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Expatriate on-boarding: the top 5 points of concern for companies and individuals

30.06.2019

Julia Borozdna
Roman Gerebtsov

Are you planning to hire an expatriate or are you a foreign national planning to work in Russia? In any case, it will be helpful to think about the issues discussed below before accepting a job in Russia.

1. Timing

Similar to most other countries, a foreign national must have a work permit to work in Russia. Obtaining a work permit takes some time (several weeks to several months depending on its category), while the penalties for working without a work permit are severe. Therefore, when planning the start date of a Russian assignment, one should factor in sufficient time for obtaining a Russian work permit and work visa before the start of any work activity in Russia.

2. Currency risk hedging

Salaries in Russia must be paid in Russian roubles. This is a requirement of employment law which the employer must comply with.

In most cases, expats coming to work in Russia prefer to have at least their current level of salary in their home country’s currency and would like to protect their rouble salary from currency fluctuations.

The simplest and most obvious solution is to designate one’s salary in a foreign currency and pay it in the rouble equivalent at the current exchange rate. However, based on current practice, this solution will most likely face objections from the Russian labour inspectorate if they audit the company.

Another possible solution is including a currency risk hedging clause in an employment agreement. Different wording may be used, but the idea is that if the rouble equivalent of the salary becomes lower than the rouble equivalent of a certain amount in the foreign currency, the employer will pay the difference through monetary compensation or a bonus.

3. Discrimination claims

This concern is more for employers. Typically, the salary of an expat is higher than that of a local employee. Furthermore, expats may enjoy additional benefits that are not provided to local staff (such as housing, educational allowances, travel to their home country, etc.).

In terms of the Russian Labour Code, discrimination means providing any benefits or advantages based on nationality or other characteristics not related to the business characteristics of the employee. Therefore, a higher salary and/or additional benefits to expatriate employees may be grounds for discrimination claims from local employees in the same positions who are paid a lower salary or are not provided with additional benefits. To minimise potential risks, it is advisable that the employer thinks in advance how to argue for the provision of additional benefits to its expats.

4. Indemnifying liability

Indemnifying the liability of expats is both important for the employer and the expat. The imposition of administrative liability on an expat may cause a variety of negative consequences for him/her and for the company, from the risk of being deported from Russia to difficulties obtaining Russian visas and work permits in the future.

Therefore, it is crucial that no administrative liability is imposed on an expat while working in Russia. While it is the personal responsibility of the expat to ensure that no penalties are imposed on him/her for personal infringements (such as driving or parking violations), it is highly advisable for the employer to think in advance how to indemnify its foreign managers (especially general managers) against potential liability for violations which the company might commit within its activities and for which liability could be imposed on its foreign officer.

For that purpose, the employer may cascade the liability of its expatriate senior managers (in particular, the general manager) to their subordinate Russian employees responsible for the company’s compliance within a particular area. Such liability is to be cascaded by careful drafting of the relevant internal policies and the job descriptions of the employees in question.

5. Migration registration

A foreign national staying in Russia must be registered at the place where he/she is staying. It is important to note that, in most cases, foreign nationals may not register themselves, as this is the responsibility of the individual or company providing them with a dwelling in Russia. However, employers wish to remain responsible for registering their expatriate employees to shield them against potential risks of non-compliance with the requirements for migration registration. Generally, this should be possible if a residence is provided to an expatriate employee by an employer, but since the practice varies it is advisable to think in advance how to properly arrange migration registration for expats in accordance with the requirements of the local migration authorities.

In addition, employers (as well as other persons or companies inviting foreign nationals to Russia) should keep in mind that they must take measures aimed at ensuring that their invitees comply with the declared purpose and period of their stay in Russia. Specific measures have not yet been adopted, but the draft regulations (in Russian) can be accessed via the following link: https://regulation.gov.ru/projects#npa=81853.

Despite the above concerns (which obviously exist in every country), working in Russia can be an excellent opportunity for an expatriate to experience working and living in a new environment. Russian employers will also benefit from a fresh look and the international experience of the expats.

Source: AEB Business Quarterly | Summer 2019

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