Paying a salary to employees in the amount set forth by the employment contract is one of the primary duties of the employer provided for by labour laws.
However, employees often question the accuracy of calculations, where in any given month the amount of salary is different from customary payments for prior periods. Such situations are in place, if the employee was, for example, on vacation or on a business trip.
Why does such difference occur? The point is that for any periods, in which the employee was not involved in the workflow for a good cause, the Labour Code of the Russian Federation provides for preserving average earnings.
The procedures of calculating average earnings are covered by Article 139 of the Labour Code of the Russian Federation and are detailed in Regulations on Special Aspects of Calculating an Average Salary approved by Decree of the Government of the Russian Federation dated 24.12.2007 No. 922.
Periods, for which the employee is paid average earnings, include:
- paid vacation (annual, study, additional);
- business trips;
- donor’s days;
- feeding breaks;
- additional days to take care of disabled children;
- advanced training periods;
- medical examination periods; and
- periods for employees to fulfil their state duties (reserve trainings, participation in a trial as a witness or member of jury).
- limits of the employee’s financial liability;
- amount of costs caused by downtime and a failure to meet labour standards at the fault of the employer; and
- amount of payments due and payable on dismissal (compensation for unused vacation, severance pay, etc.).
One of such distinctive features is that calculations should consider only employment with the current employer and payments effected by such employer. Earnings accrued by the previous employer are not taken into consideration. If the employee was first dismissed and then re-employed by the same employer, average earnings are calculated only for the period of employment under a new employment contract.
Average earnings to external specialists combining works and part-time employees are paid according to the general procedure. Average earnings of employees combining works are calculated per each employment contract.
The key stage of such calculations are:
- determining the calculation period;
- determining the amount of salary taken into account;
- determining average daily (average hourly) earnings;
- determining average earnings; and
- indexing average earnings (in cases laid down by labour laws).
1. GENERAL RULES OF CALCULATING AVERAGE EARNINGS
Irrespective of the employee’s operation mode, average earnings are calculated on the basis of his/her actually accrued salary and actually worked time for 12 calendar months preceding the period, in which his/her average salary is preserved. A calendar month is the period from the 1st through the 30th (31st) day of the relevant month (in February – through the 28th (29th) day). For employees working for the current employer for less than 12 months, average earnings are calculated on the basis of their actually accrued salary and actually worked time for the period preceding the month of preserving average earnings.A collective bargaining contract or local regulations may stipulate other periods for calculating an average salary, provided the same does not deteriorate the employee’s state.
The calculation period omits the time and any amounts accrued for such time, if:
- the employee was paid average earnings in accordance with Russian laws (except for feedings breaks set forth by the Labour Code of the Russian Federation);
- the employee was paid a temporary disability allowance or a maternity benefit;
- the employee did not work because of downtime caused by the employer or for any reasons beyond control of the employer and employee;
- the employee was not involved in a strike, but was prevented from doing his/her job in connection with such strike;
- the employee was granted additional paid days-off to take care of disabled children and children disabled since childhood; and
- the employee was otherwise released from work with full or partial preservation of his/her salary or without pay in accordance with Russian laws.
Calculations should take account of all types of payments covered by the employer’s payroll system, irrespective of the sources of payments, in particular:
- salary accrued to the employee by using tariffs and salary rates, piece rates, in percentage of revenue;
- allowances and additional payments for professional skill, qualification, service record (employment history), command of a foreign language, dealing with information constituting state secret, combining professions (job titles), extending the coverage area, increasing the volume of work done, foremanship, etc.;
- payments due to regional payroll regulation (in the form of locality pay factors and rated increases to salaries);
- increased salaries for heavy work, operations involving harmful and/or hazardous and other special work conditions;
- payments for work at night;
- compensation for work on weekends and public holidays;
- overtime payments; and
- bonuses and remunerations for fulfilling job duties and achieving certain performance figures.
Calculations omit social payments and other non-payroll payments (financial aid, paying meals, transportation, education, utilities, leisure, etc.).
In particular, the following types of payments are not treated as labour compensation and, accordingly, are not taken into account in calculating average earnings:
- non-production bonuses (in respect of holidays, anniversaries, etc.), as well as bonuses for fulfilling the duties not covered by the employment contract;
- payments under civil law contracts;
- indemnification of expenses dealing with business trips and work-related journeys;
- compensation for using employee’s personal property;
- compensation for unused vacation;
- allowance for working in shifts paid instead of subsistence remuneration; and
- compensatory payment replacing the issue of milk or other similar food products to employees engaged in working in hazardous environment.
Any bonus accrued for a calendar year preceding the relevant event (annual bonus, performance bonus) shall be considered in calculating average earnings, irrespective of the month of its accrual. In case of accruing an annual bonus after calculating average earnings, it shall be re-calculated, and the resulting difference shall be paid to the employee.
Bonuses accrued for a period exceeding a calendar year are taken into account in calculating average earnings in the amount of a monthly portion for each month of the calculation period.
A quarterly bonus is accounted in full, only if the following conditions are concurrently met:
- the period, for which such bonus is accrued (bonus period), is totally covered by the calculation period;
- such bonus was based on the time actually worked in the bonus period.
It sometimes happens that the employee has no earnings and/or days worked during the calculation period. How should an average salary be calculated in this case? The calculation algorithm depends on the situation.
- A female employee takes an annual vacation right after the completion of her leave for childcare. In this situation, the calculation period is totally composed of the time to be omitted from calculations, therefore, average earnings are determined on the basis of the amount of salary actually accrued for the previous period equaling the calculation period. Calculations should be effected for the same period that was used to determine the amount of prenatal allowance.
- An employee employed on the 1st day of the month takes a business trip on the 15th day of the same month. In this case, such employee has no accruals and actually worked time either in the calculation period or in the period preceding it, accordingly, average earnings will be based on accrued payments and the number of days worked in the period of preserving average earnings. Calculations should be made for the period from the date of employment until the date preceding the commencement of such business trip (from 1 to 14).
- A new employee is sent on a business trip on his/her first working day. Such employee had no actually accrued salary and actually worked days either in the calculation period, or prior to such period, or in the month of the occurrence of the event triggering preservation of average earnings, for which reason calculations should be based on the tariff rate or rated salary of the employee.
2. CALCULATING AVERAGE EARNINGS FOR ALL CASES, EXCEPT FOR VACATION
Average earnings to pay for days on a business trip, severance pay on dismissal, payments for downtime, donor’s days and other cases stipulated by the Labour Code of the Russian Federation are calculated by using the following formula:AE = (SAL : Dwork) х Dpay,
where:
AE – average earnings;
SAL – salary accrued for actually worked days in the calculation period (including bonuses, paying for work on weekends (public holidays), overtime payments and other compensatory and stimulating payments comprising the payroll system);
Dwork – number of days actually worked in the calculation period (including weekends (public holidays), during which the employee was engaged in work);
Dpay – number of working days to be paid at the rate of average earnings.
In determining average earnings of the employee with summarized accounting of the working time, average hourly earnings are used.
3. CALCULATING AVERAGE EARNINGS TO PAY CALENDAR DAYS OF VACATION AND COMPENSATION FOR UNUSED VACATION
Average earnings to pay vacation (annual, study, additional) and compensation for unused vacation on dismissal are calculated by using the following formula:AE = SAL : (29.3 х Mcp) х Dvac
where:
AE – average earnings;
SAL – salary accrued for actually worked days in the calculation period (including bonuses, paying for work on weekends (public holidays), overtime payments and other compensatory and stimulating payments comprising the payroll system);
29.3 – average monthly number of calendar days per year;
Mcp – number of months in the calculation period (in case of a fully worked 12-month calculation period, Mcp = 12);
Dvac –number of calendar days of vacation.
If one or more months of the calculation period are worked not in full, then the number of calendar days for each incomplete month is determined as follows:
29.3 : Dc х Dwork
where:
Dc – number of calendar days in a month (30 or 31, for February – 28 or 29);
Dwork – number of calendar days attributed to the time worked in such month.
Average earnings for determining the amount of unemployment benefit are calculated in a special manner approved by Decree of the Ministry of Labour of the Russian Federation dated 12.08.2003 No. 62.
Average earnings calculated in accordance with such procedures are indicated in a certificate produced by the dismissed employee to employment services.
Average earnings are calculated for three calendar months (from the 1st until the 1st day) preceding the month of dismissal.
Average daily earnings are calculated by dividing the amount of salary actually accrued for the calculation period by the number of days actually worked in such period.
In case of part-time employment (incomplete working week or incomplete working day), average daily earnings are calculated by dividing the amount of actually accrued salary by the number of days in the calendar of a five-day (six-day) working week attributed to the time worked in the calculation period.
It is obvious that there are many nuances in calculating the salary, in particular, in determining average earnings in various situations. To avoid any problems, contact experts in calculating salaries. BDO Unicon Outsourcing has been rendering advisory services for 25 years already and has successfully completed over 700 projects for various industries.
This article was prepared with the use of materials from reference legal system GARANT
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