Labor & Migration
Staff Leasing to Be Prohibited
From 1 January 2016 staff leasing will be prohibited in Russia in accordance with
a law recently signed by the President of the Russian Federation (the “Law”)1.
What the Law says
The Law substantially restricts the provision of personnel in Russia. The Law
prohibits “agency work,” i.e. work performed by an employee for an employer
under the management and control of an individual or a legal entity that is not the
employer of the employee. According to the Law, employees may be sent to
another individual or legal entity only under a contract on staff provision.
Significant limitations are set on the provision of workers on the basis of a
contract for staff provision. In particular, the provision of employees (personnel)
can be carried out only by the following:
private employment agencies;
other legal entities in exceptional cases provided by law (if employees
with their consent are temporarily sent to a legal entity that is affiliated to
the sending entity; e.g. between legal entities that are party to a
In accordance with the Law, private employment agencies should be accredited
and the Law sets accreditation requirements, including a high share capital,
education and work experience of the head of the agency, etc. The list of
instances in which an organization may hire workers through an employment
agency is limited. These include provision of personnel to:
a private individual for rendering help in the area of household
an individual entrepreneur or legal entity, to replace temporarily absent
employees whose jobs are held for them in accordance with labor law;
an individual entrepreneur or legal entity for the temporary expansion (up
to nine months) of production and volume of services rendered. If the
number of employees taken on exceeds ten percent of the average total
number of employees the decision to take on such employees should
take into account the opinion of the primary trade union organization;
for the temporary employment of certain categories of individuals seeking
temporary work (full-time students, single parents and parents with many
1. Federal Law No. 116-FZ of 5 May 2014 “On Changes to Individual Legislative Acts of the Russian
For further information please contact
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Labor & Migration
2 Legal Alert May 2014
children, those raising children, individuals recently having served prison terms), when labor legislation permits the use of temporary labor contracts.
The Law specifies a number of cases where the use of a staff leasing agreement is not allowed. These include the replacement of employees who are on strike, performing work during work stoppages, during operation of a reduced work schedule to preserve jobs from mass layoffs and in certain other instances.
Several questions have been raised regarding the practical application of the Law, such as:
it is directly stated that work relations between the assigned employee and the employer do not terminate, but also that such relations never arise in the first place;
the Law also defines the rules for paying insurance premiums for employees assigned to work for a private individual or legal entity under a staff leasing agreement: the insurance rate is determined based on the main type of economic activity of the legal entity to whom the employee is assigned and additional payments toward the insurance tariff are based on the employee’s salary.
The Labor Code of the Russian Federation introduced a new chapter 53.1 regulating the labor of employees temporarily assigned to work for a private individual or legal entity under a staff leasing agreement. Several points of this chapter are aimed at protecting the labor rights of such workers. In particular, the law states that:
the pay of the assigned workers must not be worse than that of workers of the host organization performing the same functions;
the staff provider must ensure that the work performed by employees at the host corresponds to their job description and that the host respects labor law standards;
the host organization bears subsidiary liability for the obligations of the staff provider, including payroll obligations.
The law does not affect outsourcing issues (i.e., transfer of certain, as a rule non-core, functions to third party providers on the basis of a contract or fee-based contract). The law also states that provision of staff to other legal entities (secondment) will be regulated by a separate federal law.
Actions to consider
We recommend that companies using employees engaged through agencies review these arrangements before 1 January 2016 and, if no grounds for use of agency workers apply, either sign employment contracts with them or transfer to an outsourcing model.
This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.