Russia’s economic potential and continued growth continues to lure multinationals to set up shop. Although payroll processing in Russia is significantly more rules-based than in Western countries, not to mention with a high level of bureaucracy, multinationals continue to flock there.
Russian payroll is extremely complex. The key to starting to understand Russian payroll is grasping the importance of Salary Calculation and Personnel Administration.
For the purposes of this article, I will highlight some of the basics:
1. By law, two payroll payments are required to be made to the employee each month. Typically, the first payment is handled mid-month and the second payment at the end of the month.
2. Employers must withhold Personal Income Tax from Employees’ pay. This rate is based on a fixed rate of 13% across all Employees. This amount is due to the tax authorities at the time the employee receives their pay.
3. Employers must provide Obligatory Medical Insurance to its employees.
4. The Russian Labor Code is extremely rigid when it comes to maintaining detailed documentation on employees and activities. This includes extensive documentation for:
c. Business Trips
5. Each employee must have a “labor book.” This book lasts for an employee’s entire working career. The employer must keep record of all labor books.
6. HR Records must be constantly formally updated to account for anything from a change in salary to vacation taken.
7. Vacation procedures are complex and Vacation pay is calculated based on the average salary during the previous 12 months. The vacation pay must also be paid to the employee before the employee takes the holiday.
8. Administration of Business trips is extremely complex because such expense can result in specific tax-deductible allowances depending on many factors such as accommodations, locations, length…etc. Nondeductible expenses will be taxable to the employee. Thus, employees need to provide and maintain clean record for expense reports, documents supporting expenses, official orders for the trip…etc.
The above listed is only scratching the tip of the iceberg but it is a starting point.