23.02.07

Lessons to Grow by:
Russian HR in 2006
Tatyana Terekhova,
Head of HR Solutions, Alinga Consulting Group

What a year it's been – full of news and developments in the tax authority’s struggle against undeclared wages. Several new amendments have also come into force in the Labor Code of the Russian Federation. Looking back, we see that new laws and the realities of doing business in Russia have very strongly affected the personnel market, and we believe that the amendments enacted are intended to further develop civilized attitudes in society in general and in the labor market in particular. Certainly, the year has not passed without incidents and while the legislation still contains many ambiguities, we can look back at the lessons learned from our experience in 2006.

Looking at the Moscow labor market, one might think that everyone except employers has lost interest in work. Recruiters search high and low for talented individuals to enrich their companies, companies which are growing at ever quicker rates in the Russian market. However, this does not mean that people are not searching for work. One of Alinga's HR Solutions clients hit the nail on the head by describing the situation as follows: as the market grows and develops, both Russian and foreign businesses are searching for people who can help them maintain their growth. The people, however, are lagging seriously behind in professional development.

There are simply not enough people in Russia, even in Moscow, with the education and the training in international standards necessary to compete in their professional spheres. So, we have inherited a raging "War for Talent." We expect both employers and workers to survive this war, as they work and educate themselves to develop the talents that keep their businesses and the Russian economy growing.

Challenges in the Russian labor market in 2006 seem to have activated Russian lawmakers. The Tax Service has stepped up efforts to stamp out "gray" wages, with which the Labor Service has also struggled against, as well as with improving the Labor Code, and the Migration Service has striven to improve the lives of foreigners in Russia. Each of these has, in its own way, affected the labor market. However, gray salaries still exist, and are actually growing fast enough to compete with white salaries. Labor inspectors are already actively enforcing the new changes to the Labor Code which came into force in October, 2006. In the Rostov area alone, inspectors report, the heads of 690 enterprises and organizations were fined for violations connected with payment of wages. In total, 1408 inspections were conducted, including 479 checks in conjunction with the Office of Public Prosecutor. 8921 violations were found, four cases were sent to court and two people were stripped of their qualifications.

The main news of 2006 from the Federal Labor and Employment Service was the publication of the “Explanations on the Order of Implementing the Governmental Order of the Russian Federation” from November, 15th, 2006 # 683 and known as "On the Establishment of Quotas for Admissible Foreign Workers Used by Employers in the Sphere of Retail Trade within the Territory of the Russian Federation."

This order came into force on 15 January 2007, and is already being actively enforced. In a series of inspections and raids, several infringements of the new law have already been found and many foreign workers have been forced to buy tickets home. The employer is left trying to find skilled labor able to replace the employee at a similar price – which is often a problem.

2007 will bring even more questions – important questions not only about personnel search, but also about personnel retention. Even if you have already found talented employees, it's not guaranteed that they will stay with you throughout this new year. We must learn from the lessons of the past in order to study the present and avoid making mistakes in the future.

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