Employment termination by mutual consent cannot be legally treated as “staff reduction”, it is a separate ground for the termination of the employment contract under Article 78 of the Labor Code of the Russian Federation.

Dismissal due to staff reduction is a complicated procedure. The employer is required to give prior notice to employees and, in certain circumstances, to the trade union and the employment service. The company must also respect the employment rights of certain categories of employees (e.g., a pregnant woman cannot be dismissed due to downsizing) and preferential employment rights of certain employees, and is required to offer vacant positions to employees subject to downsizing, etc.

Employment termination by mutual consent is much simpler. However, in terms of pay-outs, it can be more beneficial for the employee, as the parties are not bound by any limits, and to ensure a painless departure of the employee, the employer can offer a higher pay-out.