Prior to 2014, secondment arrangements had not been clearly regulated by either Russian labor or civil law, with many Russian companies operating under the pretense that as long as it is not forbidden, it might as well be considered legal. However, this thinking caused many problems because the Russian state bodies generally do not recognize secondment agreements as valid documents (except in a number of cases for tax and payment purposes).

In order to finally address this issue, the RF State Duma passed the law (the "Law"), which amended a number of other laws including the RF Labor Code and RF Tax Code. The Federal Law on Employment Occupation of People prohibits “loaned work” ("заемный труд"), but at the same time permits the temporary supply of workers to another person based on an employee supply agreement (“secondment agreement”), subject to a number or restrictions and rules, which include:

• the staff can be provided only on a temporary basis and with the relevant employee’s written consent;
• the supply of workers can be performed only by accredited agencies (accredited agencies will need to have the charter capital not less than RUB 1,000,000 and comply with the other requirements established by the Law) or between related companies (e.g., affiliated companies or companies – shareholders of the Joint Stock Companies that have entered into a shareholder’s agreement with each other);
• workers on strike, workers who work under hazardous conditions, or workers to whom salary payments have been delayed cannot be substituted by the secondees;
• income tax is withheld and social payments are made by the employer;
• seconding people by a foreign company to a company to work in the RF does not constitute the permanent establishment within the territory of the RF for tax purposes in the absence of other signs of permanent establishment; and
• the Law governs the procedure for seconding staff by accredited agencies. The procedure for seconding staff by another company shall be set forth separately in a different law.

The Law still contains some ambiguity. For instance, it is not clear as to why the Law considers joint stock companies that enter into shareholder agreements as “related” (for the purposes of seconding employees between one another), whereas companies-participants of the limited liability companies that enter into agreements on the exercise of participatory interest rights are not considered “related.” Hopefully this issue, among others, will be clarified by the time the Law becomes effective in January 2016.

Federal Law No. 116-FZ "On Amending Various RF Laws," dated May 5, 2014.