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Home  /  News and events  /  Workplace Overview
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Workplace Overview

By Chris Willet

Over the last few years Jobs and Careers’ biannual overview of Russia’s labor market has almost continually reported a plethora of vacancies, a lack of qualified professionals and increasing salary expectations. Much, though not all, has changed.

“Gone are the days when candidates’ expectations and demands grew not by the day but by the hour and money was forced to dance to talent’s tune,” said Stanislav Alekseyev, the managing partner at Transeach International.

The responses to the current economic situation have been varied. “Companies have reacted in two ways or a combination of both, reducing absolute headcount or reducing salaries,” explained Tremayne Elson, the managing director of Antal Recruitment. The number of people made redundant in the last two months accounts for around 30 percent of all those laid off in 2008, according to data from Moscow’s Employment Service. And this may not be the end, “rather we can call it the first wave of redundancies,” said Raisa Myslovskaya, the head of 3R’s FMCG and infrastructure department.

 

However, Elson added, there are companies taking slightly different approaches. “Some firms are reducing working hours, or in an extreme case a well-known Russian real estate company put its whole staff on unpaid holiday in January.” In optimizing their management structures, many firms are combining functions duplicated in parent companies, creating further layoffs.

Yet the situation has not completely changed. “The personnel deficit will remain as it was and the fight for talent continues,” Myslovksaya said. “Companies that are now interested in recruiting new staff are evaluating candidates more strictly and looking for those who are 100 percent necessary,” said her colleague, Alexandra Baranova, a senior consultant in IT and telecommunications recruitment.

Redundancies and vacancies depend primarily on the market segment. Logically redundancies have been greatest in those sectors whose business has been majorly affected by the economic downturn. Primarily this is banking and those segments heavily reliant on debt financing, such as the construction industry.

Nearly all areas of finance have experienced staff cutbacks; on average they have reduced their headcount by 5 to 10 percent, said Natalya Rostovtseva, a senior consultant in 3R’s finance and banking department. The worst affected are retail credit professionals and investment analysts. “However, we can’t say recruitment has completely stopped,” Rostovtseva added, citing risk analysts and auditors as those finance professions still in demand.

Indeed, research from Antal, published in February, noted an increase of 10 to 15 percent in the number of finance vacancies in January compared to December. Irina Kalkin, a principal consultant at the company, explained that the increase was because employees kept on after cutbacks were overloaded with work.

The construction industry, with the raft of project freezes it has experienced over the past six months, has also seen large-scale layoffs. This has consequently affected supporting sectors such as real estate consultancy firms. In the last quarter of 2008 all the major brokers announced redundancies ranging from 10 to 20 percent of their staff.

LAYOFFS IN 2008 AND 2009 

Similar knock-on effects are noticeable between other industries. Although to a much lesser extent than others, the FMCG sector has been touched by the downturn, Alekseyev explained, because a lack of financing has affected retailers who, in turn, cannot pay their suppliers.

Elsewhere, manufacturing and those industries that derive much of their income from advertising have also suffered. A survey of 70 marketing directors from among the top 100 Russian companies, published in Vedomosti in January, revealed that 24 percent planned to reduce their expenditure on advertising in 2009 and 48 percent intended to maintain 2008 levels. Moreover, only four percent of respondents named the press the most effective way to reach their audience.

Consequently, many titles have simply disappeared from the shelves; Media Guide, an independent media portal, calculated that 15 publications have closed, which excludes glossy magazines that rely on luxury goods advertising. And many of the business dailies have reduced their staff.

Not all industries, however, are as badly affected. “The consumer goods sector, and particularly the tobacco industry, is more resilient than others but it is also facing crisis,” said Mark Phillips, the HR director at JTI in Russia. The tobacco company is still hiring, particularly in sales and marketing but also in finance and HR. “We have noticed that their [candidates’] expectations are shifting from the amount of money toward stability, social package and career opportunities,” Phillips said.

JTI has not made cutbacks in staff development. “We are also continuing to invest in educating and training our staff, because we see it as a unique opportunity to build the skills of our people,” he added.

The consumer goods industry is not alone in largely escaping the effects of the downturn. Russia’s fast-growing IT industry is continuing to expand. As companies look to optimize business practices, technology often provides the solution. Similarly, the pharmaceuticals industry is suffering less and billboards advertising vacancies at fast-food outlets still adorn many metro escalators. In February McDonald’s announced plans to invest $140 million to open 40 new restaurants in Russia this year. They will continue hiring and will not cut salaries, Khamzat Khasbulatov, the company’s president for Russia and Eastern Europe, told The Moscow Times.

How is this affecting Russia’s large expatriate community? Usually more expensive than locals, foreign nationals are becoming increasingly vulnerable. Lengthy bureaucratic procedures and the costs these involve are making firms think twice about employing expats. What’s more, foreigners’ benefits are often, though not always, more expensive than their Russian counterparts’. “In unstable times any extra financial outgoings are considered undesirable,” said Felix Kugel, the managing director of Manpower in Russia and the CIS.

Moreover, “in reality, they enjoy little protection in a court of law for unlawful dismissal,” said Elson. However, many foreigners are not considered expendable. “Expat sales staff who are still bringing in revenue are the most secure,” he added.

Although some expats have decided that this is the time to head home, many are intent on finding another position in Russia. Luca Gandino, who has recently worked in FMCG and real estate in Moscow, remains positive about the situation. “This ‘cleaning procedure’ is, in a way, good for all industries and will create better opportunities in the future,” he said. People who have invested in the language are likely to stay and look for something else, while those who haven’t are more motivated to go somewhere else, explained James Brooke, a freelance real estate consultant in Moscow.

Expats are not alone in their interest in Russia’s job market. Owing to the downturns and redundancies in the West, the number of so-called repats, Russians returning to the country after a prolonged period away, is also increasing. “Repats are becoming desirable candidates for many Russian and foreign companies,” said Tatiana Baskina, recruitment director at Ancor Holding.

This is not the only form of labor migration continuing amid the economic downturn. The recent trend of Muscovites looking to regional centers for career opportunities looks set to continue. “Professionals from a range of industries who are interested in maintaining career growth in their sector are looking at opportunities in Russia’s regions more actively than in 2008,” Baskina said. Meanwhile, although inter-region migration is also continuing, interest from the regions in the Moscow labor market has decreased.

However, the jobs market beyond Moscow is in a much worse state than in the capital. As many towns are heavily reliant on one particular industry their economies are subject to the tides of one sector. Moreover, the supply and demand relationship tends to be one way; the regions’ fortunes depend on orders from and the consumer spending power of the center, explained Nikolai Arkharov, a senior consultant in IT and telecommunications at 3R.

Besides cutting headcounts, many businesses have introduced pay cuts. Wages have been dropping since the fall, following an annual 21 percent increase in salary levels to the end of September 2008, according to data from 490 firms analyzed by Ancor Survey Services. Factors such as the 2014 Winter Olympics in Sochi and completed industrial projects in Siberia raised these regions’ growth rates before the fall. The recruitors surveyed for this overview all stated that salaries have fallen, on average by 15 to 20 percent in Moscow, while in the country as a whole this figure is lower, at 10 percent.

“Smaller firms and Russian firms are the quickest to reduce salaries or even not pay salaries at all,” said Elson. However, much still depends on the market sector. While real estate professionals have experienced pay cuts, sometimes by up to 50 percent, the IT and telecommunications markets have been much less affected. “Salary levels have remained the same [in IT and telecoms], but the qualification requirements for candidates have increased,” said Arkharov.

For current job seekers stability and job security are again priorities. Consequently, purely financial demands have moved from the forefront of candidates’ considerations. A downward trend in salary expectations is noticeable, with candidates looking for 15 to 20 percent less than pre-crisis levels, said Baskina.

On the whole, the qualities companies are seeking remain as before, explained Kugel. “However, thanks to the increased volume of applications, they have become more discerning and demanding,” he added.

For some who have been laid off, now is the time to improve their qualifications. The MBA is the most popular across a range of professions. “However, the MBA long ago stopped being completely necessary for candidates,” said Svetlana Myslina, a consultant at Transearch. Some firms have had bad experiences of employing MBA graduates, who they believe can have an unjustified sense of their own worth and unrealistic salary expectations, she explained.

Still, MBAs provide a range of transferable skills, which are key in the current situation. “There is one more obvious advantage — the opportunity to establish contacts in business circles,” Myslina added.

Given the current uncertainties, predicting the future of the labor market is difficult. Increased competition could make this a good time for companies to strengthen their teams. However, firms are likely to hold onto their most prized employees and let the weaker ones go. Consequently, the enlarged pool of candidates may not represent an increase in applicants’ caliber, explained Elson.

Official prognoses for 2009 estimate unemployment will reach 6.6 percent. “In practice the real figure will be much higher, as official statistics do not take into account those who officially left employment ‘of their own accord’ or ‘by mutual agreement’,” said Myslina. Further redundancies are expected before the summer, said Arkharov, who estimated that unemployment would increase by 10 to 15 percent.

The future of pay is varied. A recent survey of 665 companies by Ancor found a third were planning to alter salaries this year. Of the total, 14 percent plan to decrease salaries while 19 percent intend to raise pay. Alekseyev, who estimated increases of 9 to 10 percent, explained that any raises would simply be an adjustment for inflation. However, “the level of income will decrease significantly as many companies are canceling their yearly bonuses, which can account for 15 to 50 percent of managers’ income,” he added.

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