Main points
- An employer should document that compensation has been paid to employees in the application for state registration. The tax authorities will refuse to register the liquidation of the company in the absence of such information.
- Compensation can be paid either monthly payments or lump sum compensation.
- The deadline for an employer to pay compensation is 15 calendar days from the day of the employee’s application.
A closer look
The new rules apply to the payment of severance wages to employees dismissed due to a staff redundancy or a company’s liquidation.
Employees are now required to file a request to receive severance payments beyond one month. Employers will have the option of paying either monthly or as a lump sum.
The new rules also prohibit companies from liquidating their business until they pay compensation to an employee for the second and third months after dismissal.
What are the company’s financial obligations to employees?
A company may not liquidate itself until it discharges its obligation to dismissed employees and pays compensation for the second and third months after dismissal.
An employee should contact the employer with an application no later than 15 business days after the end of:
- the second month from the date of dismissal.
- the third month after the date of dismissal if the public employment services decide on a monthly salary payment. To obtain such compensation, an employee should register with a public employment service within 14 days after the employment agreement was terminated and remain unemployed for two months from the date of his or her dismissal.
What is the deadline for an employer to pay compensation?
15 calendar days from the day of the employee’s application. If the employee finds a new job before the end of the month, the company must pay the average salary for the days when the employee searched for the new job.
How is compensation paid to the employee?
The company may pay a one-time compensation of double the monthly salary, i.e., for the second and third months, instead of monthly payments.
If the company has already accrued severance pay for the second month of employment, it will be set off against the one-time payment. Such an option will accelerate the process of the company’s liquidation.
How does the new ruling impact the existing monthly payments process?
Under the current Article 178 of the Russian Labor Code, in the event of a company’s liquidation or staff reduction, employees are entitled to severance pay in the amount of one average monthly salary, payable upon their dismissal. If the employee cannot find new employment within one month, the employer must pay the average salary for the second and third months of the employee’s job search.
While these basic terms remain unchanged, the new wording requires that the employee file a request with their employer for the second monthly payment no later than 15 business days after the second month of unemployment ends. The employee is entitled to a third monthly payment only if they registered with the state employment center within 14 days of dismissal and if the latter has approved the payment.
The employer must make the monthly payments within 15 calendar days of the employee’s request.
If an employee finds a new job before the end of the second or third month of unemployment, the final compensation payment shall be prorated to the time when the employee was unemployed.
What does the ruling say about the lump sum compensation?
To speed the process up, an employer can pay for the second and third months of unemployment straight away. This option may be preferable for companies undergoing liquidation, as the new rules guarantee the payment of the above compensation to employees before the liquidation can be completed.
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