Russian businesses are increasingly turning to outsourced staffing arrangements to cut personnel costs and fill vacancies faster, but the practice carries hidden risks for both companies and workers, according to Arsen Badalyan, deputy general director of the private employment agency Kadrovyi Kapital.
Badalyan told the Russian news outlet Lenta.ru that a growing number of companies in Russia rely on an outsourcing model in which a staffing agency supplies personnel to work at a client company, whether a factory, a warehouse or a catering business.
Outsourcing itself is a convenient and widely used arrangement, he said. But he drew a distinction between cases where an intermediary genuinely provides a service by taking on a defined piece of work, and cases where a service contract is used to formalize a relationship that, in substance, has all the features of direct employment.
Where the Line Blurs
In practice, Badalyan said, the boundary between the two arrangements can be unclear. A situation in which a person works permanently on a client company's premises, follows its internal rules, takes instructions from its staff and uses its equipment, while formally being employed through a contractor, is economically attractive to the client.
Such an arrangement lets a business quickly secure the staff it needs without expanding its own headcount or taking on the administrative work of managing personnel, he said.
But if the real relationship is later found to be one of employment, the company can face claims from Russia's Federal Tax Service, the country's tax authority. That can result in additional tax assessments, fines and penalties, as well as the need to restructure its relationship with the affected workers, Badalyan said.
What Workers Stand to Lose
Workers caught in such arrangements can lose out on paid leave, sick pay, bonuses, voluntary health insurance and other benefits they would be entitled to as direct employees, according to Badalyan. It also becomes harder for a worker to determine who is actually responsible for their working conditions, their pay and the protection of their rights, he warned.
Under Russian labor law, arrangements in which one company supplies staff to work under another company's day-to-day direction are tightly restricted and are only permitted through accredited private employment agencies operating under specific conditions, which is part of why the distinction Badalyan describes matters for both sides of the contract.
Nabiullina Defends Young Workers
The comments followed remarks from Bank of Russia governor Elvira Nabiullina, who defended the country's youngest workers, saying the younger generation is not having a negative effect on the growth of Russia's economy. Nabiullina, who has led the central bank, Russia's monetary policy and financial regulation authority, since 2013, was responding to questions from journalists about whether market stability could be threatened by young workers' preference for four-day work weeks and remote work.
She rejected that possibility, noting that the trend toward a gradual shortening of the working week, provided it comes alongside a corresponding rise in labor productivity, has been under way for some time.
