WHAT IS SECONDMENT?
Secondment is a temporary movement of an employee to another Russian or
foreign organization. In a secondment arrangement, one company (the "Secondor")
'lends' an employee (the "Secondee") to another company (the "Client") in
exchange for a fee. The Secondee remains under the employment of the Secondor
during the whole period of secondment and does not become a formal employee of
the Client, though he performs his duties in accord with the instructions and
under the control of the latter. The Client makes payment for the provided
workers and the Secondor pays wages to the Secondee during the whole period
of secondment. (See The Scheme of Placement of the Holding Staff at Host Organizations).
THE SCHEME OF PLACEMENT OF THE HOLDING STAFF AT HOST ORGANIZATIONS
HR Assistance offers you services of the organization of placement
of the personnel in different companies (Secondment), including development
of the schemes of secondment (considering tax and legal consequences
of secondment) and organization of the secondment process itself. We have
an opportunity of elaboration and development of secondment schemes both
inside your holding company and on conditions of Outstaffing.
WHAT ADVANTAGES YOUR ORGANIZATION WILL GET FROM THE USE OF SECONDMENT SCHEME?
Studies held in a number of European countries by international consulting
companies, as well as our experience of work with global and transnational
companies show that for successful business under the conditions of access
to foreign markets and development of international projects, an organization
should have an opportunity to direct the necessary people to the necessary
place operatively and with the least expenses, in other words to manage
personnel movements effectively. All this can be achieved, having created
a special organization, and having concentrated in it the so-called "mobile
Operational efficiency of movements of the mobile personnel, unified
approaches in the work with it, application of various corporate programs,
co-ordination of the system of career planning with remuneration system and
systems of training and development, and also the organization of deductions
in the Russian systems of obligatory social insurance can be most easily and
effectively achieved under the conditions of hiring the mobile personnel
within the limits of one organization.
This organization can also perform the functions of research of a
competitive labor market in the countries of the Company presence meaning
creation and duly adjustment of an effective system of remuneration of
the mobile personnel.
Unlike the variant of hiring in a host country the system of secondment
allows to supervise effectively the costs of maintenance of the mobile
personnel, and the total costs of the corporation on such purposes, as
a rule, essentially decrease, due to their concentration in one center of expenses.
Problems of a different level of taxation of the mobile personnel in Russia
and in the countries to which it is directed can be effectively solved only
with the use of the secondment scheme.
As a result of application of the method of tax flattening which is widely
used by transnational companies, the mobile personnel directed to various
countries has an opportunity to receive net-income in the same size as though
it worked in Russia. In this case, the factor of a host country, and also
the level of taxation in the concrete country should be certainly considered.
So, for example, an employee directed for work to Bulgaria will have to pay
the income tax under the rate of 29 %, however his counterpart in the Russian
Federation will pay the income tax under the rate of 13 %. The method of tax
flattening under which the seconding organization considers the difference of
taxation in the host country when setting the amount of remuneration for the
seconded employee, allows to create fair conditions for all seconded employees.
In addition, the seconded employee will have no interest to understate his
income when declaring it in a host country, which is also significant.
As was already mentioned above, direction of the personnel is carried out
under the Agreement on provision of the personnel between the Seconding Company
and the Client. Before the conclusion of the Agreement on provision of the
personnel it is necessary to explore thoroughly the tax and legal consequences
arising at the interface of the legislation of two countries as a result of the
conclusion of the contract.
Agreements on provision of the personnel in the Russian Federation are
regulated by the general provisions of the civil and labour legislation -
there are no special rules regulating these contacts in our legislation.
This circumstance can be regarded as positive as it gives the Seconding
Company and the Client more freedom in establishing contract conditions of
seconding an expert.
When seconding a citizen of the Russian Federation it is also important
to consider the necessity of obtaining the work permit for the majority of
European countries and in the USA. The obtainment of the permit to hire foreign
workers is usually imposed on the Client.