Reform of Labor Legislation and Labor Productivity

At the conference of the Russian Union of Industrialists and Entrepreneurs (RSPP) "Human capital as a means of the economy modernization" held on April 13, 2010, a report was made by M.D. Prokhorov, President of Onexim Group, Chairman of the RSPP in Labor Market, with proposals to reform labor legislation, which caused a broad resonance in the business press.


In his report entitled "Strategic Challenges in Human Capital Management", there were included the following main ideas on the pending reform of the shortcomings of the Russian labor laws:

  • The effective legislation restrains the growth of labor productivity, creating non-competitive conditions to the employers in the terms of a layoff and its cost (5 months in the entire territory of Russia and 8 months for the regions of the Far North).
  • Legislation does not allow to efficiently create new forms of labor relations associated with the development of innovative economy, for example, using remote jobs, etc.
  • The list of reasons for the conclusion of temporary employment contracts and the introduction of flexible work schedules, established by the effective legislation significantly limits their application.
  • The regulations, established in the Labor Law on working hours and rest time, benefits and bonuses to employees are significantly overestimated in comparison with similar regulations in the legislation in OECD countries (the working time scope of a miner in Canada is by 40% of the annual working time of a similar worker of a Russian mine, located in the same latitudes).
  • Procedure of a transfer to another work in view of the technological changes is excessively rigid and constrain the necessary innovation.
  • There are no provisions for ensuring the effective employment of older workers (flexible work schedules, part-time employment, simplified procedures for hiring and dismissal, etc.). 

The most heated debate was around the first and fourth points of the report. Implementation of those measures may cause significant opposition from social organizations. Thus, the Federation of Independent Trade Unions has already expressed its negative attitude to this initiative. It should be noted that the existing labor laws regarding dismissal of employees, as well as the regulations on their work and rest hours are frequently violated by employers now, and they cannot be regarded as an effective guarantee of the rights of the employee. Nevertheless, until recently, they remained an important legal benchmark, the abolishment of which could significantly affect the legal rights of citizens.

According to Clause 2, Article 55 of the Constitution of Russia, "in the Russian Federation should not pass the laws that abrogate or derogate human rights and freedoms". Thus, there is a chance of recognition as unconstitutional the bills, impairing the legal rights of workers.

One should not forget that the proposed amendments are reviewed in the context of increasing labor productivity. In this connection, the most important thesis of the report is: "In 2008-2009 incomes and wages were declining. High productivity is possible at the low, but growing wages (for example, in China), the increased productivity is impossible with decreasing in wages (Russia)". This factor, coupled with the above-mentioned lack of provisions for employment of the older generation – both in view of the failures of the legal regulation, noted by Prokhorov, as well as due to actual discrimination against the older generation in employment - are the major barriers in increasing productivity and the introduction of innovative approaches to performance.

D.A. Kazantsev – Senior Legal Analyst, Laboratory for Review and Development of Legal Regulations