Hiring Expat Managers in Russia: Job Titles that Matter
- By Evgeny Reyzman
- Sep. 22 2009 00:00
Baker & McKenzie
Excerpt from migration interview (all details of participants are classified and have been changed):
Senior Migration Officer: “Mr. Smith, what is your place of work?”
Mr. Smith: “I work at the representative office of Smithson Trading, Inc, a foreign company located in Nagonia.”
Officer: “What position do you currently hold?”
Mr. Smith: “I am country manager for Russia.”
Interpreter (secretary to Mr. Smith, recent graduate of local pedagogical university): “Я - управляющий страной в России.”
Officer (translated by interpreter): [loudly] “Mr. Smith! According to the Constitution, Russia is managed by our respected President and Prime Minister! [whispering] Please be careful if you do not want to have problems. … Once again, what is your position?”
The Russian Labor Code and other statutes are often rather sensitive when it comes to job titles. In practice some positions are generally recognized as quasi-mandatory, for example, chief accountant (if a company does not outsource this function, or a CEO does not assume liability for accounting and tax reporting). Many positions at manufacturing facilities (mainly associated with hazardous operations) bring mandatory statutory benefits to their holders and in such cases the law dictates the use of statutory names for such positions. Statutory benefits bind any employer unless the employer proves, within the so-called “workplace attestation” procedure that, due to special technical measures or precautions, dangerous factors have been eliminated or limited.
Unfortunately, not many foreign companies working in Russia pay due attention to the specifics of Russian job titles. Below, we attempt to identify the most important cases when the names of positions held by expat employees do matter.
In Russia each company is treated as an independent employer, even if several companies belong to the same group, whereas the Western approach tends to recognize the group as an employer, even if technically employees are hired by different companies. This is due to differences in the corporate and tax status of companies in Russia and in Western jurisdictions. Most transnational corporations apply uniform systems for naming positions, with almost no attention to the company that acts as employer. In many cases corporations specially register SPVs to accommodate managers for specific regions. In Russia this approach may cause problems. If an officer hired in Russia via a representative office holds the title of Sales Director for X Region, this may, in the eyes of the tax authorities, place a question mark over the non-commercial status of such office, or suggest that this office renders taxable services to other companies of the group, especially if the head company of the office is not a manufacturing company.
The position of senior vice president in a small Russian company hiring a total of some 10 employees, and in the absence of the position of president, may also attract unnecessary attention from the regulatory authorities. If an expat officer is supposed to be responsible for accounting and tax reporting, and to sign relevant documents, it is important to appoint him to the position of chief accountant, and not finance director or a similar position, since otherwise the company may face difficulties in having its financial documents accepted by Russian banks and tax authorities.
The most important consideration at selecting the names of positions for expat employees is that Russian migration authorities now issue permissions to hire foreigners and work permits only at positions included into the so-called All-Russia Classifier of Industrial Workers Professions, Office Workers’ Positions and Grades. Thus, the Russian name of a position for an expat manager who needs a work permit should be taken from this classifier, and not just translated from a worldwide company schedule.
With this in mind, worldwide businesses will have to separate the positions of expat employees within Russian employing structures from their worldwide corporate status. The names of positions “for intra-Russia use” should reflect the role of the officer only within this Russian structure and be compliant with the classifier: general director, head of department, etc., and be used consistently in all formal HR and other official papers. A worldwide corporate status may be shown on business cards for presentation purposes. However, in such an eventuality we would recommend showing the name of the corporation. If such corporate status needs to be indicated in a letter, it is always possible to refer to both this and the position in Russia.
Due to the generosity of the Health and Social Development Ministry there is a very short list of positions that are “quota-free” for foreigners. Since extremely tight migration quotas have become a real headache for employers hiring foreigners, it is always important to think in advance about how to avoid them. Thus, if you open a representative office, it is better to call its head the director of the representative office in the regulations and HR documents. A CEO named president may well become quota-dependent, but a general director or a director of a company will definitely be quota-free this year.
It is not infrequent in transnational corporations for an expat and a local employee to hold positions with similar names, but receive very different salaries. From a business prospective this is quite logical: a company incurs expenses in bringing only the best, most experienced and qualified workers to Russia, who very often act as coaches for local employees. However, in the event of a conflict this may well give rise to allegations of discrimination, especially if the formal job descriptions of expats do not differ very much from those of their Russian colleagues.
Russian HR departments learned to avoid this problem by resorting to Soviet-era practices: they do not apply the same names to positions with different compensation, but use additional words or references to grades/categories to formally differentiate positions, such as “senior,” “chief,” or “grade 1,” and formulate job descriptions with visible differences. When such devices cannot be used (for example, when employees really do the same job, but the difference is caused by substantially different qualifications), it is quite legitimate to establish the so-called “personal increment” of a specific employee with reference to some objective superiority (long-term job experience, higher qualification, professional training, etc.). Thus, the base salary will be the same for both, leaving no space for successful allegations of discrimination.
It looks like after almost two decades of doing business in Russia, foreign employers have accepted the fact that in Russia the official language of employment is Russian, and that Russian regulatory officers draw conclusions based mainly on Russian-language HR documents. However, we still remind our clients from time to time that in setting out internal staffing structures it is always useful to think how this or that position may be translated into Russian. This is important when foreign names have no direct counterparts in Russia, such as logistics manager or chief financial officer, which may be translated in several ways, depending on what this manager will be doing. This is even more important when a foreign position name includes an abbreviation adopted by the corporation and which means nothing to outsiders.
This is particularly important when the holder of a specific position is entitled to statutory benefits, therefore in oil drilling a drill man, drill master, tool pusher or rig superintendent should always be a “буровой мастер” in Russian, and a foreman or a supervisor at a foundry should be titled “мастер плавильного цеха/участка.” And naturally, we think twice about how to indicate the position of a country manager in Russian. After all, who wants complications?