Starting from 3 October 2016, the employers’ liability for failure to pay salaries when due or in full will increase, according to Federal Law No. 272-FZ dated 3 July 2016 (the “Law”). The Law has also introduced novelties in the regulation of the salary payment terms.
Administrative liability for partial or non-payment of due salary
Once the Law becomes effective, partial or non-payment of due salaries and setting salaries below the statutory minimum will be grounds in their own right on which employers may be held administratively liable.
The sanctions provided for the above offences are as follows:
First time offence
An administrative fine ranging from RUB 30,000 to RUB 50,000 (approx. EUR 414 to EUR 690)
An administrative fine ranging from RUB 50,000 to RUB 100,000 (approx. EUR 690 to EUR 1,380)
A warning or an administrative fine ranging from RUB 10,000 to RUB 20,000 (approx. EUR 138 to EUR 276)
An administrative fine ranging from RUB 20,000 to RUB 30,000 (approx. EUR 276 to EUR 414) or disqualification for a period of one to three years
Determination of the salary payment terms
Pursuant to the amendments, salaries must be paid to employees on or before the 15th calendar day of the end of the period for which the salaries were accrued. That said, as before, salaries must be paid at least twice a month. This means, for instance, that the second salary instalment for September must be paid by 15 October at the latest.
Previously, the Russian Labour Code was silent about the actual salary payment terms. This led to disputes between the employers and the regulatory authorities. Such authorities insisted that salaries must be paid on or before the last day of the accrual month. The employers found this deadline rather inconvenient as it created difficulties in the calculation and payment of salaries.
The above salary payment terms do not apply to incentive payments (bonuses, supplemental pay and allowances). Local regulations or collective agreements can set the day by which such payments are to be effected.
Increasing the employers’ material liability for delaying salary and other payments
The penalty interest payable by employers to employees for delaying the payments of salaries, vacation allowances, dismissal allowances and other remunerations payable to employees (including accrued, but unpaid bonuses) has been increased two-fold. Starting from 3 October 2016, the minimum penalty interest (monetary compensation) payable by employers for delaying payments to their employees will be 1/150th of the key rate of the Central Bank of Russia (the “CBR”) accrued on the unpaid amounts for each day of the delay. The CBR’s current key rate is 10% per year.
In addition, the employers’ failure to pay full salaries will also constitute a ground for payment of the above penalty interest to employees. In this case, the amount of interest is based on the outstanding amount.
Extension of the limitation period for claiming outstanding salaries
In the event of a delay in payment or partial payment of salaries and other remunerations, employees may file a court claim against their employers within one year of the payment due date.
As a general rule, the period within which an employee may apply to court with an individual labour claim is three months from the day when the employee became aware, or should have become aware, of the violation of his rights, while for dismissal-related claims, the period is one month from the date of receipt of a dismissal order or work book.
Possibility to apply to court at the place of the employee’s residence
Employees will be able to apply to court for the restoration of their employment rights at their places of official residence if a labour dispute arises on any issue.
Up until now, the courts had interpreted the legislation in such a way that employees could apply to court at their places of official residence only in a very limited number of cases.
This novelty may create additional difficulties for employers who have employees in Russia’s further-flung regions and those who hire employees under remote work agreements.
We recommend that employers:
- put more focus on compliance with salary payment dates;
- ensure that the salary payment dates set out in their local regulations and their employment agreements with employees are fully in line with the new requirements; and
- set in their local regulations or collective agreements, the term within which incentive bonuses, supplemental pay and allowances are to be paid.