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Business news
Foreign Enough to Follow The Rules
03.28.2007 15:50

employees By Vladislav Zabrodin, Pavel Karpunin and Alexei Nikitin

On January 15, 2007 new regulations on the employment of foreigners in the Russian Federation entered into force. We provide a brief analysis of some of the key aspects of the new rules and how they affect both those wanting to work in Russia and the companies wanting to hire foreign employees.

The new laws

The new order of employment of foreign citizens in Russia is stipulated in the amended Federal Law No.115-FZ On the Legal Status of Foreigners dated July 25, 2002 and Government Decree No. 681 On Issuing Foreign Labor Permits dated November 15, 2006.

The law divides foreign citizens into three categories — Visitors, Temporary Residents, and Permanent Residents:

1. Visitors* are foreign citizens who come to Russia on a visa or who do not need a visa, and have neither a temporary nor permanent residence permit. The length of stay is defined by the visa. If a visa is not needed, the stay cannot exceed 90 days with the exception of cases provided for by the law (e.g. the stay may be extended for a period of up to one year if the foreigner has a contract to work in Russia for such a time period).

2. Temporary Residents are foreign citizens who have obtained a temporary residence permit. Such a permit is valid for three years. The only restriction for this category of individuals is the prohibition to work outside that region of the Russian Federation in which the temporary residence permit was issued.

3. Permanent Residents are foreign citizens who have obtained a permanent residence permit. It is issued for a period of five years. Foreign citizens belonging to this category do not need a work permit and may work anywhere in the Russian Federation.

Therefore, the only foreigners who need to obtain a work permit are those belonging to the first category. The new order for issuing permits to foreign citizens and the documents that need to be obtained are defined in the Procedure for Issuing Foreign Labor Permits. However, all permits for employment of foreign employees as well as individual work permits issued prior to the new regulations will remain valid for the full term stated in such permits.

A call for change

The authorities hope that the new rules will reduce the administrative barriers that put off foreign specialists from coming to Russia as well as reduce illegal immigration and expand the existing guarantees in place for foreigners.

Employing foreigners may carry undisputable advantages, such as higher qualifications and/or lower labor costs. Nevertheless, there are disadvantages connected with their employment — a complicated documentation procedure and the risk of losing money in case of violation thereof. Attempts to engage foreign employees may also be complicated by the fact that state employment agencies adhere to the principle that new jobs should be allocated to Russian citizens and that foreigners should be employed only in exceptional cases.

The employer applying to register a foreign employee may also get refused, even at the stage of state approval, on the grounds that there are Russian citizens of the same profession or qualifications already living in the region. Moreover, even if the employer obtains a favorable decision, the employee may still have difficulties obtaining a visa.

Since in some cases engaging foreign employees is rather complicated, many companies prefer to bear the risk of administrative liability than go through a whole host of cumbersome procedures.

Presumably, the new rules that increase administrative fines and at the same time simplify administrative procedures (in respect to the foreigners who don’t need any kind of visa), will reduce the number of violations in this sphere.

Restrictions and procedures

The new regulations establish various restrictions and procedures to be adhered to. Some of them are briefly examined below.

From January 15, foreign citizens are not entitled to work, for example, in the retail of alcohol (including beer) and pharmaceutical products. For retail trade outside of stores (e.g. markets), the quota for foreign citizens is 40 percent; and from April 1 they are to be excluded entirely from this area of trade.

For foreigners who need a visa the procedure of obtaining work permits is still very long and needs to be simplified before it becomes a viable alternative to using foreign workers in a manner that circumvents legal procedure.

The abovementioned restriction to limit work to the region for which a permit is issued may be modified for an employee sent on a business trip, for example. The maximum length of such trips depends on the business at hand and whether the employee is a Visitor or Temporary Resident. For Visitors the limit varies from 10 to 60 days within the term of the work permit; for Temporary Residents – from 40 to 90 days within 12 calendar months.

The permit for “attraction and use” of foreign employees, issued to employers by the regional department of the Federal Migration Service (FMS), requires several documents to be submitted, among which is a draft of the employment agreement or other documents confirming a preliminary agreement with foreign citizens. When applying, the requirement to pay a state duty (3,000 rubles for each foreign employee) should be checked and monitored very attentively, as there have been many cases when such payments were made based on erroneous data, causing refusal in the processing of documents, with the result that companies lose money, time and are in some cases unable to carry out the projects for which they had invited the foreign employee(s).

Foreigners exempt from visas

The new regulations establish a revised and simpler procedure for the employment of foreign citizens who do not need a visa to enter Russia (citizens of CIS states except Georgia and Turkmenistan) — a welcome innovation to the law. If an employee from an exempted country already possesses a work permit, then the employer is not required to obtain any additional permits.

Such a work permit is obtained by submitting to the FMS an identity document, migration card and proof that the state duty (1,000 rubles) has been paid.

In addition, if the period of the permit exceeds 90 days, medical certificates confirming the absence of drug addiction, infectious diseases and AIDS need be submitted to the regional department of the FMS within 30 days of obtaining the permit.

Liability

Though the procedure of employing foreigners is complicated, the sanctions for not adhering to them strictly may be substantial. For example, fines exist of up to 1,000,000 rubles ($38,500) for a company violating foreign citizen employment rules and of up to 50,000 rubles for violation of the rules by company executives.

As reform of the foreign citizen employment system continues, further regulations will be stipulated in future government acts that are mentioned in the law.

Presence of the applicant

An additional administrative barrier for carrying out business in Russia, including foreign companies, has been the necessity that the applicant be personally present at the registering of any amendments in statutory documents. This practice was introduced by the tax authorities at the beginning of 2006, after which even the notarized powers of an attorney were not accepted by the registering authorities (i.e. tax inspectorates) and the CEOs of companies were forced to spend their time waiting in long lines. Another option was to send documents by mail, which entailed long delays (up to two to three months).

Later this provision stipulating the personal presence of the applicant was rendered invalid by the Supreme Court. The registering authorities, however, reacted differently than anticipated. For example, Tax Inspectorate No. 46 in Moscow opened two service windows for the acceptance of documents on the grounds of the powers of attorneys, but the documents confirming registration were only delivered through the post to the legal addresses of the companies, causing delays. Paying no heed to the Supreme Court decision, Tax Inspectorate No.15 in St.?Petersburg still only accepts documents from the CEOs of companies in person or by mail.

Formally such a policy aims to create barriers preventing the registration of fictitious organizations, but in practice it complicates the position of valid organizations, especially if the parent companies are registered abroad.

Conclusion

The new changes simplify some aspects of employing foreign citizens in Russia. However, many aspects await further regulation with a clearer set of rules and, as many employers hope, a more “user-friendly” system, which would allow spending less time in lines for permits and more time in actual production. There are also difficulties tied to inconsistent enforcement of the regulations throughout Russia’s regions, which sometimes introduce local regulations in addition to the federal ones.

As legislation and enforcement practices in Russia evolve, we hope to see rules that are more uniform and that will take into account the interests of legitimate employers. We will keep a watchful eye on new changes in the future.

Vladislav Zabrodin is managing partner, Pavel Karpunin lawyer and Alexei Nikitin junior lawyer at Capital Legal Services International, L.L.C.

News source: times.spb.ru
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