Employing Foreigners: The Legal Maze (AmCham News. An insider prospective on International Business in Russia. July-August 2003)

Matvey Levant, managing partner Levant & partners law firm

A new law on foreigners and a government decree with detailed regulations on the issuance of work permits took effect last fall. Most foreigners need visas to enter Russia, while employers who want to hire foreigners need to receive work permits. Visas depend on the purpose of travel to Russia (business, working visa, tourist, stu­dent, etc.). A person who intends to work in Russia needs to obtain a working visa, which is usually issued after the work permit is received. Work permits are required even for top-level managers who do not receive salaries or if they are not physically present in Russia. In order for a foreigner to obtain a visa, in Moscow particularly, she must receive an invitation from a host company that is regis­tered with the Interior Ministry, Local Department of Visas and Registrations (OVIR) and Passport and Visas Central Department (PVU – former UVIR). Upon arrival in Russia, all visas have to be registered by a hotel or with PVU within three days. Prior to employing a foreign national, a Russian company must apply for a work per­mit. A foreigner is not allowed to engage in any business activities (e.g. as a consultant or entrepreneur) without a work permit.

The Russian government sets a national quota for foreign labor each year, giving pref­erence to the local workforce. In Russia, work permits and the corresponding confirmations are related to the company in whose name they are issued. This means that the foreigner will have to leave Russia upon termination of employment (with a few exceptions). Work permits are non-transferable and allow for only one job. If a person takes up positions in two or more separate legal entities, then a separate work permit and confirmation is required for each.

Work Permits

An employer has to submit documents to six different auihorities when applying for a work permit. The company may include more than one position in the applications. According to current practice a company is allowed to file for work permits only once a year, requiring the company to foresee all of its needs to employ foreigners and apply for all simultaneously.

First, the employer has to register with OVIR and PVU. Once registered, the com­pany may submit an application to receive a general permit to employ foreign citizens (or persons without residency in Russia). This is done by obtaining a decision regarding the necessity to employ a foreigner from the local (regional) labor agency with confirmation by the central labor agency. Upon receipt of the decision, the employer files for the permit through the local migration department. Next, the company applies to the federal migration department for the work permit. Once the permit is granted, the employer will be able to issue an invitation for a specific person for a specific position, as detailed in the permit.

Once the future employee is identified the employer has to receive confirmation from the migration department for the right to employ that individual.

Prior to the new law, companies with for­eign investments received quotas for work permits without any special application. These companies could directly apply for confirmation to employ a specific foreigner (exemption to employ foreign “top manage­ment” and “specialists”). This practice lives on, although the law does not differentiate between companies with foreign investments and fully Russian owned companies.

The employer assumes the following obligations when employing a foreigner:

  • Ensure that the employee (or contractor) has a valid work permit
  • Deposit the amount to cover the cost of return transport to the foreigner’s home country;
  • Register the foreigner at his/her place of residence;
  • Notify the local tax inspectorate about hir­ing a foreigner in specified cases;
  • Facilitate the foreigner’s departure upon his/her termination;
  • Cover deportation costs, if necessary:
  1. Notify the Interior Ministry about a breach of agreement terms or early termination; and
  2. Notify the Interior Ministry and Federal Security Service (FSB) about a foreigner’s absence from work or place of residence.

At the same time certain categories of foreigners are exempt from the requirement to receive a work permit. These are

  • Foreigners with temporary or permanent residence permits;
  • Diplomats and foreigners with similar sta­us, according to law;
  • Accredited journalists;
  • Foreign workers contracted to install imported  machinery and equipment (installations, supervision, servicing, war­ ranty or post-warranty repairs);
  • Students — in specific cases;
  • Teachers in licensed educational institu­tions (except for religious instruction).

Long-term options

Visa and work permit requirements should also be considered in light of the pro­visions of residency. According to the Foreign Status law, a foreigner can apply for either temporary residence or permanent residence. A temporary resident is required to obtain a visa, but not a work permit. A permanent resident needs neither a visa nor work permit.A temporary resident is not allowed to change his/her place of residence without permission from the state authorities.

In order to receive a permanent residen­cy permit a foreigner must live in Russia for at least one year as a temporary resident. The permanent residency permit is valid for five years and is renewable.

Sanctions for violating laws concerning visas, work permits and residency are stipu­lated in the Code of Administrative Violations of the RF, the Foreign Status law and the Entry and Exit law and prescribe in particular:

  • Fines levied on the company and its head;
  • Employee deportation;
  • Liability for expenses incurred by the for­ eigner.

In addition to the sanctions directly imposed by the law, the relevant authorities require the host company to sign a guarantee letter whereby the company takes on exten­sive liability for the conduct of a foreigner who has a multiple-entry visa.

Despite their good intentions to simplify the process for foreigners to obtain work and residency permits, lawmakers have made it more difficult in most cases.