24.09.08

Kelly Services, the international personnel agency, has conducted research on the presence of expatriates (foreigners) in companies operating in Russia. They found that foreigners worked in 87 percent of the companies taking part in their research (large and medium-size companies in Moscow), but their total number was quite low at 1-5 percent of a company’s personnel.

“In the last two years, a tendency has been observed of appointing Russian specialists at the highest levels where foreigners had previously been employed. That is mainly connected with the fact that a generation of qualified personnel has emerged since the 1990s,” Kelly notes. The lack of qualified managers in Russia means that that tendency is unstable during expansion of business or economic growth.

Kelly Services conducted the August study to determine the relations between Russian employers and expats as well as to figure out the goals of expats in Russia. Today, expats account for an average of 1-5 percent of the staff of the 50 companies included in the study. Of these companies, only one had a workforce with 10 percent foreign employees. 68 percent of the companies polled had foreigners employed as top managers and 26 percent had foreign mid-level managers. Expats are most commonly employed in the following sectors: marketing (18 percent), sales (17 percent), finance (12 percent) and administration (10 percent). 43 percent of foreign employees reported coming to Russia temporarily: parent companies commonly send their employees abroad to fulfill a specific business task.

Obstacles of the Law

Over the past two years the process of hiring expats in Russia has undergone significant changes owing to amendments that were passed on the federal law on the legal status and migration reporting procedures of foreign citizens. New administrative rules on granting permission to use foreign employees came into effect July 25, 2008, which also contributed to the significant change in the process of hiring foreigners. Igor Simonov, a lawyer of the Moscow Association of Lawyers, believes that this legal provision technically simplifies the job placement process for foreigners, while on the other hand it lowers their chances of completing that placement due to a new requirement forcing employers to prove that it was not possible to hire a Russian citizen for the same position.

Svetlana Shneider, the Deputy Director of the Department of Labor Law and HR Management for the company NS Consult, agrees with Simonov. She says that according to the new rules an employer is freed from the obligation of independently asking the State Employment Agency if hiring foreign labor would be "advisable." Now the Federal Migration Service fulfills this function. But whether the employer’s job has become easier is debatable, says Shneider, because employers must strictly follow the requirements set out under the law “On the Employment of the Population in the Russian Federation” and submit information on the vacant position beforehand. Before, employers were not required in all cases to do this and many didn't. Now, however, failure to submit this information means being denied the permit to invite foreign employees to work in Russia, meaning that they cannot be hired at all. It’s obvious that these changes were meant to force employers to hire Russian citizens, says Shneider. She also adds expenses for filling a position with an foreigner (which includes various state fees) are higher than for a Russian.

Hanging in the Balance

20 percent of respondents noted that legislation on hiring foreigners is a problem. However, 34 percent of employers believe the main problem is foreigners’ high salary expectations, and 26 percent say the main problem is foreigners’ unfamiliarity with the Russian mentality, which, according to them, is equivalent to not understanding how business is done in Russia.

The reasons vary for why companies want to hire expats for key positions: 68 percent of companies want the latest foreign know-how in a particular business sphere. 11 percent cite the possibility of introducing innovations into the company structure. Another 7 percent of respondents say knowledge of Western technology is one of foreign employees’ advantages. Other reasons companies cite include adding new expertise to their workforce, gaining international connections, or improving business culture.

“Employers most commonly turn to foreigners for help when they can’t find people with comparable qualifications domestically,” says Yuri Virovets, President of the group of companies HeadHunter. “Secondly, sometimes foreign companies don’t trust Russians to be in key positions. Finally, sometimes employers want to build a corporate culture according to the Western model.” According to him, the deficit of qualified specialists is sharply felt in certain spheres due to the fact that in Russia, these spheres only recently began developing. One example is retail banking. Many major retail banks offer leading positions to foreigners because they can’t find managers of comparable experience and education in Russia. Foreigners are in demand to shine up still rough business sectors in Russia.

“In our board of directors we have an independent director by the name of Hans Goldenburg,” says Dmitry Denezhkin, General Director of the group of companies "Russian Sea." “He has experience in the most important areas of the consumer goods industry. Besides that, he’s worked for companies that are models of the corporate process. It’s practically impossible to find Russian specialists with such experience because our market economy is too young.”

“About 60 percent of independent directors in Russian companies are foreigners,” notes Alexandre Filatov, Managing Director of the Association of Independent Directors. “They are usually invited by companies whose shares are sold on international markets, companies preparing for IPOs or private offerings to partners with Western interests.”

Demand for Specialists Won’t Ebb

“Taking into account demographics, the deficit in the personnel market, and the growth of the Russian economy, the demand for qualified specialists will not decrease until at least 2015,” says Andrei Korovkin, the head of Labor Forecasting for the Institute of Economic Forecasting, a part of the Russian Academy of Science. Anna Koff, Senior Partner of the headhunting firm RosExpert, agrees with Korovkin. “Fast moving consumer goods has traditionally been an industry that offers foreigners positions as general director or other marketing-related positions,” Koff says. “But now there is less demand for these positions, which is why they are recruited to be consultants and independent directors. As before, non-foreign managers hold positions of power in the industrial sector, while the demand for foreign managers in the retail sector is still high. On the other hand, it’s obvious that the time is past when deciding to hire a foreigner was a long-term decision: now these foreigners are brought in either come several times a year, or they are here for a project period, during which they need to fine-tune business processes and make preparations for it be handed over to Russians.”

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Source: "Vedomosti" and Kommersant