Almost 200,000 workers in Russia are still on western payrolls
Multinational companies continue to pay wages despite pledging to cease operations in the country since the invasion of Ukraine
Multinationals continue to pay nearly 200,000 workers in Russia despite pledges to suspend or close operations in the country, raising fears of mass layoffs or nationalization as hopes of a quick end to the war in Ukraine fade.
A slew of Western companies, from McDonald's to Renault, have pledged to pay the wages of thousands of workers as they suspended operations in the country last month. An analysis shows that at least 188,000 workers remain on the payroll.
The actual number is likely far higher, as major employers like KFC-owner Yum Brands and Coca-Cola have not confirmed whether they still pay their employees.
The analysis comes as Moscow Mayor Sergei Sobyanin warned on Monday that among workers at foreign companies in the Russian capital "about 200,000 employees are at risk of losing their jobs," saying the authorities had a support plan worth having of Rbs 3.36 billion ($41.4 million) for those at risk.
As employees of employers like Boston Consulting Group, Linklaters and McKinsey are relocated to other countries, workers in the manufacturing, retail and consumer sectors risk bearing the brunt of job losses if companies see no prospect of reopening soon.
Chip Bergh, CEO of Levi Strauss, said this month that the denim brand is continuing to pay its more than 800 employees in Russia. But he added: "As things are going now, I'm not optimistic that we'll be back in full force anytime soon."
According to FisherBroyles labor lawyer Peter Finding, under Russian law companies that have gone out of business are still required to pay their employees.
Options included paying employees normally, paying up to six months' salary in the form of combined redundancy and severance packages, or redeploying employees to business areas unaffected by the suspensions, he said.
Employers could also agree to keep employees on reduced wages while operations are shut down, he added, in which case workers would have little bargaining power.
Ikea has pledged to pay its Russian employees for three months until the end of May, one month more than the two-month severance payments required by Russian law.
An employee said staff occasionally entered the abandoned stores to update paperwork but feared unemployment in the coming months. The company declined to say whether it would lay off employees.
According to a BCG survey, the majority of investors believe it will be two to five years before Western companies can return to Russia.
Finding, who has experience advising multinationals with Russian branches, said employers are more likely to lay off inactive workers than keep paying salaries for years. "That would be very nice, but not particularly economical," he said.
Maintaining the minimum wage of about 12,500 rupees ($156) a month is a relatively small expense for large companies.
McDonald's, which had global sales of $23 billion last year and still employs 62,000 people in Russia, said its total wage and rental costs in the country are $50 million a month.
However, many Western companies are struggling to transfer money to the sanctions-hit economy and are unable to generate revenue while operations are suspended. They may have to pay their employees from reserves at their Russian companies, which may soon run out, Finding said.
"We will see a whole series of bankruptcies and liquidations in Russia," he said. "Theoretically, if a Russian employer is liquidated, they are obliged to pay their employees before this happens. If there is no money, they cannot.
The Russian government is already making efforts to avoid mass unemployment and has a 40 billion -Euro package launched which Prime Minister Mikhail Mishustin said would support about 400,000 workers
or allow their intellectual property to be
Russia"The government passed these laws that say they can nationalize a company if it leaves the country," Levi's Bergh said. "They could literally take our trademark away from us."
Josh Gerben, a US trademark attorney, has noted, that "brand squatters" have already made requests to use logos similar to those of M cDonald's, Coca-Cola and other western brands are similar.
Companies like British American Tobacco have chosen to transfer their operations to Russian partners. As a result, jobs could be retained after they leave, Finding said.
However, in these circumstances, employees are unsure of how they will be treated by their new employers. A multinational employee said it was "an open question" how they would receive their salary. "The Russian company even pays its own employees in envelopes," he said, referring to a common tax avoidance practice.
When the layoffs begin could depend on public pressure from Western consumers. Laura Marie Edinger-Schons, Chair of Sustainable Business at the University of Mannheim, Germany's leading business school, predicted that companies could come under pressure to lay off Russian employees as the war continues and evidence of Russian atrocities mounts.
"The mood really changes after Bucha," she said. "There's a collective understanding that it's not just Putin. There's a sizeable section of Russian citizens who don't actively support this, but who accept
it coming back," said a restructuring expert with experience in the former Soviet countries, who pointed out that consumer companies are more likely to go out of business than leave Russia altogether.
It is also uncertain how the loss of jobs in Russia will affect the economy political opinions about the war.
"We want to put as much pressure on Russia as possible," Edinger-Schons said. "Even firing people who are not to blame for the war could build pressure.
" that job losses would tend to harden anti-West sentiment within Russia.
"Sooner or later After that, tens of thousands of people who used to work in large Western factories will be unemployed," they said. "This will be used as a political tool by the Russian government to say, 'Look at these western companies that we shouldn't have trusted'."