A federal law now in force aims to prevent incidents of wage arrears, and put more onus on the employer for payroll non-payment.

New Federal Law #272-FZ dated July 3, 2016 "On amendments to a number of legislative acts of the Russian Federation on matters of increasing employers' responsibility for payroll law violation" came into force on 3 October 2016.

In case of delays in payroll payments by the employer, the following measures are currently provided in the Russian Federation:

1. The right of an employee to suspend the execution of job duties if the delay in payroll payment exceeds 15 days (article 379 of the Labor Code of the Russian Federation, a number of limitations are provided in part 2 article 142 of the Labor Code).

2. According to the article 236, in case of delays in payroll payment, the employer must pay payroll with interest (monetary compensation). As of 3 October 2016, the size of the monetary compensation cannot be less than 1/150 of the Bank of Russia's key rate during the delay period for the unpaid amount for each day of delay, starting the next day after the due day and including the day of actual payment.

3. The non-payment or a partial payment within the prescribed payroll payment period (if mentioned actions do not constitute a criminal offense) provides for punishment by a warning or a penalty according to part 6 article 5.27 of the Code of the Russian Federation on Administrative Offences.

4. In case of a partial payroll non-payment for more than three months, criminal sanctions can be introduced (part 1 article 145.1 of the Criminal Code of the Russian Federation) to the management of the company, its branch or the representation of a separate business unit.

According to the law, companies should specify the deadlines for payroll payment. The new version of article 136 of the Labor Code of the Russian Federation stipulates that payroll for the first half of a month is to be paid on a day from the 16th to 30th (31st) of a current month, and the second half is to be paid on a day from the 1st to the 15th of a following month.

The period is set taking into account the right of an employee for a timely payroll payment, and the employers' means to organise the calculation and the payment of payroll.

The remuneration and bonus system is set by collective agreements, contracts, and local regulations. Bonuses and stimulating allowances are paid for longer than two week periods (month, quarter, year, etc.) and are awarded based on performance results, KPI achievement, ie. after the assessment of the KPIs is completed.

Penalties

Also under the new law, the administrative and financial responsibility of an employer for payroll delay is increased. The penalties for officials in case of a first violation are increased, and recurring violation leads to the increase of the upper limit of all penalties.

The compensation to be paid to an employee by an employer for the payroll delay is increased twofold. It's calculated on the basis of 1/150 of the Bank of Russia's key rate the day of the delayed amount instead of the previous 1/300.

The period for employees to take legal actions regarding payroll payment delay is increased from three months to one year. The jurisdiction of the cases on restoration of labor rights has changed. Now, an employee can apply to court by his or her place of residence for the resolution of an individual labor dispute. Previously, it had to be done only by the employer's location.

The State Labor Inspectorate now has the right to conduct inspections on complaints on payroll non-payment or payment of less than the minimum amount of statutory salaries with an immediate notification of the prosecutor's office. Previously, it was necessary to obtain prior consent of the prosecutor's office.

Actions

In light of the new law now in effect, it's prudent for company heads, chief accountants, payroll accountants and HRs in Russia to check and make the appropriate changes in internal regulations. A full calculation of the employees' salary should be checked and provided twice a month within the appropriate time limits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.