Wage is a kind of payout or monetary reward for a job subject to a worker’s level of proficiency as well as the activity’s complexity, amount, quality and conditions. As such, it’s a kind of reward agreed by both parties and systemically paid to a hired person for performing certain contractual duties.

Legislation on Wages

Officially, wages are considered as the reward someone gets for their job. The Russian Labor Code, Art. 129, stipulates that a wage is dependent on a hired person’s level of proficiency as well as on the activity’s complexity, amount, quality and conditions. It typically covers any payments having a compensatory or incentive nature too. Also, regulation in this field allows paying for non-worked time.

Wage Structure

The remuneration structure enterprises currently use looks like this:

1. Basic wage. It is paid for a job actually done.

2. Bonuses. They are paid to incentivize and can be offered for such reasons as:

• for monthly work results;
• for annual work results;
• for adoption of new equipment or technologies;
• for saving material resources;
• for completing works and tasks assigned by the administration with high quality;
• for certain types of activity;
• for skills and proficiency.

 

3. Compensations. These are paid for:

• working during night hours;
• working during the second or third shift;
• overtime works;
• weekend and holiday works;
• operating in circumstances different from normal labor conditions;
• multi-skilling;
• high labor productivity;
• a new production (product) implementation stretch of time, etc.

 

4. Guarantees. Such payments cover time when you actually were not working or present:

• years of employment;
• study leave payment;
• payment for downtime which is not a worker’s fault;
• payment for forced absence;
• payment for a period of training or acquiring a side skill approved by the administration;
• regional premiums;
• special premiums, etc.

Principles of Wage Setting

When setting a wage, these principles are followed:

• Providing an equal amount for the same labor;
• Availability of multiple wage levels by groups of workers;
• The increase of actual wage;
• The operating efficiency growth outpaces the increase in rewards;
• Rewards are subject to the volume and quality of working activities;
• The staff’s financial interest in their own work results and those of the entire business.
• Availability of guarantees — each entity sets its own minimum staff rewarding standards.

 

How It Is Paid

Payroll payouts should be made according to the Russian Labor Code, Art. 136. Namely: at least every half month, the exact date to be established by a company’s labor policy or an individual contract, but within 15 calendar days after the payroll period is ended. That said, the staff gets its money at least twice a month.

 

Wage Forms

Nominal wage is a cash sum received for a time frame. It does not reflect price levels, so its growth does not imply an actual increase in living standards.

Actual wage is how many goods and/or services can be purchased with the nominal wage.

Types and Methods of Calculation

There are two compensatory schemes:

• piece rate;
• time rate.

 

With a piece-rate approach, the wage calculation relies on the product volume manufactured by a hired person (services rendered or works fulfilled.

When You Should Use a Piece or Time Rate

Time-rate systems are typically applied to specialists with diverse and difficult-to-quantify job duties (such as accounting experts, legal department personnel, core staff etc.).

If, for a particular job performed or service provided, quality is a more important index than performance, use the time-rate scheme.

As for the piece-rate scheme, it is primarily used in manufacturing. Specifically, if production efficiency boosting and being able to quantify work results are required, you should implement a piece-rate system. In such a case, applicable wage accounting and payment procedures should be described in an agreement, union and/or individual, and in the business’s internal policies.

Minimum Wage

The lowest level of rewarding the Government officially sets for enterprises of any type of ownership in the form of the lowest monthly cash or a per-hour rate.

No organization in Russia is entitled to pay less than this value. The exception is made for part-time and second-job personnel.

The minimum wage index affects calculation of national taxes, a variety of payments, penalties etc.