New tax and visa laws to bridge the skills gap in Russia

Legislation: Medvedev’s open-door policy targets well-qualified economic migrants

With modernisation in Russia requiring highly skilled foreign managers, recent legislation is aimed at attracting more of them.

Russian immigration policy is now one of the most relaxed in the world for highly skilled workers, as the Kremlin aims to harness scientists and senior managers from Europe and beyond to help drive the modernisation of its economy.

In May, legislation was passed easing immigration rules for highly skilled workers. President Dmitry Medvedev, who has said Russia must modernise or die, hopes to import experience and skills from abroad to help in this mission. At the same time, the programme hopes to attract more foreign investment in Russia by making it easier for multinationals to bring in managers and specialists.

The development of hi-tech industries has grabbed most headlines. But while Russia deserves its reputation for educating scientists, it falls down when it comes to offering them commercial opportunities – and so loses out to other countries. That’s the principle behind attracting companies such as Nokia and Intel to Skolkovo – the $2bn “Silicon Valley” being created in the Moscow suburbs.

Russia also needs to attract experienced managers across its corporate sector to improve efficiency, productivity and innovation. An IBM report last year pointed out that, while the quality of Russia’s scientific research institutions is among the best in the world, management schools rate poorly.

“Skills are an obstacle for many Russian companies,” the report concludes, “with 59pc reporting labour resources as a significant obstacle to development.”

Foreign managers will be key, says Lilit Gevorgyan of consultancy IHS Global Insight, because they “bring relevant skills, since most of the companies envisaged to be the backbone of modernisation are likely to be designed after Western prototypes specialising in cutting-edge high technologies”.

Gennady Odarich of PricewaterhouseCoopers points out that foreign managers can also act as role models for the Russian staff.

The Russian government has essentially imported immigration schemes for qualified people from countries such as the UK, Canada and Australia. The legislation transforms a tortuous process into one of the easiest in the world, for highly skilled people at least. Qualifying employees and their families receive a three-year visa rather than face a yearly trek home to reapply, with the additional benefit of the chance to bypass emergency income tax (30pc for the first six months) and go straight onto Russia’s flat 13pc rate.

Perhaps the biggest bonus for companies is that highly skilled employees are now exempt from the Federal Migration Service’s annual quota on foreign employees. To contract foreigners who are not highly skilled, companies must still apply for permission to employ from abroad in January, with no recourse to revise this through the rest of the year.

Headhunters, such as Nikita Prokofiev of Odgers Berndtson, suggest the plan is working in helping companies focus on importing the most valuable professionals, even while they’re increasingly looking to hire locally. “The market has evolved and now hiring Russians is preferable for many companies,” he says. “Fifteen years ago, someone bilingual with a basic command of finance was much in demand. Now companies are looking for senior people with very specific skills.”

As well as a desire to employ staff who understand local business culture, this is also due to the definition of a highly qualified employee, which runs to no more than an annual salary of 2m roubles (£41,500). In contrast, salaries in the local market are still recovering from the economic crisis, while skilled and experienced people from the West expect a premium to relocate.

Mr Odarich suggests the appetite for such candidates is strong, with PwC having “many clients asking about the new system – both for current employees and future hires”. Best of all, he points out, is that the groundwork is ready: “It does seem to be running smoothly already – the authorities have put a lot of effort into making sure that the bureaucracy understands the new process at all levels.”

That’s a welcome contrast to the chaos that ensued when a new customs regime was introduced in the summer.

Mass migration

Russia ranks second in the world, after the United States, for the total number of immigrants (12 million) living within its borders, according to the United Nations. The overwhelming majority consists of inexperienced workers from post-Soviet republics, especially from Central Asia. More than 40pc of newcomers do not have higher education. Another problem is their poor command of the Russian language, which impedes many of them from successfully competing in the higher-end labour market or defending their rights before employers.