Secondment Arrangements in Russia: The Game Is Changing

by Morgan Lewis

Russian law now recognises secondment, but restricts the sphere of its use.

On 7 May, Russian President Vladimir Putin signed into law a long-discussed act that will regulate private employment agencies and secondment arrangements in Russia (the Law).[1] The Law amends, in relevant ways, the Law on Employment of the Population (the Employment Law) as well as the Labour Code, the Tax Code, and a few other related laws. It will take effect on January 1, 2016.

Secondment arrangements have not been clearly defined in Russia’s labour and civil laws to date (although they have been recognised for tax reporting and payment purposes). This has caused uncertainty for employers and lawyers in Russia because the widely used international secondment practice has not fit into the rather stiff Russian legal framework. Various political undercurrents have also contributed to the vagueness of the compromises reached.

Thus, the Law, for the first time, provides a specific definition for secondment: “loaned labour” (in Russian, “??????? ????”) provided under an “agreement for provision of the labour of workers (personnel)” (in Russian, “??????? ? ?????????????? ????? ?????????? [?????????])”. The Law first states flatly (at Labour Code new article 56.1) that “loaned labour” is prohibited. It then goes on (at Labour Code new chapter 53.1 and Employment Law new article 18.1) to outline and regulate the instances where secondment is permitted and not permitted (including permissible parties to such arrangements) and sets forth tough new restrictions on private employment agencies and secondment through them.

Summarised below are the most significant changes introduced by the Law.

Parties to Shareholders' Agreements and Affiliated Entities May Use Secondment

As now expressed in the amended Employment Law, “legal entities (including foreign legal entities) and their affiliates” may second their employees to other legal entities if they are

  • affiliated with the seconding party;
  • joint-stock companies, if the seconding party is a party to a shareholders’ agreement with respect to the joint-stock company in question; or
  • a party to such a shareholders’ agreement with the seconding party.

The fact that secondments will now be clearly permitted between corporate parties to a shareholders’ agreement and affiliated entities reflects a partial success for the business community in its lobbying for changes to an earlier draft of the Law that would have outlawed such arrangements.

However, by the words of the Law, the new permission for secondment does not seem to extend beyond the Russian OAO and ZAO stock company context. It does not apply (i) to and between parties to a participant’s agreement in a limited-liability company (LLC) (in Russian, an OOO—the form mostly commonly used for joint ventures) or (ii) to secondments to a company’s own branch in Russia (an approach often used by foreign companies) because a branch is not a separate “legal entity” from the civil or corporate law perspective.

The permission to second employees between affiliated entities would, in practice, allow parent companies to send employees to their subsidiaries (in which they hold more than 20% of the charter capital) and vice versa. This could be an approach used by companies that structure their own businesses or joint ventures in Russia through LLCs.

The general terms of and procedures for such permitted secondment arrangements going forward will be set out in a further separate new law, which has not yet appeared in draft form. It is possible that certain clarifications could be introduced in that law—spurred by further lobbying effort—to expressly broaden the permitted sphere to cover LLC-based joint ventures and parent-to-branch secondment.

Companies that currently use secondment arrangements in Russia should watch this situation closely between now and the end of 2015 to determine whether they will need to make any changes in their current employment or secondment approaches.

Limitations on Private Employment Agencies

The Law sets out a limited number of situations where a private employment agency will be entitled to administer secondment arrangements with commercial-employer clients. It also establishes an accreditation requirement for such agencies and sets out certain standards that they must meet in this regard.

Ongoing secondment arrangements for major foreign companies through private employment agencies would likely have limited practical use because of the new restrictions imposed (if they are not softened by the end of 2015). These include the temporary nature of (up to nine months) and prohibition on such secondments to dangerous-category workplaces.

As a result, we expect that many companies using employment agencies in Russia will have to reconsider or restructure their current arrangements. Some companies may feel compelled to move to outsourcing arrangements or to restructure their secondments by following either the shareholders’ agreement or affiliated entity option.

Related Tax Code Amendments

As noted, the Russian tax treatment of secondment has been more laissez-faire to date, and the Tax Code amendments simply conform to the newly introduced terminology.

One Tax Code provision (article 306.7, regarding permanent establishment for Russian tax purposes) is worth flagging in this regard. It, too, is unchanged in essence and changed only in terminology. It states that a foreign company will not be deemed to have a permanent establishment in Russia solely by virtue of seconding its employees into a Russian company and, absent any other indicia of permanent establishment, as long as such employees “are acting exclusively and in the interests of the receiving organisation.”

The Law has, so far, received a mixed reaction in the Russian business community, and it remains to be seen how the labour regulatory authorities will implement the new regime in practice and how the contemplated further special law on secondment will develop.

[1]. Federal Law No. 116-FZ, “On Amendments to Certain Legal Acts of the Russian Federation”.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.