Liability for underpayment of salary

LEGAL DIGEST, NEWS \ 22.06.2020

A situation in which an employee has not received salary payments in full is possible in any company. The reasons for underpayments may vary: from calculation errors to the human factor. We will explain in detail how to safeguard your company against such cases, and what to do if the fact of an underpayment has been established.

When are deductions possible and legal?

Deductions of part of an employee’s salary by the company are stipulated in article 137 of the Labour Code of the Russian Federation. The main reasons why an employer may make deductions are:

• The employee did not work off an advance that was issued by the employer on account of his / her salary.
• The employee did not fully use and did not return to the company the advance funds accrued for use on a business trip or in other cases.
• The company detected that an employee was overpaid owing to an error in payroll accounting.
• The employee was dismissed, but had already finished an annual leave, and there are still unearned days of leave left.

Why may an employee be underpaid?

Let us have a look at the most common errors that lead to partial non-payment of salary:

Distortion in the understanding and implementing of state regulations. Accountants may encounter problems when making various accruals to an employee owing to the misinterpretation of legislation. This often occurs unintentionally, owing to professional characteristics. There are situations in which the accountant intentionally fails to pay the employee’s salary in full. If the accountant uses sub-statutory documents that have been issued by the company independently and that do not correspond to the legislation when performing payroll accounting, all the company’s settlements will be determined to be incorrect.

Errors during the calculation process. Despite the fact that most companies have automated this process, errors may be present at the early stages of entering initial data, when calculating income tax, personal income tax, and other deductions. Also, it is necessary to regularly check the software sanity that automates the calculation processes.

What are the consequences of underpayment of salary?

Let us establish a few basic concepts. All obligations to observe the rights of employees, including the payment of salary to an employee, are undertaken by the company’s chief executive in full. The company’s accountant is also responsible within the scope of his / her official powers. If an employee has identified the fact of an underpayment of salary, the issue may be resolved amicably within the company without involving third parties. If the company does not satisfy the employee’s request, the employee has the right to apply to the court.

The judicial authorities may impose the following liability on the company:

Disciplinary liability

An employee who has committed misconduct in the course of his / her employment may be subject to the appropriate measures established by the employer with regard to labour discipline in the organization. According to the labour code, an employee may be subject to several disciplinary sanctions, depending on the severity of the misconduct, namely, a warning, a reprimand or dismissal.

Material civil liability

According to article 236 of the Labour Code of the Russian Federation, in a case where the fact is recognised of an underpayment of salary to an employee, the company is obliged to pay not only the withheld amount but also interest. Monetary compensation is calculated from the amount of salary withheld, not less than one hundred and fiftieth of the key rate of the Bank of Russia for each day of the delay.

Administrative liability

Apart from giving the company the mandatory financial obligations payable to the employee, the actions of an organization and its main persons in charge may be recognized as an administrative offence (article 5.27 of the Administrative Code of the Russian Federation). In accordance with this, the following measures are established for officers in the form of fines of 10,000 – 20,000 rubles. Individual entrepreneurs pay a fine of 1,000 – 5,000 rubles. For companies, the amount of the fine is 30,000 – 50,000 rubles.

If violations of employees’ rights are detected again, the amount of punitive sanctions increases for all categories of responsible employees.

Criminal liability

This occurs in the worst cases, when the act is characterized by the refusal of the company’s Accounts Department to provide explanations and pay the missing part of the salary (more than half). It may be concluded that the employer intentionally violated the employee’s rights.

Such crimes are regulated by article 145.1 of the Criminal Code of the Russian Federation. The article provides for various types of punishment, from monetary measures to imprisonment.

What to do if you have detected that the company’s employees were underpaid?

When determining the fact of underpayment of employees in terms of salary, the company needs to take timely measures that will help you avoid unpleasant consequences:

1. Notification to the employee that the fact of an underpayment has been detected, specifying the period of the payment of monetary funds.
2. Calculation of the underpayment.
3. Calculation of the amount of monetary compensation.
4. Payment of all funds to the employee.

In order to minimize the risk of underpayment to your employees and protect yourself from possible negative consequences, it is necessary to take the proper approach to the issue of calculating accruals. Acsour’s HR record management and payroll accounting experts will help you with this. We guarantee accuracy in the maintenance of timesheets and other human resources documents, while the outsourcing of your HR record management will ensure that initial data is correctly entered. In addition, our payroll accounting specialists will make sure that your employees are paid all stipulated accruals. You can also contact the company, when underpayments are detected, for advice or to settle labour disputes. Our employees have professional expertise in resolving these issues and are ready not only to conduct an audit of your settlements, but also to offer you the most effective solutions.