Russian companies desperately looking for staff, but are not paying enough

Russian companies are desperately short of workers in a labor market skewed by the above-average salaries offered by the military and the war industry. It may sound surreal, but Russia’s unemployment rate of just 2.4% in June — the lowest since the demise of the USSR in 1991 — is actually a serious problem. The economy has overheated, there is runaway inflation, and companies are unable to find staff even by offering higher wages. In desperation, a new business culture is blooming, with programs being introduced whereby employees are paid a bonus for referring people they know to company bosses, a system widely used in the reviled United States.

This approach increased by 30% last year, with 26% of new staff hired this way, according to a survey by Russian classifieds giant Avito. Employees recommend acquaintances to their company when they believe they can adapt to their requirements. According to the portal, this reinforces “loyalty” and saves on recruitment costs.

However, these recruitment programs do not reduce the high staff turnover in Russia, caused by low salaries and the measly bonuses offered. According to job portal HeadHunter, 40% of employees last less than one year in their job, and another 28% barely last three years. “Given what they pay, it doesn’t matter if you leave your job if you are tired of it, because you will find something else,” Andrei, who works in a state-owned enterprise in Moscow and whose salary is far less than €1,000 ($1,112) a month, tells EL PAÍS.

According to the Russian statistics agency Rosstat, 55% of the population earned less than €550 ($610) a month in 2023, and only 11.2% earned more than €1,000. The army, however, pays more than €2,000 a month and an enlistment bonus of around €19,350 though, of course, this is only good if you survive to take advantage of it.

Avito estimates that 48% of all Russian companies asking staff members for recommendations offered a bonus of less than €200. This would explain why the tendency, though growing, has so far only caught on among 13% of Russian companies. According to Forbes, in the U.S., 80% of companies depend on this recruitment strategy.

US initiative

But Russian consulting firms believe this is the right way to go for companies. “It improves the quality of hiring and enhances employee engagement,” according to Platrum. “The initiative demonstrates that the company values the opinions of its employees and is committed to creating an environment that encourages their participation in its growth.”

Russian consulting firm Akra estimated last March that the country needs at least 750,000 more workers to reach the break-even point where worker shortages are not pushing up inflation. This point would be reached with around 4% unemployment: below this level, companies are forced to compete in a race of unrestrained wage increases.

The president of the Central Bank of Russia, Elvira Nabiullina, has repeatedly warned against the overheating of the economy and has aimed several jabs at the Kremlin, whose war industry she blames for the huge internal imbalance. “The high level of interest rates is a response to overheated demand, but all other factors push to expand it,” Nabiullina said after the Central Bank raised rates from 16% to 18% in July. But even such high interest rates may have fallen short because it raised its inflation forecast in the past few days from 6.5% to 7.3% in 2024.

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