Employers frequently prefer to engage workers under a civil law contract (dogovor podryada or contract for services) rather than an employment contract (trudovy dogovor). The savings are tangible: lower contributions, no paid leave or sick pay, and an easier path to termination. However, this approach carries serious risks.
Key Differences Between the Two Contract Types
| Parameter | Employment Contract | Civil Contract |
|---|---|---|
| Paid leave and sick pay | Yes | No |
| Business travel expenses | Automatic | By agreement |
| Pension and health fund contributions | Paid by employer | Pension fund — yes; Social insurance fund — no |
| Income tax (NDFL, 13%) | Withheld by employer | Same |
| Employment record book (trudovaya knizhka) | Maintained | No |
| Employment tenure record | Yes | No |
A civil contract is more convenient and economical for the employer — but only when lawfully applied.
When a Court Will Reclassify the Arrangement
If under a civil contract the worker:
- follows a set schedule,
- is subject to internal workplace rules,
- receives a fixed monthly “salary,”
- works on an ongoing basis (rather than toward a specific deliverable),
— a court will recognize the relationship as employment. The employer will face assessment of all outstanding contributions, penalties, and an order to reinstate the worker or pay compensation.
Security Guards: Employment Contracts Only
The Law of the Russian Federation of March 11, 1992, No. 2487-1 “On Private Detective and Security Activities” expressly prohibits security guards from working under civil contracts. Private security companies must be organized as limited liability companies (OOO) and must engage security personnel exclusively under employment contracts.
Violation of this requirement results in administrative liability and may lead to revocation of the company’s license.
State Secrets and Contractors
Organizations with access to state secrets may engage contractors — provided those contractors hold the appropriate security clearance. Since clearances are issued at the place of employment, a contractor who is not a permanent staff member executes a separate non-disclosure undertaking — without an employment contract.
The Fundamental Rule
Choose the contract form based on the actual nature of the relationship, not on the desired tax savings. A civil contract is appropriate when:
- there is a specific, measurable deliverable (completion of a task, delivery of a project),
- the contractor works independently, without being subject to your workplace schedule,
- the engagement is one-time or project-based in nature.
Uncertain which contract type fits your situation? A drafting error can result in years of litigation and reassessed tax liabilities. Contact us for a consultation.