Salary indexation is the most important condition for employee loyalty. Inflation processes are a factor that undoubtedly complicates the development of businesses and the national economy as a whole. However, if prices rise, it is even more difficult for people for whom labor compensation is the main source of income.
How is salary indexation regulated by Russian law? What types of employers are required to increase labor compensation accordingly? Is it possible to say that in Russia wage indexation is an example of the correct state intervention in socio-economic processes? At what pace should payments increase?
Salary: nominal and real
The salary received by employees has at least two main measurement criteria.
The first is its nominal value in the currency of the country where it is paid.
In Russia, this, of course, is rubles. The second key criterion for measuring salary is its purchasing power.
That is, a certain index reflecting how much of one or another tangible product or service can be purchased on it.
Thus, the salary is nominal and real. Among the additional criteria for its measurement may be, for example, an expression calculated at the rate of a particular currency. That is, the salary, in principle, can remain unchanged over time in terms of nominal and real terms, but lose in price (or, conversely, increase) if measured in, say, in dollars or euros.
Indexing Essence
Wage indexation is a process designed to maximally equalize the nominal value of labor compensation and their real purchasing power (and in some cases also the fluctuations associated with the exchange rate).
That is, earnings, upon the fact of a change in prices (or, if it matters, the purchasing power of the national currency), is multiplied by a certain indexing coefficient. The main guideline for him in Russia, as in many other countries of the world, is the level of inflation, which, in principle, reflects average changes in prices for goods and services.
In Russia, as a rule, annual wage indexation is practiced. That is, based on the annual inflation rate (and its possible predicted values). But, as some lawyers have noted, there are no provisions in Russian laws that would explicitly prohibit employer companies from indexing salaries at any frequency. Therefore, a number of organizations practice both quarterly and, in some cases, monthly adjustment of the size of labor compensation.
There are two main types of wage indexation: prospective and retrospective. In the first case, the employer, based on its own methodology for forecasting inflation and other factors affecting the purchasing power of labor compensation of its employees, raises wages in a proactive manner. In retrospective indexation, an increase in "pay" is carried out in accordance with the actual increase in prices.
There is also an annual indexation minimum wage. It is produced, as a rule, at the level of federal authorities. The minimum wage, even when it is quite small (in Russia it is about 5 times less than the average salary), can be a significant guideline for calculating labor compensation in many areas of the economy.
In order for the salary to be adequate for inflation, the state is primarily interested. First of all, because citizens provide for themselves (and not wait for social assistance). Therefore, in many countries, higher authorities encourage enterprises to index employee salaries. In Russia, this is also practiced.
Features of indexing in Russia
What is the specificity and procedure for wage indexation characteristic of the Russian economy? Experts call the following main features that have formed over the years while Russia has become accustomed to the free market.
Sources of funds allocated for indexation of salaries are the budget (in the case of state and municipal organizations), the own funds of organizations (in private companies), and in some cases, sponsorship (for NPOs).
The policy of adjusting the level of labor compensation to employees of budgetary institutions can be regulated at each of the levels of their functioning. That is, the indexation of wages may occur due to legislative changes in salaries and tariff rates established by federal, regional and municipal authorities.
With regard to the state of affairs in business, the only and very indirect mechanism of the legislator’s influence on companies is the minimum wage (as well as the accompanying regional coefficients). That is, indexation of wages in the private sector becomes mandatory in terms of specific figures, if only the amount of labor compensation will be lower than the minimum established by law (however, we will talk more about the rules applicable to non-state companies a little later).
Contract Indexing
It is possible that the adjustment of the salary will occur not only by virtue of the law and inflation processes, but also in view of the relevant clauses of the labor agreement concluded between the employer and the employee. Such forms of interaction are quite common in the Russian Federation.
In Russian practice, there are so-called industry agreements that set out the procedure for indexing wages adopted among enterprises in a certain market segment. In contracts concluded between employers and employees of private companies, by the way, such a guideline for adjusting the level of salaries as inflation is not always mentioned.
Indexing or raising salaries?
Some employers equate indexation and the usual increase in salaries (commensurate with seniority, for example). According to some lawyers, such a policy is not entirely true. The fact is that there are various kinds of by-laws (as well as judicial practice), according to which the employer should, when signing employment contracts with employees, distinguish between indexation mechanisms due to a decrease in the purchasing power of wages and an increase in earnings, which may be a factor length of service and other achievements.
What is the main criterion that distinguishes between such concepts as “indexation” and “increase” of wages? Experts believe that it is as follows. If the wording of the agreements contains clauses on the dependence of the level of compensation on labor functions or the length of time a person is in his current position, then it is a question of raising salaries. If such conditions are not included in the document, then we are talking about full indexation.
Is indexing mandatory for private companies?
Russian employers are divided into two main types: budget organizations and private firms. Are both required to index salaries? What are the odds that both should adhere to? How to calculate the indexation of wages of a budget organization and a private company?
The main legislative source governing the adjustment of the level of labor compensation is the Labor Code of the Russian Federation. AT article 134 The Code sets out key provisions reflecting salary indexing responsibilities for budget companies and businesses. However, their content, as noted by some Russian lawyers, may not be interpreted quite clearly.
On the one hand, this source of law states that ensuring a real level of labor compensation should be commensurate with a rise in consumer prices. And therefore, many experts conclude: wage indexation coefficients, at a minimum, should be equal to official inflation. And this rule, according to lawyers, is valid for all employing companies - private and public.
At the same time, there is an opinion somewhat diverging from this point of view.
Adhering to his lawyers note: article 134 of the Labor Code of the Russian Federation says that indexation of wages should be carried out by public sector employers based on the norms contained in other laws, and companies in the private sector of the economy in accordance with local agreements.
But the whole point is, experts believe, that the first types of sources of law are public, their implementation is mandatory.
The latter have legal force only within one company. And therefore, according to lawyers, it is not necessary for private companies to raise salaries in proportion to the level of inflation.
However, in the Russian expert community there is no disagreement regarding the obligation of employers to index the remuneration of employees - with or without inflation. Therefore, we will answer the questions we asked at the beginning, like that.
The salary indexation of civil servants, employees of budgetary institutions, as well as specialists of private companies is required. The law does not provide for differences in this regard. The indexation indexes are calculated by budget organizations based on the recommendations set forth in the sources of law issued by the authorities (federal, regional, municipal).
As a rule, they reflect inflation figures calculated by Rosstat. Businesses, in turn, must calculate the odds themselves. If inflation targets are a guideline, that’s good. If not, then, from the point of view of the law, there will be no violations.
Indexing and formalities
Despite the fact that there are no strict legislative requirements regarding the documentation of salary indexation mechanisms for private entities, experts recommend that businesses use a number of typical local regulations. Such as, for example, the Regulation on wage indexation. It can be, for example, a document supplementing a standard labor contract. If you suddenly have to deal with inspection bodies, the fact of the existence of the Regulation will help the company show its commitment to the rule of law.
In the document in question, experts still recommend fixing the moments that reflect the dependence of internal corporate indexation procedures on official inflation data. For example, to reflect that the increase in salaries and bonuses occurs annually in proportion to the increase in consumer prices according to the annual (or, say, quarterly) reports of Rosstat.
Subscribed - follow
As we have already determined, the Russian employer is required to index the salary of employees. At the same time, he has the right to set the appropriate coefficients himself, without taking, in particular, into account the inflation rate. However, if the employer once accepted a new employee and signed contracts with him, according to which, say, annual salary indexation is performed, then, as experts say, he is not entitled to refuse to fulfill the corresponding obligations.
Is a state company also a "budget"?
A reasonable question arises as to whether the employing companies, the predominant share in the share capital of which belongs to the state, are budgetary? Is Gazprom obliged to carry out wage indexation commensurate with inflation? Russian Railways, Aeroflot, Rostelecom are also state-owned firms with a large staff. What are the salary indexation obligations established by law for them?
Experts advise to interpret the norms set forth in article 134 of the Labor Code of the Russian Federation, quite clearly. There is a clear distinction between employers of citizens on “state” bodies and institutions “and“ other employers. ”Firms like the ones listed above, lawyers believe, belong to organizations of the second type.
That is, the rule is valid with respect to them, according to which the indexation of salaries is based on internal corporate regulations, and not on inflation. Although, as many experts note, the actual adjustment of labor compensation in companies with a predominant share of state capital is quite clearly correlated with a rise in consumer prices.
Indexing: Belarus Experience
What is the situation with salary indexation in the neighboring state - the Republic of Belarus? The economy of this country is built on slightly different principles than the Russian one. The importance of the state is very great in it. The regulation of economic processes in Belarus is carried out through much more, as experts say, government intervention than in Russia. Does this mean that wage indexation in Belarus occurs according to special mechanisms? Not like the ones we have?
Lawyers note: despite the difference in the degree of state intervention in the national economy in Russia and Belarus, approaches to salary indexing are quite similar. The fact is that only those cash incomes that are paid to citizens are subject to mandatory adjustment in the Republic of Belarus. Belarusian businesses, in accordance with the requirements of national laws, are not required to index salaries for employees.
How is the adjustment of labor compensation in budgetary institutions of the Republic of Belarus? The basis is the level of a living wage, doubled twice.
That is, if the employee’s salary reaches 100% of the amount in question, then it is not subject to indexation.
Moreover, if a person works concurrently, then the adjustment of his salary in the second place of work is based on the figures in the first. The amount of income in both cases should not exceed the indexation standard, which is established by national legislation.
Adjusted salaries are paid from the month that follows when the relevant conditions for changing the amount of labor compensation are updated. How often is indexing done?
According to the comments of Belarusian lawyers, the main condition for the next revision of the salary adjustment figures is a 5% increase in consumer prices relative to the month when the previous indexation was carried out. In turn, inflation indicators are taken based on the calculations of the National Statistical Committee.
With private companies, as we said above, everything is somewhat more complicated. Some experts believe that even in the Russian Federation the law in this regard is more socially oriented - Russian businesses should index the salaries of employees in any case. And they, in principle, do it in a more or less adequate correlation with inflation.
In Belarus, the norm is established - salaries from extrabudgetary sources are not subject to mandatory indexation. True, in the laws of the Republic of Belarus it is nevertheless noted - compensation for inflation costs in respect of labor compensation is carried out by employing companies in accordance with local sources of law. These may be collective agreements and other agreements. However, as noted by Belarusian lawyers, if there are no internal corporate acts at the enterprise of this kind, then there are no grounds for indexing wages.
At the same time, according to some experts, given the rather high inflation in the Republic of Belarus, most employers still adjust labor compensation to employees. At the same time, the size of wage indexation is usually commensurate with rising prices.
