Shadow Employment in the rf Has Reached 41%: the kremlin Braces for a Shortfall in Tax Revenue

The Russian labor market is increasingly moving into the shadows. According to “rosstat” and the unified interagency information and statistical system, there were 74.6 million employed people in the country from January through May 2026, while the official headcount of employees at organizations stood at only 44.1 million. The gap between these figures reached 30.5 million people – that is 41% of total employment in the country.

It has become too expensive to officially hire an employee in the rf. Retaining a full-time employee costs an employer at least by 43% more than the gross salary – personal income tax ranging from 13% to 22% depending on the progressive scale, plus social security contributions at a base rate of 30% within the maximum base and an additional 0.2% to 8.5% for workers’ compensation. In contrast, working with a self-employed contractor costs the company zero in social security contributions, and the contractor pays only 6% tax on professional income. Under these circumstances, businesses vote with their wallets.

This trend is amplified by the platform economy. Taxi services, delivery companies, marketplaces, and outsourcing firms are increasingly hiring workers as individual entrepreneurs or the self-employed, thereby avoiding formal employment. For platforms, this is a way to reduce fixed costs and shift social and financial risks onto the workers themselves, who are left without sick leave, vacation pay, and pension contributions in their usual forms.

The largest gap between total and regular employment is observed in retail, construction, manufacturing, agriculture, and transportation – sectors characterized by seasonal fluctuations in demand, high employee turnover, and the need to quickly adjust workforce levels. It is precisely in these sectors that civil-law contracts, outsourcing, and self-employment have become the norm rather than the exception.

In 2023–2025, an acute labor shortage forced russian businesses to retain their permanent employees, compete for them, and raise wages. But the economic slowdown in 2026 is shifting priorities: against a background of slowing growth, expensive credit, and weak demand, companies are increasingly opting not to expand their workforce but to optimize costs through flexible forms of employment.

For the kremlin, this transformation results in direct financial losses. A reduction in the share of full-time employees means a narrowing of the tax and social security revenue base – precisely at a time when the war is demanding ever-increasing resources from the rf’s budget. Attempts to tighten control over the informal labor market will only drive up the cost of formal hiring and further slow down business activity.