Recruitment of Expatriates has always been one of major differences between Western and Russian companies. The former brought specialists and managers with international training and experience onto Russian soil. The latter considered it to be experimental in nature rather than a real asset to business. But times have changed. With growing maturity of the Russian labor market, we are now bearing witness to tendencies many outside observers might have found improbable a few years ago.
Expatriates are recruited vigorously by Russian companies who offer greater, and sometimes, unreasonably higher compensation packages than their western counterparts operating in Russia. Expatriates with an impressive track record on the Russian market are being sought out and coerced into joining Russian companies. But in order to have a clearer picture of what is going on, what the major tendencies are and what to expect in the foreseeable future, let us approach the problem from an analytical standpoint.
First, we must be aware that two ways of recruiting expatriate personnel exist. The first is through an international search, which is typically conducted when local specialists don’t possess a sufficient level of required expertise. The second is recruiting expatriates from the labor market within the country of employment. The advantages of the first method are self-evident. The advantages of the second are more diverse in nature .One of the main advantages is that in addition to possessing the necessary qualifications and experience, such candidates are usually conversant with the local specifics and culture, have a clearer motivation for staying within the country and many have a decent command of the language. Plus, they are less costly and problematic in terms of relocation / country adaptation issues.
The reason why Russian companies began recruiting expatriates is the very same that propelled Western employers in the past few years – knowledge and experience. With the rising incomes of Russian companies, the difference in compensation packages has long since been reduced to a minimum. Furthermore, major Russian companies are willing to pay more for the same set of skills and experience. They are the ones who employ headhunting and international executive search services increasingly often. The leaders in this sphere are; investment banking, insurance, oil producing, and real estate companies, although no sector is immune to this trend.
On the other hand, the levels of compensation between Russian managers and expatriates have shrunk. More Russian professionals are eligible for executive positions within multinational companies and more expatriates are getting employed by Russian companies. Of course, the remuneration is still in favor of the expatriate employees, many of whom enjoy social packages valued at approximately the same amount as their actual salaries. These expenses include, but are not limited to, relocation and living allowance, country risk payments, complete medical and travel insurance for all family members, corporate cars (often with personal drivers), total coverage of apartment costs etc. Add to these a foreigner status with all inherent visa proceedings, and you’ll get a very costly asset. So far, only major Russian companies can afford the risk of incurring greater expenditure at no immediate business value.
Needless to say, the macroeconomic and political situation in Russia has greatly contributed to the interfusion of domestic and foreign labor force. Traditionally in Russia, there is a nuanced difference in the terms, Expatriate, and Guest worker. But statistics know no difference between these terms – the shortage of human resources has become increasingly pronounced, especially for lowest-paying and highest-paying jobs. Hence the influx of construction workers from Moldova, Ukraine, Central Asia, and football (soccer) coaches from the Western European countries, to make the comparison more exemplary. The implications may take on a political, cultural and/or an economic aspect. Be that as it may, globalization of the world economy dictates the reality. The timely response to the new challenges results in billions in profit. One of the keys to retaining a competitive edge is talent. Talent can be raised domestically or imported – that is the question of a purely economical character.
Thus we can logically arrive at a conclusion with respect to the future of Expatriate Recruitment in Russia. We must look upon it not only as a social event, but one of profound economic significance. With that in mind we can safely assume that recruiting expatriates will become a more widespread practice. The historical parallels will most likely be found in more developed and mature labor markets. If Russia recognizes and remediates the deficiencies of its current workforce migration legislation, it will acquire a competitive advantage by creating an economic environment which is conducive to a more liberal labor exchange.
AEB Business Quarterly • Winter 2008/2009
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