Expanding your business to Russia or hiring Russian employees requires a clear understanding of the country’s tax system, social security contributions, and labor regulations. Failure to comply can lead to heavy fines, legal issues, and operational disruptions.
This guide covers everything employers need to know about:
✔ Payroll taxes & social security contributions
✔ Employment contract requirements
✔ Work permits for foreign hires
✔ Termination rules & probation periods
1. Payroll Taxes & Social Security Contributions (2024 Rates)
When hiring in Russia, employers must account for mandatory deductions from salaries:
A. Employee Income Tax (NDFL – НДФЛ)
- 13% (for Russian tax residents)
- 30% (for non-residents working in Russia)
- Paid by the employer through withholding tax
B. Employer Social Contributions (ОПС, ОМС, ОСС)
Employers must pay 30% of an employee’s salary to social funds:
| Contribution Type | Rate (2024) | Purpose |
|---|---|---|
| Pension Fund (ОПС) | 22% | Retirement benefits |
| Social Insurance (ОСС) | 2.9% | Sick leave, maternity pay |
| Medical Insurance (ОМС) | 5.1% | Healthcare coverage |
| Total | 30% |
Example:
- Employee salary: 100,000 RUB/month
- Employee pays: 13% income tax (13,000 RUB) → Takes home 87,000 RUB
- Employer pays: 30% social contributions (30,000 RUB) → Total cost: 130,000 RUB
2. Employment Contracts & Labor Laws
Key Requirements for Russian Employment Contracts
- Must be written in Russian (even if the company is foreign)
- Must include:
- Job title & responsibilities
- Salary (in RUB) & payment schedule
- Working hours (standard is 40 hours/week)
- Probation period (max 3 months, or 6 months for executives)
- Termination conditions
Types of Employment Contracts
- Indefinite (Permanent) Contract – Standard for full-time roles
- Fixed-Term Contract – Max 5 years (must justify limited duration)
- Freelance (GPC Agreement) – No social benefits, but more flexible
⚠️ Important:
- Probation periods can be terminated easily, but regular employees have strong protections.
- Overtime must be paid at 1.5x–2x the normal rate.
3. Work Permits & Visas for Foreign Employees
Hiring Foreigners in Russia
- Work permits required for non-Russian hires (exceptions: EAEU citizens)
- Process:
- Employer obtains a quota permit (if required)
- Employee applies for a work visa (usually highly qualified specialist (HQS) visa)
- Employee registers with tax authorities
Highly Qualified Specialist (HQS) Visa
- Minimum salary requirement: 167,000 RUB/month
- Fast-tracked approval (~14 days)
- Tax benefit: 13% income tax (vs. 30% for standard work visas)
4. Termination & Severance Rules
Terminating an Employee in Russia
- At-will firing is illegal – Employers must provide valid grounds (e.g., poor performance, redundancy).
- Notice period: At least 2 months (unless mutual agreement).
- Severance pay:
- 2 weeks’ salary (standard termination)
- 2–3 months’ salary (layoffs due to company restructuring)
⚠️ Warning:
Wrongful termination lawsuits are common—always document performance issues.
5. Compliance Risks & Penalties
| Violation | Penalty |
|---|---|
| Unpaid taxes | 20–40% of owed amount + criminal liability |
| No employment contract | Fines up to 100,000 RUB (for employers) |
| Illegal foreign workers | Deportation + company blacklisting |
| Missed social payments | 5% monthly penalty on overdue amounts |
6. How Foreign Companies Can Hire Compliantly
Option 1: Set Up a Russian Legal Entity
- Required for long-term hiring
- Must register with tax authorities & social funds
Option 2: Use an Employer of Record (EOR)
- A local partner handles payroll, taxes, and compliance
- Ideal for short-term projects or testing the market
Option 3: Hire Freelancers (GPC Contracts)
- No social security obligations
- But freelancers can later claim employee status if work resembles employment
Key Takeaways for Employers
✅ Salary calculations must include 13% income tax + 30% social fees
✅ Employment contracts must be in Russian and detail all conditions
✅ Foreign hires need work permits & visas (HQS is the best option)
✅ Terminations require valid reasons & proper documentation
By following these rules, businesses can hire legally, avoid fines, and build a strong team in Russia.