Bonuses still to be had for Russia’s workers

Many employees will receive bonuses this year despite a grim economic outlook, says a study commissioned from the Headhunter staffing agency.

The company surveyed 2,300 personnel, 150 HR directors and heads of companies as part of the study. The decision to pay bonuses had already been taken by 41 percent of companies, of which 22 percent were planning to pay bonuses to all their staff members and 19 percent only to those “who were particularly successful at work,” . Thirteen percent said only management would be receiving an extra payment.

The situation concerning bonuses has returned to pre-crisis levels,” quoted the head of Headhunter, Yury Virovets, as saying on Friday. “For the first time since the crisis businesses have started to notice a shortage of workers and companies are trying in any way hold onto people, including via bonuses.”

Last year, 30 percent of companies surveyed paid bonuses, 19 percent only paid outstanding workers and 16 percent gave bonuses only to management. Twenty-seven percent did not paying any bonuses at all, compared with 25 percent this year.

Superjob.ru conducted a similar survey in November. Results from the 1,600 people surveyed indicated that 16 percent of companies were planning on paying bonuses to all their employees, while a further 24 percent were planning on paying bonuses to selected workers. All the results match last year’s figures.

Headhunter’s survey also looked into the size of the bonuses. One-third of bonuses paid were an extra month’s wages, 22 percent paid from one to three months’ wages in the form of a bonus and 5 percent paid more than three month’s wages. The remainder was undetermined.

The financial situation has, nonetheless, led to uncertainty. Forty-seven percent of workers surveyed by Headhunter said that they did not know yet whether they would be receiving anything extra this year.

“This is a big problem for employers -- they are stretching out till the end of the year the announcement about annual bonuses," said Virovets. He added that waiting until the very last moment was problematic: "Such a state of suspense, degenerates into alarm and eventually pushes the worker to seek a more transparent company."

Is business a mug’s game?

Tax relief, financial aid for the self-employed and even direct investment from the state innovations fund are not enough to persuade Russians to set up in business.

That’s the somewhat gloomy view expressed in a survey on small business here by GlobeScan, an international polling service, which asked 24,000 people worldwide how hard they felt it was to start a business in their country.

And it found out that less than a third of Russians would consider setting up in business. According to GlobeScan, 74 percent of respondents in Russia “mostly agreed” with the statement: "It's hard to start your own business in this country for someone like me," while only 16 percent of respondents disagreed.

But Denis Kashuba, the general director of a small engineering company with 30 employees, said that most people’s fears are groundless. “I am not afraid of any inspection – these bad days are gone, it’s all rumours,” he said. “If a fire officer comes to me asking for money and if he is wrong, I’ll call his office and he’ll have problems,” Kashuba said, adding that he started his business five years ago “from a notebook and a table”.

Kashuba admitted that it had taken him two years of very hard work and an ascetic lifestyle to launch the venture.

But despite such examples of successful self-employment, the image of “hero-entrepreneur” is losing its attractiveness among young people. Russian public opinion researchers say that youngsters see better career prospects mostly with state institutions or state-owned corporations such as Gazprom or Sberbank.

Worse since the crisis

The financial crisis has increased this trend, experts say.

A Public Opinion Foundation survey found that students chose state organizations over private companies, and named state organizations as seven out of the top 10 most attractive employers.

Entrepreneurs’ organizations and private businessmen see different reasons for that, but all of them concluded that this tendency is quite risky for Russian society. Over the last four years there has been a noticeable increase in start-ups, thanks to the Skolkovo innovation project, Rosnano and the Russian Venture Company. But the tendency towards favoring state organizations among young people worries them.

Georgy Satarov, a former presidential adviser in the 1990s and head of the anti-corruption Idem think tank, said in an interview with Vedomosti said that independent businesses had pulled the country through after the 1998 default.

“Political competition” will eventually create independent courts and other institutions essential for the right business climate, he said, Vedomosti reported. “In the late 1990s independent business emerged in its full strength, as it wasn’t pressed like now,” Satarov said, adding: “And that was what we call democracy.”

Historical roots

Entrepreneur Vladislav Korochkin, vice-president of the Opora small business association, said that the problem has historical roots. “For decades we were told that business is bad and criminal and some have remained in this opinion,” he said. The early years of Russian reforms, so called “tough nineties” with their criminal excesses, are yet another bad historical experience, and not so far away, he said.

Korochkin said that Russia lacks its version of the so-called American free enterprise “dream”, as the idea to start a business for the sake of your family’s future generations isn’t popular here.

“Historically, it just happened that most people here do not think this way about a private business,” said Korochkin.

Alexei Devyatov, chief economist at Uralsib Capital, said the phenomenon could be explained by people having limited planning horizons.

“To plan your family business, a venture to be inherited by future generations of your family, you should think in terms of the next 20-30 years – until you reach retirement age. But most business planning here is half a year, or a year as a maximum,” he said.

A difficult investment climate impacts equally on the decisionmaking processes of both investment bankers, who invest billions, and ordinary people, who think in terms of several thousand dollars.

Bad historical experiences, red tape and corruption all play their part in crimping people’s entrepreneurial spirit, Devyatov said.

The government should be praised for its recent efforts to eliminate excessive inspections and cut down on red tape, but the burden on business of bribes and other hidden payments remains very high.

“The tax regime is very permissive here, but the weight of undercover rent-seeking payments [i.e. bribes] has reached $300 billion a year – its onefifth of the GDP,” Devyatov said.

There is an urgent need to improve the way financial support packages are used to help small businesses, Korochkin said. “For example, loan guarantee funds are very important as they allow you to unblock collateral,” he said.

Across some regions of the country the number of small businesspeople who used such loans guarantee funds was very low, and in some cases the aid was simply ignored, Korochkin said.