Salaries in a number of industries may further increase by 20–30% due to amendments to the Labor Code
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Salaries in a number of sectors of the economy this year may additionally increase by 20–30% thanks to government amendments to the Labor Code, which passed the first reading in the State Duma last week. They establish the employer’s obligation to pay overtime to employees employed under an employment contract, taking into account not only the salary, but also all other payments due to them, despite the fact that the ratio of the former to the latter at 40/60 is not uncommon in the Russian Federation. Workers in trade, construction, the military-industrial complex and civil servants should expect wage growth.
In 2024, some employers in both the commercial and public sectors will be forced to spend additional money on the wage fund. For individual items it can grow by 20–30%. This will happen due to amendments to the Labor Code on overtime payment, adopted by the State Duma last week in the first reading. Overtime – working hours that those employed under an employment contract work in addition to the standard 40-hour work week established by the Labor Code. Now according to Art. 152 of the Labor Code, the first two hours of overtime work must be paid at least one and a half times higher than “regular”, the subsequent ones – at least twice as high. However, at the same time Art. 152 does not specify what is taken for “regular” payment – salary or the entire set of payments to the employee, including compensation and incentives. At the same time, as Kommersant previously wrote, in many sectors of the Russian economy, an employee’s salary consists of a small constant part (salary or tariff rate) and a large variable part (including bonuses and other payments). This approach is so widespread that it has allowed us to talk about the unique specifics of the Russian labor market, which responds to crises not by reducing the number of employees, but by reducing wages: it is easier for an employer to manage a high share of variable payments than to initiate layoffs of employees (for more details, see Kommersant on January 30) . In particular, in the public sector several years ago, intentions were declared to move from the ratio of salary and bonuses of 40/60 to the “reverse” (60/40), but the authorities did not announce its achievement.
Now, as follows from the amendments proposed to the Labor Code by the government, a clarification will be made to Article 152: the overtime pay base will include all payments. There are no statistics that can accurately assess the prevalence of overtime work in Russia, explains Rostislav Kapelyushnikov, deputy head of the Center for Labor Research at the Higher School of Economics. “But there are survey data on the length of the work week, and they allow you to see which industries work the hardest,” he says. Thus, as follows from the Rosstat collection “Labor and Employment in Russia”, on average in 2022, per employee there were 38.1 hours of working time, but the distribution of this indicator among the employed was uneven. If the majority of the employed (88%, or 63.5 million people) in 2022 worked 31–40 hours a week (standard duration under Article 91 of the Labor Code), then 4.6%, or 3.3 million people, worked more: 2.6 million people were employed 41–50 hours a week, another 700 thousand were employed over 51 hours a week. According to a rough estimate, the amendments, assuming an average of five hours of overtime per week and a 50/50 ratio of salary and additional payments, will frontally increase payments to such employees by 12.5%.
Men, in general, overworked more often: for example, 1.7 million men worked 41–50 hours a week versus 900 thousand women, and almost 600 thousand men and 150 thousand women worked more than 51 hours a week. Most often, Russians aged 40–49 years (700 thousand people) and aged 50–59 years (500 thousand people) face overtime. In the industry context, in 2022, retail trade workers most often overworked – there the number of people working over 41 hours reached 730 thousand people, then transportation and storage (500 thousand), construction (400 thousand), processing (300 thousand) and the sphere health and social services (180 thousand).
However, probably not all employees will be able to qualify for the new overtime payment calculation. As Pavel Kudyukin, a member of the council of the Confederation of Labor of Russia, reminds, labor relations are not formalized everywhere, and in some places some employees work under GPC contracts, which do not imply overtime work. In addition, he notes, in a number of industries where processing is the norm, it is designed fundamentally differently. “For example, doctors work at one and a half to two times the rate – and in fact overtime, but in practice they are paid for a regular working week. The situation is similar in higher education,” he says. “First of all, in my opinion, it is not commercial organizations that will face an increase in costs, but budgetary organizations. If you look at the judicial practice on disputes over underpayments for work on a day off, the lawsuits were mainly filed by law enforcement officers, other civil servants and local government employees,” says Anna Ivanova, head of practice and labor law at BGP Litigation. In 2022, we note, according to Rosstat, the number of people working more than 40 hours a week in the civil service and in the field of state security was over 170 thousand. It is likely that payroll costs will also increase at military-industrial complex enterprises – in 2022, the government, by its resolution, made it easier for them to introduce overtime work (see “Kommersant” dated July 4, 2022).
Let us note that the alternative to overtime employment has always been to expand the staff, but now this is quite difficult to do given the low unemployment (according to Rosstat – 2.9%). In addition, attracting new workers in conditions of active competition for personnel will require employers to compete in terms of wages, which will also put pressure on the payroll.
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