Increased penalties for employers for non-payment and untimely payment of wages

Since October 1, 2016 the Federal Law of 03.07.2016 №272-FL «On amendments to certain legislative acts of the RF tightening employers’ liability for employment-related violations» comes into force.

Amendments by the Law were made to the Russian Code of Administrative Offenses, the Russian Labor Code and the Civil Procedure Code.

After taken amendments administrative offence is the non-payment of wages, in whole or in part, within the established time limit in the absence of criminal actions. Penal sanctions for the offences for officials were increased from 1 – 5 th RUB to 10 - 20 th RUB. For a repeated offense administrative fine will cost from 20 to 30 th RUB – for officials; from 10 to 30 th RUB – for individual entrepreneurs; from 50 to 100 th RUB – for legal entities.

According to the Labor Code, wages now must be paid within 15 calendar days after the end of the period for which they are accrued. Progressive scale is fixed for calculation of monetary compensation to employees for a delay in the payment of wages and other benefits. In case of delay in payment of wages during more than 15 days an employer is obliged to pay an employee a monetary compensation of at least 1/150th of the key rate of the Central Bank of Russia. Earlier, the minimum monetary compensation to an employee was 1/300 of the key rate regardless of the delay period.

Relevance of the taken Law is confirmed by the data from the Federal State Statistics Service (Rosstat) on overdue arrears of wages (Picture 1).

(*) Data unadjusted for inflation.

Following the results of 2012, arrears of wages decreased to minimum values for the observed period and more than twice increased to 2014.

According to Rosstat, amount of arrears of wages to one employee increased (Picture 2.).

(*)Data unadjusted for inflation.

According to the data of the Ministry of Labour and Social Protection of the RF on July 2016, arrears of wages to 77 thousand employees are about 4 bln RUB.

Administrative pressure on employers, certainly, will affect the decrease in arrears of wages rate. However, general improvement in the national economy can play more significant role. This can be confirmed by experience in overcoming of the previous economic crisis of 2008-2009 (look at Picture 1.). From 2005 to 2008 6-time decrease in arrears was observed, then in 2009 – almost 2-time increase and further soft decrease up to 2013.