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A new procedure for employees’ severance payments

A new procedure for employees’ severance payments

LEGAL DIGEST, NEWS \ 19.08.2020

Since 13 August 2020, amendments to the Russian Labour Code have come into effect. These prohibit companies from liquidating their business until they pay compensation to an employee for the second and third months after dismissal.

It is widely known that when an employment agreement with an employee is terminated, the latter should be paid severance pay in the form of his or her average monthly salary. If the term of employment exceeds one month and the employee has documentary confirmation to this effect, the employer shall pay to him or her the average salary for the second month from the date of dismissal. In exceptional cases, a compensation payment can be obtained also during the third month from the date of dismissal further to a decision of the public employment services. However, if the company has terminated its operations and has been excluded from the Unified State Register of Legal Entities, an employee will be deprived of the opportunity to receive the above payments.

According to the new rules, a company may not liquidate itself until it discharges its obligation to dismissed employees and pays compensation to them for the second and third months after dismissal. To this end, an employee should contact the employer with an application not 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 the payment of a monthly salary. However, to obtain such compensation an employee should register with a public employment service within 14 days after the employment agreement was terminated and must remain unemployed for two months from the date of his or her dismissal.

The deadline for an employer to pay compensation is 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 will have to pay the average salary for the days when the employee was searching for the new job.

The company may pay one-time compensation in the amount of double the monthly salary, i.e. for the second and third months, instead of the above 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.

The employer should document the fact 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.

For any matters concerning compensation payments to dismissed employees, please contact Acsour’s specialists.

Documents: Federal Law No. 210-FZ dated 13 July 2020 and Federal Law No. 203-FZ dated 13 July 2020.