor Pension
  The pension consists of a basic flat-rate benefit and an earnings-related benefit.

Companies employing 7 or more people in special economic zones for technology development may pay reduced premiums of around 14%.

Old-age Pension

All employees are under the coverage of the Russia’s pension system. The qualifying age for an old-age pension is 65 years for men and 60 years for women.

Work Injury Compensation

Temporary Disability Benefit: Injured employees are entitled to free medical care and necessary treatment for recovery from their disability, and additional payments until recovery or evaluation of the disability as permanent. The monthly allowance is equivalent to 100% of the concerned employee’s gross earnings.

Workers who are unable to perform their work due to work-related injuries or diseases get a lump-sum payment as well as monthly payments and access to medical care. The lump-sum amount will depend on the severity of those employees’ incapacity.

Permanent Disability Benefit: The pension amount varies depending on the severity or degree of disability. It applies if a worker has a minimum of 10% loss of work capacity.