Temporary Staffing and Staff Leasing in Russia

By Ekaterina Nagaynik

As summer approaches, the mass outflow of employees leaving for vacations will create problems for employers. While obligated to grant leave, employers face the question of working without indispensable employees. Recruitment agencies may provide solutions to temporary - or longer term - staffing problems through staff leasing models. Familiar to many employers in Russia through international experience, these staffing solutions are becoming increasingly popular in the country.

Terminology

Staff leasing is defined as an arrangement by which employees of one company (hereinafter provider) are assigned to work at a client company, and in which employment responsibilities are, in fact, shared by the provider and the client company. Additionally, the employee's assignment is intended to be of a long-term or continuing nature (as a rule, three months or more), rather than temporary or seasonal in nature, and a majority of the workforce at the client company or a specialized group within that workforce consists of the provider's employees.

Temporary staffing is an arrangement by which an organization hires its own employees and assigns them to a client to support or supplement the client's workforce in a special work situation, including an employee's absence (e.g. vacation or sick leave), a temporary skill shortage, a seasonal workload or a special assignment or project (as a rule, from one day to three months).

As part of the staff leasing model, the client company does not necessarily maintain its own labor pool. The provider takes over the client company's employment responsibilities and the client pays the staff leasing company a fee for the employees to be leased back to it. In this article, hereinafter the term "staff leasing" will be used for these two types of hiring, regardless of term or purpose.

Popularity Among Sectors

Staff leasing services are more popular among large banks, consulting companies, manufacturing ventures, and representatives of automotive, oil and gas, and pharmacology industries. The most frequently sought personnel fill positions as sales managers, receptionists, secretaries, personal assistants, promoters, merchandisers, translators, junior accountants, accountants, office administrators, IT specialists, PC specialists, financial clerks, auxiliaries, technical personnel and couriers.

Companies are turning to the staff leasing model for a variety of reasons:

· To allow flexible and fast adaptation to structural changes caused by changing market conditions and technical innovations

· To avoid work stoppage due to illness or leave

· To acquire qualified workers in the shortest time period and without bureaucracy (It's the provider's concern)

· To optimize tax burdens vis-à-vis payroll

· To limit the company's responsibility to service contract obligations

· To take advantage of possibilities to replace workers on conditions agreed to with the provider - different from those prescribed by the RF Labor Code

· To reduce compensation (non-salary) costs. It is the provider who pays for health and social insurance, savings plans, and other benefits for the staff leasing employees

· To lessen the workload and expenses of HR departments. Clients provide staff leasing companies with detailed requirements, and the provider takes care of the rest, allowing clients to focus their energy on their most critical business functions

· To fill staffing needs when head offices do not allow increases in permanent staffing numbers l To have a "probation period" after which the worker could be offered a permanent position without staff recruitment costs, etc.

Issues

Nevertheless the staff leasing model is problematic in Russia. Current law doesn't recognize the term "staff leasing." Moreover, leasing and labor legislation prohibit regarding staff as a subject to be leased. Also, the state plays a strong regulatory role in employer-employee relations.

The present legal framework frequently is debated, and several politicians have expressed a wish to modify the strict regulations to meet the requirements of today's labor market. The State Duma Committee of Labor and Social Policy is drafting a law to regulate agency labor. However, there is still not a staff leasing regulatory act or even a ratified ILO Convention No. 181 on private employment agencies (drafted on June 19, 1997) to regulate staff leasing activity.

Meanwhile, for foreign businesspeople coming toRussia, it remains strange that so convenient a structure like staff leasing not only is not formally regulated by the law, but is still hotly debated as to its legality.

The Current View

Under current law, staff leasing relations can be regarded as three-party relations. But in practice it should be regulated by two types of contracts: a civil contract between the provider and client, and a labor contract between the provider and employees. These relations are regulated by civil law with its optional provisions, and by labor law with its strict employer-employees requirements. By virtue of the mandatory nature of labor legislation, the client company incurs some responsibility regarding the leased employee. The question is: Which part exactly? This must be discussed in depth with the provider.

The thorniest issue is the recognition of labor relations between the leased employee and the client company, as the substantive provisions of formal labor relations then come into play. However, service contract procedures partly enable staff leasing companies to overcome these difficulties. Providers and clients can avoid problems and comply with state regulations by: correctly choosing the contract type, protecting employees' rights in practice and through contract, observing mandatory RF labor law norms, dividing responsibilities between contractual parties, and answering several other essential points.

In spite of the absence of specific legal regulations, staff leasing is not prohibited by the law. Rejection of the staff leasing model does not seem reasonable, especially in light of its benefits. Changes in the labor market have led to the necessity of changes to the legal framework.

By www.amchamnews.ru