Borrowed labor in Russia 2019

The article was prepared by Volkova Alina, the leading consultant of Confidence Group Company.

 

Law dated by May 5, 2014 №116 “On amending certain legislative acts of the Russian Federation”, which came into force on 01.01.2016, prohibits the use of borrowed labor. This document introduced a new article 56.1 into the Labor Code of the Russian Federation, which establishes the the above-mentioned prohibition. It also contains a definition of borrowed labor. It means that work performed by an employee at the direction of his employer under the management and control of a person (legal or physical) who is not a direct employer of the specified specialist. The law introduces a ban on such services.

 

On the other hand, a particular group of people it allows to provide a loan of its staff to other organizations. These include private employment agencies that have passed state accreditation, as well as other organizations, if they send employees to a legal entity that is:

Thus, since 2016, the provision of personnel between unaffiliated legal entities is considered illegal. Opportunities for hiring employees from the outside through outstaffing or outsourcing schemes have also significantly decreased.

 

Private employment agencies are allowed to provide personnel under an outsourcing or outstaffing scheme, provided they have certain accreditation:

 

The procedure for accreditation of employment agencies (hereinafter AZ) is regulated by Decree No. 1165 of the Government of the Russian Federation of October 29, 2015. The form of the annual report, which should be provided to accredited private AZ, is approved by order of the Ministry of Labor of the Russian Federation No. 265 from 30.05.2016.

 

In addition to accreditation and other legal and organizational aspects, in the field of outstaffing and outsourcing of personnel, the following requirements have been introduced for persons wishing to provide such services:

It should be noted that there are many companies with accreditation - all of them are presented and are publicly available on the website of Rostrud by the link https://www.rostrud.ru/opendata/7712345678-chaz/table.html. There were 1263 companies on the beginning of June 2019. 

 

What are the differences between outstaffing and staff outsourcing?

Outstaffing is actually the removal of personnel from the staff of the company. Outstaffing personnel perform their duties in one particular organization. The employment contract is concluded between individuals and this organization, next step is so-called "leasing" of personnel in order to performing a specific task. At the same time, the staff has a permanent workplace, formed job description, determined wages. Employment is in one particular company, but the actual work is in the another. The contract is valid for a maximum of nine months during the outstaffing Outstaffer takes over the functions of paying wages, paying taxes, enforcing labor laws (hiring, firing, etc.).

 

Outsourcing is the transfer of certain functions of one organization to another (accounting, human resources, etc.). The outsourcer does not have a permanent workplace and a clear work schedule. Payment is made upon completion of the work. The term of the contract is not limited.

 

Let's look why outsourcing and outstaffing are so beneficial if the use of these schemes involves certain risks.

 

In particular, outstaffing and outsourcing can solve various basic problems. Among them:

Who has benefit from it?

Most often this system is used:

If this scheme is so good, are there any disadvantages?

Of course, there are certain disadvantages: 

As mentioned above, only AZs can provide personnel under the outsourcing or outstaffing scheme and only under certain conditions, however, the Russian market is full of unscrupulous companies providing outsourcing and outstaffing services without the necessary accreditations, as well as unscrupulous employers who are ready to apply for illegal services. Our company conducted a small study of this market of companies and found out both legal and illegal schemes of work.

 

So let's get it right. The only legal outstaffing scheme is the following: the company temporarily needs to hire people who are constantly working in the state (i.e. there is such a full-time position), but for some reason there are currently no employees, for example, they are on sick leave or on maternity leave. In this case, the Customer company enters into an agreement with AZ, which must be accredited. This agreement clearly defines the working conditions, the functions that the outstaffer will perform. At the same time, the Customer company does not participate in the selection of personnel by the employment agency, in no way motivates the “rented” personnel, does not participate in its development, training, distribution of the volume of work, in a word, does not participate in managing it. Salaries are paid to staff by their agency, and not by the customer company.

 

Next, we want to talk about the outstaffing scheme, which is defined as contingent labor and is prohibited in the Russian Federation, however, for one reason or another it continues to be used by many companies. The company-customer enters into an agreement to perform a certain type of work, however, the volume of these works is not fixed in the agreement, that is, in fact, the client-customer does not care about the result of the work, but the process of its implementation. At the same time, the customer participates in the discussion of the candidacy of the person being sent, puts forward his requirements for his qualifications, distributes the work, and trains him. All of the above can be qualified as signs of an employment relationship, which is strictly unacceptable in the outstaffing scheme. Such Customer companies are considered by the inspection bodies as companies wishing to withdraw their staff for the staff, saving not only taxes, but also compensations and benefits to their employees.

 

Outsourcing is actually equivalent to the provision of services: an outsourcing agreement is not among the list of possible agreements in the Civil Code of the Russian Federation. However, article 421 states that individuals and legal entities have the right to freedom to conclude contracts. It is allowed to conclude contracts, which are provided for by legislation and regulations, and contracts that are not reflected in laws and regulations. One of the possible ways to implement an outsourcing agreement is to conclude a contract for the provision of services for a fee. At the same time, the requirements for the personnel who provide this service cannot be spelled out in the contract for the provision of services. The contract fixes directly certain services, payment is made for the performance of each specific service. The employee whom the agency provides for the performance of a particular type of service is not subject to the schedule of the customer company, and services can be provided remotely. Moreover, this employee can be replaced without the consent of the client-customer, who also does not participate in his training or control.

 

Outsourcing is used when the staffing of the company-customer does not imply one or another position that he needs, he does not have sufficient knowledge, experience and qualifications. An example of legal outsourcing is the following: conclusion of an agreement between the company-customer and the agency on the provision of any kind of services, for example, accounting. The contract clearly defines the name of the services and the fixed cost for their provision. The person providing these services can both provide them on-site in the company of the client-customer, and remotely. In the absence of this person, the agency provides the customer with a replacement or the agency at any time replaces the person at will and discretion. All reports are provided directly to the agency, which fully controls the process of providing the service, pays wages to its employee.

 

The difference between legal outstaffing and outsourcing is insignificant and lies, in particular, in the timing of the provision of services.

 

However, some unscrupulous companies wishing to remove their staff for the staff are trying to do this through an outsourcing scheme, which in itself is illegal. Consider the example of a restaurant / cafe, when the staffing of an institution implies the presence, for example, of a cook or a waiter. However, the company-customer wants to withdraw the staff for the staff and “disguises” it as a service agreement with a certain agency. In this case, the inspection body at the time of the inspection can establish the presence of labor signs in the relationship between the customer company and employees.

 

In both cases of using both outstaffing and outsourcing, when deciding on the use of this scheme, it should be borne in mind that the inspection bodies, including the territorial body of the federal executive body in the field of internal affairs in the subject of the Russian Federation, in whose territory the given foreign citizen carries out labor activities , will consider the relationship between the Customer company and the temporary staff / personnel provided to it, providing services as labor.

 

Confidence Group recommends checking relations with temporary staff providing services in the following positions:

If you are not sure whether your relations with the staff fall under the above signs, we recommend that you either change the scheme of these relations or refuse to use this scheme as a whole, since penalties for violating the law in this area are significant:

In the case of foreign citizens, there are also additional difficulties. The inspection body is the Ministry of Internal Affairs, whose employees often did not even hear about such a concept as borrowed personnel.

 

The physical presence of a foreign worker at the workplace and the clarification that he is a borrowed worker is considered by default to be an illegal attraction of a foreign citizen to work by this body. For these violations, an administrative fine is imposed:

Confidence Group strongly recommends those wishing to use the services of outstaffing or outsourcing to apply only to accredited agencies, which take full responsibility for the services provided, including for foreign workers, and also use only legal methods of outstaffing or outsourcing. Agree that it is better to pay more for services, but to be sure of the quality and legality of the services provided, rather than save, but in the future get under millions of penalties for violating the laws of the Russian Federation.