Federal Law No. 272-FZ of July 3, 2016 “On the amendments to individual legislative acts of the Russian Federation enhancing responsibility of employers for violation of the legislation on labour remuneration – delays in payment of earnings» (hereafter Law No. 272-FZ) has introduced many amendments to the Labour Code of the Russian Federation and the Administrative Offences Code of the Russian Federation. These amendments stipulate increased penalties for employers and increased compensation for employees for backdated wages for a period over 15 days since the end of the calendar month. Amendments to the pay plan will come into force 90 days after its publication, on October 3, 2016.
There are no strict instructions on setting the dates of salary payment in the legislation. Article 136 of the Labour Code of the Russian Federation provides that wages are to be paid no less often than bimonthly, on the day set by the internal work regulations, the collective agreement or the labour contract. It should be noted that regulations in Article 136 of the Labour Code of the Russian Federation determines responsibilities of organization. Thus neither employee’s statement about salary payment once a month at the employer’s request nor similar conditions introduced into employment agreements entitle employer to labour violation. Letters from Rostrud No. 472-6-0 of March 1, 2007 and No. PG/1004-6-1 of March 6, 2012 contains appropriate explanations. There’s no matter if it is principal place of work or secondary employment. In any event employer is obliged to pay wages twice a month. The only exception is a workplace absence for the first half a month; an advance is not required to be paid. Letter No. 14-1/10/B-660 dated February 3, 2016 from Ministry of Labor provides these explanations.
From the fourth quarter of 2016 salary payment deadlines will not be allowed to be imposed arbitrarily. According to the changes effective from October 3, 2016, salary shall be paid not later than 15th of the next month. If there are another terms in the company, it will require revision and changes in the relevant documents.
Three documents are mentioned in the Labor Code, fixes deadline (Article, 136 of the Labor Code of the Russian Federation); internal workplace regulations, collective agreement (at presence), employment contract. In order to modify an employment contract it is necessary to prepare and sign an additional agreement to employment contract with each employee (Art.72 of the Labor Code of the Russian Federation). In order to modify work rules it is necessary to issue an order on amendments to the work rules. It is required to conclude additional agreement to the collective contract.
A clear payment day should be spelled out in the documents. It is not permitted to specify date interval (the period for receiving salary) or to pay salary later than a fixed date (i.e. not later the 5th day) (Letter No. ПГ/6310-6-1 dated June 20, 2014 from Rostrud and Letter No. 14-2/242 dated November 28, 2013 from Ministry of Labor). According to officials these wordings do not comply with Part 6, Art. 136 of the Labour Code of the Russian Federation that wages are to be paid no less often than bimonthly.
Compensation for the delay in the payment of wages to workers
An employee shall be compensated for the delay in the payment (Art. 236 of the Labor Code of the Russian Federation).It shall be calculated as:
Compensation for the delay in the payment | = | Salary arrears | × | 1/300 refinancing rate (or higher percentage, established by the company) | × | Number of days of backdated wages |
After the entry into force of the amendments made by Federal Law No. 2752-FZ, minimum compensation amount shall be calculated applying 1/150 refinancing rate. This requires notation of this increase in regulations on compensation, collective or labour contract. Percent is not restricted to maximum limits.
The period shall be considered as expired since the day following the date of payment and till the day of debt repayment (Letter No. 03-04-05/4-54 dated January 23, 2013 from Ministry of Labor). Days off that fall on the period of expiry shall also be calculated.
It shall also be noted that if the day falls on a weekend or holiday, wages are to be paid not later than the last work day before this non-working day (Part 8, Article 136 of the Labor Code of the Russian Federation). In addition, company is obliged to establish the exact date of payment of wages (exact days of the calendar month). When the wages delayed an employer is obliged to pay compensation to a worker.
According to Article 236 of the Labor Code of the Russian Federation company is obliged to pay compensation regardless of the employer’s guilt. That would mean that if the funds have been credited to account of the employee with a delay by bank, or the light has been cut off in accountant's office or computers have been broken, or money was delivered to the office with a delay – employer is obliged to compensate for the delay in the payment of wages to workers.
Since January 1, 2016 refinancing rate is equal to the key rate of Bank of Russia. Since June 14, 2016 key rate of the Central Bank of the Russian Federation is equal to 10.5% per annum. This very percent shall be applied when calculating of compensation.
Time limits for the payment of tax on income of physical persons
As a general rule the date of the receipt of income shall be deemed to be the last day of the month for which income was credited (Part 2, Article 223 of the Tax Code of the Russian Federation). Thus when advance is paid tax is not calculated or withheld, as tax agents shall be obliged to transfer amounts of tax which has been calculated and withheld no later than the day following the day on which the taxpayer receives income. Tax cannot be paid prematurely. Prematurely paid amount cannot be considered a tax as in that would mean that company does not withhold it from the wages but transfers from company’s funds, which is forbidden (Part 9, Article 226 of the Tax Code of the Russian Federation). Thus tax shall be paid within the time limits, otherwise a fine in the amount of 20 per cent of the amount required to be withheld and (or) remitted is to be paid (Article 123 of the Tax Code of the Russian Federation).
There is an exception to this rule. Upon payment of advance on the last day of the month, an employer shall pay tax on income of physical persons not only during final payment on a monthly basis, but also for this advance.
The conclusion from the above is that pay day should not be the 15th day of the month to avoid confusion with the payment of tax on income of physical persons. As wages shall be paid bimonthly, day of advance payment falls on the 30th day. It is the last day in many months which means that such advance shall be taxed on income of physical persons. In these months tax should be withhold twice and in months which include 31 days once.
Administrative responsibility for delay
Along with compensation for the delay in the payments to workers employer shall be also sentenced to a fine. Non-payment or delay in payment of the wages shall entail the imposition of an administrative fine on officials or persons engaged in business activity in the amount of between one thousand and five thousand rubles, upon legal entities - from thirty thousand to fifty thousand rubles (Part 1, Article 5.27 of Administrative Offences Code of the Russian Federation). Persons engaged in business activity or officials who have been administratively penalized for a similar administrative offence before shall entail the imposition of fine in the amount of between ten thousand and twenty thousand rubles, the latter shall entail disqualification for a term of from one year to three years. Legal entities shall entail the imposition of fine in the amount of between fifty thousand and seventy thousand rubles.
Since October 3, 2016 according to Part 6, Article 5.27 of the Code of the Russian Federation on Administrative Offences, which had not yet entered into force, non-payment or delay in payment of the wages, other payments within the scope of the employment relationship, if such activities do not constitute criminal offence, or fixing of wages less than minimum wages under the labor law - shall entail the imposition of an administrative fine on director or chief accountant in the amount of between ten thousand and twenty thousand rubles, upon a company – from thirty thousand to fifty thousand rubles. An official who has been administratively penalized for a similar administrative offence before shall be sentenced to increased fine in amount of up to thirty thousand rubles or shall be disqualified, and company shall be sentenced to a fine in amount of up to hundred thousand rubles (Part 7, Article 5.27 of the Code of the Russian Federation on Administrative Offences).
According to Part 9, Article 136 of the Labor Code of the Russian federation compensation for a vacation shall be effected no later than three days before its start. According to Part 1, Article 15 of the Federal Law No. 255-FZ dated January 29, 2006 sick leave and maternity leave compensations an employee is obliged to pay on the nearest day after awarding of the compensations established for the wages payment. During the termination of a labour contract, the payment of all sums due to an employee from an employer shall be effected on the day of dismissal of the employee. If the employee did not work on the day of the dismissal, then the relevant sums must be paid no later than the following day after the presentation of a claim for settlement by the dismissed employee. In the event of a dispute regarding the amounts of the sums due to an employee during a dismissal, the employer shall be obligated to pay the sum not disputed by him within the time period indicated in this Article (Part 1, Article 140 of the Labor Code of the Russian Federation).
Criminal responsibility for non-payment of wages
Article 145.1 of the Criminal Code of the Russian Federation provides for criminal responsibility for non-payment of wages, pensions, stipends, benefits and other payments for a long period. Not only head of an organization, but also head of a branch, representative office or other separate structural unit of an organization shall be recognized a subject of crime. The amount of the employees whose wages have been delayed is irrelevant (one person is deemed to be sufficient).
A partial non-payment within more than three months of salaries, wages, pensions, stipends, benefits and other payments established by law which is committed by the head of an organization owing to a mercenary or other personal interest shall entail (Part 1, Article 145.1 of the Criminal Code of the Russian Federation):
- a fine in an amount of up to one hundred and twenty thousand roubles or in the amount of the salary or wages or other income of the convicted person for a period of up to one year;
- deprivation of the right to occupy certain posts or to be engaged in a certain activity for a period of up to one year;
- compulsory labour for a term of up to two years;
- deprivation of freedom for a term of up to one year.
According to the note of Article 145.1 a partial non-payment means their payment in the amount of less than half the sum to be paid.
A full non-payment within more than two months of salaries, wages, pensions, stipends, benefits and other payments established by law, or payment of salaries or wages within over two months in the amount which is below the minimum labour wage owing to mercenary or other personal interest by the head of an organization shall entail (Part 2, Article 145.1 of the Criminal Code of the Russian Federation):
- a fine in an amount of one hundred thousand to five hundred thousand roubles or in the amount of the salary or wages or other income of the convicted person for a period of up to three years;
- compulsory labour for a term of up to three years with deprivation of the right to hold specified offices or to engage in specified activities for a term of up to three years or without such;
- deprivation of liberty for a term of up to three years with deprivation of the right to occupy certain posts or to be engaged in a certain activity for a period of up to three years or without such.
Partial or full non-payment have entailed grave consequences shall be punishable by (Part 2, Article 145.1 of the Criminal Code of the Russian Federation):
a fine in the amount of two hundred thousand to five hundred thousand roubles or in the amount of salaries or wages or other income of the convicted persons for a period of one year to three years or by deprivation of liberty for a term of two to five years with deprivation of the right to occupy certain posts or to be engaged in a certain activity for a term up to five years or without such.
- a fine in the amount of two hundred thousand to five hundred thousand rubles or in the amount of salaries or wages or other income of the convicted persons for a period of one year to three years;
- deprivation of liberty for a term of two to five years with deprivation of the right to occupy certain posts or to be engaged in a certain activity for a term up to five years or without such.
It should be noted that prosecution of an employer is possible only in cases where he has mercenary or other personal interest which has caused the delay of wages. That means that the guilt must be proved.
Amendments | What has been changed | Appointed date |
Part 6 of the Article 136 of the Russian Federation Labour Code | Wages shall be paid not later than the 15th day of the next month (currently a clear date is not defined) | 03.10.2016 |
Article 236 of the Russian Federation Labour Code | Compensation for unpaid wages shall compile not less than 1/150 of the key rate of the Central Bank per day of the amount delayed | 03.10.2016 |
Articles 6,7 of the Code of Administrative Offences of the Russian Federation | Penalty for non-payment or nonfull payment of the wages within the time limits set has been increased | 03.10.2016 |
The full text of the article in Russian is available via a link
