Introductory information
One of the most common ways of borrowing third-party personnel is called outstaffing.
Translated from English, “outstaffing” means “removing personnel outside the state” (out - “outside” + staff - “staff”). This term is not used in Russian legislation. However, in practice, outstaffing is used quite widely, although it threatens certain tax risks and close attention from the labor inspectorate (see, for example, “Personnel leasing (outstaffing)”, “Documents required to attract an employee under an outstaffing agreement”, “Registration of employees when concluding an outstaffing agreement with another company").
The essence of outstaffing is as follows: one organization or entrepreneur (contractor) transfers a certain number of employees to another organization or entrepreneur (customer). As a result, employees work for the customer, and the employer is the contractor. It is the contractor who concludes employment contracts with employees, pays them wages and benefits, maintains personnel records, etc. Thus, employees actually work in an organization with which they are not connected either by labor or civil law relations (see diagram).
Let us note that although the Civil Code of the Russian Federation does not directly stipulate the possibility of concluding an outstaffing agreement, it does not prohibit it. According to Article 421 of the Civil Code of the Russian Federation, the parties have the right to draw up mixed contracts (containing elements of various contracts), as well as any agreements that are not provided for by the Civil Code of the Russian Federation, if they do not contradict current legislation. Therefore, it cannot be said that all outstaffing contracts were drawn up in violation of the law. In arbitration practice, there are decisions in which judges recognize that the conclusion of contracts for the provision of personnel does not contradict the law, and the relations that have arisen between the parties to such an agreement have signs of paid services (see, for example, resolution of the Federal Antimonopoly Service of the North-Western District dated April 12, 2004 No. A56-20964/03).
The subject matter of the contract is extremely important. If the subject of the outstaffing agreement is the rental of personnel, and not the provision of paid services by the contractor’s employees, then the agreement will be recognized as void or invalid, and, accordingly, problems with the recognition of expenses under this agreement are almost inevitable. Thus, Professor A.P. Sergeev, author of a textbook on civil law, Fr.
In practice, the concepts of “outstaffing” and “outsourcing” are often confused. The latter term is also not found in Russian legislation. The English word “outsourcing” (outer-source-using) means “using an external source or resource.” When outsourcing, an organization or individual entrepreneur transfers the performance of part of its functions (for example, accounting or advertising support for a business) “to the outside”. At the same time, employees of a third-party organization or individual entrepreneur who will perform these functions are not subordinate to the customer company (unlike outstaffing). A clear distinction between these terms is necessary to understand the changes that will be discussed further.
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Agency work: what is it and why is it prohibited?
In 2021, Article 56.1 appeared in the Labor Code of the Russian Federation, which provides a clear definition of the concept of “agency labor,” or labor at the direction of a nominal employer, but under the direction and in the interests of another company. Such work has been banned in Russia since 2021.
The essence of agency labor is as follows: one company or entrepreneur (contractor) transfers a certain number of workers to another organization or entrepreneur (customer). As a result, employees work for the customer, and the contractor is the employer. The contractor, in turn, enters into employment contracts with them, pays them wages and benefits, and maintains personnel records. Thus, employees work in an organization with which they are not connected either by labor or civil law relations (see the diagram below).
The state of affairs in outstaffing that existed before 2021 was unfavorable for the employee. An employee was hired to work for one company, and he worked for another. The employer did not bear any responsibility for the employee. Most often this concerned work in hazardous industries, where no payment was provided for hazardous work. Organizations with harmful and dangerous working conditions thus saved on insurance premiums for injuries. These conditions served as the reason for the adoption of a new article 56.1 in the Labor Code of the Russian Federation.
It is possible to lease employees of another company, but now outstaffing has changed and is regulated by the new Chapter 53.1 of the Labor Code of the Russian Federation.
Changes in legislation from 2021
Agency labor will be prohibited
From January 1, 2021, the provisions of Federal Law No. 116-FZ dated 05.05.14 (hereinafter referred to as Law No. 116-FZ) will come into force, which stipulate the conditions and procedure for borrowing personnel from other employers. In particular, a new article 56.1 of the Labor Code of the Russian Federation is being introduced, which contains a definition of agency labor. This rule states: agency work is work performed by an employee at the order of the employer in the interests, under the management and control of an individual or legal entity that is not the employer of this employee.
It turns out that with agency work, the employer transfers his employees to the subordination of third-party individuals or organizations. That is, in essence, agency labor is the form of labor that is used under an outstaffing agreement. The main news is that from January 1, 2021, agency work will be prohibited. This is directly stated in Article 56.1 of the Labor Code of the Russian Federation. Does this mean that next year it will be impossible to use the labor of third-party personnel?
A new type of activity will appear
Having established a ban on agency labor, legislators simultaneously introduced a new type of activity - “activities for providing labor to workers (personnel).” In this regard, in the Law of the Russian Federation of April 19, 1991 No. 1032-1 “On Employment of the Population in the Russian Federation” (hereinafter referred to as Law No. 1032-1), a new Article 18.1 appeared, which lists the conditions for carrying out this type of activity. And a new chapter 53.1 has been added to the Labor Code of the Russian Federation “Features of regulation of the labor of workers sent temporarily by the employer to other individuals or legal entities under an agreement on the provision of labor for workers (personnel).”
Dispute Resolution
In this section, the parties determine the procedure for resolving emerging contradictions. The parties indicate the court authorized to consider all arising disputes. The parties may establish a condition for the consideration of arising disputes by an arbitration court. When agreeing on an arbitration clause, the parties must indicate whether the arbitrator's decision is final for the parties to the dispute.
Registration of relations for the provision of personnel
The circle of persons who, starting from 2021, will be able to carry out activities to provide labor for workers is limited (see diagram).
Before moving on to a description of the conditions that must be met by organizations providing personnel, let us dwell on the question of how the relationship between such organizations and those to whom the workers are transferred will be formalized. The agreement with the party receiving the workers (individual or organization) will be called the “Agreement on the provision of labor for workers (personnel).” Under such an agreement, the contractor (for example, a private employment agency) temporarily sends its employees, with their consent, to the customer to perform labor functions defined by their employment contracts, in the interests, under the management and control of the customer. And the customer is obliged to pay for the services of the organization that provided the personnel and to use the labor of the workers sent to him in accordance with the labor functions defined by their employment contracts (clause 2 of article 18.1 of Law No. 1032-1).
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Services for the provision of personnel labor are subject to VAT (subclause 1, clause 1, article 146 of the Tax Code of the Russian Federation and paragraph 6, subclause 4, clause 1, article 148 of the Tax Code of the Russian Federation, as amended by Law No. 116-FZ). The costs of these services can be taken into account when calculating income tax as part of other expenses associated with production and sales (subclause 19, clause 1, article 264 of the Tax Code of the Russian Federation as amended by Law No. 116-FZ).
The contract for the provision of personnel to perform work is governed by:
- Chapter 39 (Paid provision of services) of the Civil Code of the Russian Federation;
- paragraph 1 (General provisions on contracting) of Chapter 37 (Contracting) of the Civil Code of the Russian Federation.
With this document you will definitely need
- Documentation
Application (Appendix to the contract for the provision of personnel to perform work)
- Documentation
Certificate of services rendered (Appendix to the contract for the provision of personnel to perform work)
- Documentation
Contract for the provision of recruitment services
- Documentation
Customer's application for the selection of a specialist (Appendix No. 1 to the Agreement for the provision of personnel selection services)
- Documentation
Certificate of services rendered (Appendix to the contract for the provision of personnel selection services)
- Documentation
Contract for paid services (general)
- Documentation
Contract for paid services with an individual (one-time services)
- Documentation
Contract for paid services (one-time services)
- Documentation
Contract for paid services (regular and (or) upon request)
- Documentation
Agreement for paid services with an individual (regular and (or) on request)
Private employment agencies
The right to provide labor to workers will be given to private employment agencies - legal entities registered in the Russian Federation that have undergone special accreditation. The procedure for accreditation must be determined by the Government of the Russian Federation. At present, the corresponding document has not yet been adopted. However, the requirements for private employment agencies are already known (Clause 6, Article 18.1 of Law No. 1032-1):
- presence of an authorized capital of at least 1 million rubles;
- absence of arrears in taxes, fees and other obligatory payments;
- the head of a higher education agency, as well as work experience in the field of employment or promoting employment in the Russian Federation for at least two years over the last three years;
- the head of the agency has no criminal record for committing crimes against the person or crimes in the economic sphere.
Let us note one more, extremely important limitation: organizations applying special tax regimes will not be able to be private employment agencies (clause 6 of article 18.1 of Law No. 1032-1). In this regard, starting from 2021, paragraph 3 of Article 346.12 of the Tax Code of the Russian Federation will directly indicate that private employment agencies engaged in providing labor for workers (personnel) do not have the right to use the “simplified tax system”.
Registration of labor relations with employees
A private entertainment agency is obliged to conclude an employment contract with an employee who will be temporarily sent to work for another organization or an individual and make an entry in his work book.
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The employee’s employment contract must stipulate that he will work in the interests, under the management and control of an individual or organization that is not his employer. At the same time, such a condition can be included in an employment contract only in strictly specified cases, namely (Article 341.2 of the Labor Code of the Russian Federation):
- if an employee is temporarily sent to an individual who is not an individual entrepreneur for the purpose of personal service or assistance with housekeeping;
- if an employee is sent to an organization or individual entrepreneur to temporarily perform the duties of absent employees, who retain their place of work;
- if an employee is sent to an organization or individual entrepreneur to carry out work related to a deliberately temporary (up to nine months) expansion of production or the volume of services provided. Let us note that if through an employment agency it is intended to attract more than 10 percent of the average number of workers to such work, then when making this decision it is necessary to take into account the opinion of the trade union (clause 10 of article 18.1 of Law No. 1032-1).
Legislators have identified three categories of workers who can be sent to work for the receiving party not only in the cases listed above, but also in all cases where fixed-term employment contracts are allowed. These categories of workers include:
- persons studying full-time;
- single and large parents raising minor children;
- persons released from institutions executing a sentence of imprisonment.
Let us recall that the cases in which it is possible to conclude a fixed-term employment contract are listed in Article 59 of the Labor Code of the Russian Federation. For example, a private employment agency can enter into a fixed-term employment contract with a full-time student for the duration of temporary (up to two months) work and for this period send such an employee to an individual or organization under a staff labor contract.
The working conditions of the host party are specified in an additional agreement to the employment contract, which is concluded between the employee and the private employment agency. The additional agreement specifies information about the receiving party, as well as information about the contract for the provision of labor for workers (personnel). It is also possible to include provisions in the additional agreement that stipulate the rights and obligations of the receiving party listed in Article 341.2 of the Labor Code of the Russian Federation.
Let us note that the private employment agency is obliged to monitor whether the sent workers actually perform the labor functions defined by the employment contracts, and also whether the receiving party complies with the norms of labor legislation.
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Other organizations (except employment agencies)
Other legal entities, including foreign ones, will be able to carry out activities to represent workers only if, with their consent, workers are temporarily sent:
- to an affiliated organization;
- to a joint-stock company, if the sending party is a party to a shareholder agreement on the exercise of rights certified by shares of such a joint-stock company;
- to an organization that is a party to a shareholder agreement with the sending party (clause 3 of Article 18.1 of Law No. 1032-1).
Thus, the legislation has seriously limited the ability to provide personnel to those organizations that are not private employment agencies.
Registration of labor relations with employees
The specifics of formalizing labor relations with employees of organizations that are not private employment agencies must be reflected in the federal law (Article 341.3 of the Labor Code of the Russian Federation). Currently, the corresponding law has not been adopted.
When will it be prohibited to use third party workers?
The conclusion of contracts for the provision of personnel labor is not allowed in the following cases (clause 12 of article 18.1 of Law No. 1032-1):
- if the host team went on strike;
- to perform work in case of downtime or part-time work, announced in order to preserve jobs in the face of the threat of mass layoffs of workers of the receiving party;
- if the receiving party is in bankruptcy;
- to replace employees of the receiving party who refused to work in cases established by labor legislation, in particular if their salary payment was delayed for more than 15 days.
In addition, private employment agencies will not be able to send their workers to perform certain categories of work, as well as to certain jobs and positions (clause 13 of article 18.1 of Law No. 1032-1):
- for work at hazardous production facilities of hazard classes I and II,
- to workplaces where working conditions are classified as hazardous working conditions of degrees 3 and 4 or dangerous;
- for positions that are associated with obtaining a license or other special permit to carry out a certain type of activity, a condition for membership in an SRO or the issuance of a certificate of admission to a certain type of work;
- to perform work as crew members of sea vessels and mixed (river-sea) navigation vessels.
Advantages and disadvantages
The purpose of attracting freelance personnel is to reduce costs and optimize costs.
So, thanks to this service the customer receives:
- reduction in the number of full-time employees and the volume of work of the personnel service. In some cases, you can do without it completely if the enterprise is very small and only managers remain as full-time employees. There is no need to spend time on recruiting employees, conducting interviews with candidates, placing personnel, training, completing documents when hiring and dismissing;
- reducing the burden on accounting, which will thus have to spend less time on calculating and paying salaries;
- reduction of insurance risks and risks associated with unforeseen circumstances - according to the law, the risk is shared by both parties (customer and outstaffer) in equal parts, and in some cases only by the outstaffing company;
- removal of obligations from the company in the event of labor disputes;
- increasing the flexibility of employee management;
- the opportunity to operate as a small enterprise and, accordingly, pay less taxes. When determining the size of a company by number, outstaff workers are not taken into account, since they are not full-time employees;
- reducing costs that arise from staff turnover.
Flaws:
- the customer cannot influence the quality of work;
- non-staff employees are not required to obey internal labor regulations;
- the customer cannot apply disciplinary sanctions to such employees;
- if employees do not meet the qualification requirements, the problem can only be solved through an outstaffer, and since his responsibility is considered to provide an employee with the required qualifications, and not be responsible for the quality of work, the contract for the provision of employees should specify in more detail the requirements for their qualifications.
Payment of personal income tax and insurance premiums
Since for employees sent under a contract for the provision of personnel, the transferring party remains the employer, it is she who must calculate, withhold and transfer personal income tax on the remuneration paid to them.
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Also, the employer (for example, a private employment agency) must calculate and pay insurance premiums from the remuneration of such employees based on the tariffs it applies.
The specifics are established only for calculating insurance premiums “for injuries”. The innovation is as follows: employers who temporarily send their employees to work in other organizations or individual entrepreneurs must pay insurance premiums “for injuries” based on the insurance rate determined in accordance with the main type of economic activity of the receiving party. This takes into account premiums to the insurance rate and discounts from it, established taking into account the results of a special assessment of working conditions at the workplaces to which workers are actually assigned. The receiving party will be obliged to provide the employer with information about the main type of activity and the results of a special assessment of working conditions. Such rules are spelled out in the new paragraph 2.1 of Article 22 of the Federal Law of July 24, 1998 No. 125-FZ “On compulsory social insurance against industrial accidents and occupational diseases.”
We also note that accidents that occur with employees who are sent to work under a contract for the provision of personnel labor are investigated by a commission created by the receiving party. This may include introducing the employer of this employee (Article 341.4 of the Labor Code of the Russian Federation).
Responsibility
Administrative responsibility
In case of violation of the new rules, including the provision banning the use of agency labor, the following measures of administrative liability may occur (Part 1 of Article 5.27 of the Code of Administrative Offenses of the Russian Federation):
- for organizations - a fine from 30,000 to 50,000 rubles;
- for individual entrepreneurs - a fine from 1000 to 5000 rubles;
- for officials - a warning or a fine from 1000 to 5000 rubles.
A repeated violation committed within one year from the date of prosecution for a previous similar violation faces more serious sanctions (Part 4 of Article 5.27 of the Code of Administrative Offenses of the Russian Federation):
- for organizations - a fine from 50,000 to 70,000 rubles;
- for individual entrepreneurs - a fine from 10,000 to 20,000 rubles;
- for officials - a fine of 10,000 to 20,000 rubles or disqualification for a period of one to three years.
Vicarious liability
The new article 341.5 of the Labor Code of the Russian Federation provides that for the obligations of the employer, including obligations related to the payment of wages and other amounts due to an employee who is sent under a contract for the provision of personnel, the receiving party bears subsidiary liability.
This means that if, for example, a private employment agency has a debt to employees that it cannot repay, then funds can be recovered from the organization or individual entrepreneur that used the labor of these workers. In this regard, the receiving party becomes interested in ensuring that the employer who sent its employees complies with labor laws and pays all amounts due to them.
Please note: the terms of remuneration for workers sent under a personnel supply agreement must be no worse than those of employees of the receiving party performing the same functions and having the same qualifications. This is what the norm in Article 341.1 of the Labor Code of the Russian Federation says.
Practical conclusions
In order not to fear being held administratively liable for the use of agency labor, it is better, in our opinion, to terminate previously concluded outstaffing agreements if their validity extends to the next year. At the same time, please note that the innovations will not affect outsourcing services, in which organizations or individual entrepreneurs outsource some of their functions rather than renting someone else’s staff. An outstaffing agreement can be distinguished from an outsourcing agreement by such a criterion as the subject of the agreement. If the subject of the contract is the implementation of certain activities on the instructions of the customer, we have an outsourcing contract. If the subject of the agreement is the transfer of personnel for rent, then we are talking about an outstaffing agreement.
I would also like to note that some companies and entrepreneurs enter into outstaffing agreements only in order to relieve themselves of the responsibilities of maintaining personnel records, calculating salaries and taxes, and submitting reports. Most likely, starting next year they will have to employ the necessary workers. In this situation, it will be possible to maintain personnel records, calculate salaries, vacation pay and benefits, as well as submit reports on contributions and personal income tax using modern web services that help perform these tasks.
Outstaffing or outsourcing - how not to make mistakes in documents
The concepts of “outstaffing” and “outsourcing” are different. Outstaffing, if everything is done within the framework of the law, is acceptable. Outsourcing has not been canceled. All that remains is to prepare the documents correctly so that neither the customer nor the contractor are held liable for violations related to the registration and use of agency personnel.
