Do I Need a Local Entity to Hire in Russia?

In Russia, a "local entity" typically means establishing a legally recognized presence, such as a subsidiary or branch office, which allows you to operate as an employer. This setup is crucial for managing payroll, tax obligations, and employment contracts in compliance with Russian law.

Without a local entity, you generally can't perform essential employer functions like registering for taxes, managing mandatory social contributions, or issuing compliant employment agreements. An alternative is to use an Employer of Record (EOR), which can handle these responsibilities on your behalf.

What is Required to Employ Someone in Russia?

• Local employing entity required to directly employ? Yes (you must register with the Federal Tax Service)
• Payroll registration required? Yes (mandatory registration with the Federal Tax Service)
• Withholding/tax remittance required? Yes (employers must withhold income tax from salaries)
• Social contributions required? Yes (employers must pay social insurance contributions)
• Local employment agreement required? Yes (written contracts are mandatory under Russian labor law)
• Mandatory benefits to budget? Yes (includes paid leave, sick leave, and social security)
• Works council/collective agreements considerations? Usually (may apply depending on the industry and workforce size)

Best Options If You're Hiring in Russia

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should proceed with caution. Hiring contractors can be a flexible option, but misclassification risks exist if the contractor's work resembles that of an employee.

In Russia, the law is strict about worker classifications. If the contractor is integrated into your business operations or if you dictate their work conditions, you might face legal challenges. Consider these points:

• Ensure the contractor has multiple clients to demonstrate independence.
• Avoid controlling their work hours or methods excessively.
• Keep the contractor's role clearly defined and project-based.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to establish an entity in Russia, depending on the type of entity and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 30,000–80,000 RUB per month ($400–$1,000)
• Payroll provider: Estimated 5,000–15,000 RUB per employee per month ($65–$200)
• Employer registrations and recurring compliance: Estimated 20,000–50,000 RUB per year ($260–$650)
• Corporate tax filings and annual reporting: Estimated 50,000–150,000 RUB per year ($650–$2,000)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social contributions, typically around 30% of gross salary)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Russia

Hiring in Russia can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Russia quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.