Compensation of expenses for remote employees

PUBLICATIONS \ 26.04.2021

Starting from January 1, 2021, a Federal law came into force that establishes the procedure for organizing remote work of employees. The specified amendments supplement Chapter 49.1 of the Labour Code of the Russian Federation with new provisions, thereby defining the features of the interaction with employers of remote employees .

One of these features is the organization of labour, in which the employee uses his or her own or rented property, or necessary items that the employer provides him or her with. In addition to this, the employee bears additional expenses on electricity, mobile communications, and so on.

Hence, a legitimate question arises – whether to compensate such costs and in what amount? How will such expenses be taken into account in taxation and what documents should be issued for this? These and other questions are answered by Acsour’s Internal Auditor Ekaterina Lutenko for “Raschet” magazine.

THE CONCEPT AND TYPES OF REMOTE WORK

According to employment legislation, remote work is recognized as work aimed at an employee performing his or her job functions:

• outside of the employer’s location;
• outside of the employee’s own permanent workplace;
• outside a territory that is directly or indirectly under the control of the employer.

When concluding a labour contract or a supplementary agreement, it may be indicated that the employee is employed or transferred to one of the following remote working modes:

• permanent (throughout the term of the labour contract);
• temporary (for a period not exceeding 6 months);
• periodic (if periods of working remotely and in the office are alternated).

These documents can be drawn up in electronic form when an employer uses an enhanced qualified electronic signature (EDS), and an employee uses a similar or enhanced unqualified electronic signature. This method is also used in cases when such documents are terminated.

The employee also has the right to apply to the employer with a written statement requesting the provision of:

• a copy of the labour contract in paper form;
• copies of documents associated with work (in accordance with article 62 of the Labour Code of the Russian Federation) in paper form or in the form of an electronic document.

The deadline for submitting documents is 3 working days from the date of receipt of the statement from the employee.

I would like to draw your attention to the following aspects:

1. It is not allowed to transfer an employee to remote work at the employer’s initiative, if:
2. the relevant decision was not made by a state or local government body;
3. such initiative is not associated with a threat to the life or living conditions of the population (natural or man-made disasters, epidemics, or natural disasters).

The place of work is one of the main conditions of the labour contract, which can be changed only after written consent is received from the employee.

On the initiative of the employer and without consent, such a condition can be changed either in the exceptional cases mentioned above, or when there are changes to organizational or technological working conditions.

If the transfer to remote work is associated with a threat to the life or living conditions of the population, the employer has to issue an appropriate internal regulatory document containing the following information:

• the reason for and period of the transfer;
• a list of employees temporarily transferred to the working in remote mode;
• the procedure for organizing the labour of remote employees;
• the procedure for providing all the necessary tools to perform work remotely.

If the reason for the transfer is a change in organizational or technological working conditions, then not later than two months in advance, it is necessary to notify the employee of such a decision in writing, indicating the reason for the transfer. If an employee refuses to work remotely, the employer is obliged to offer him or her another vacancy available in the company. In the absence of such work or if the employee refuses a position that is offered, the employment relationship between him or her and the employer is terminated on the basis of clause 7, part 1, article 77 of the Labour Code of the Russian Federation.

Otherwise, if the employer transfers the employee to remote work for reasons not specified above, then the employer may face administrative liability under article 5.27 of the Administrative Code of the Russian Federation.

• Do not equate remote work with home-based work.

Home-based work means manual labour, which is carried out by an employee at his or her place of residence. Family members may be involved in the work, but there are no employment relationships between them and the employer. The result of such labour is often material. This mode of work is regulated by Chapter 49 of the Labour Code of the Russian Federation.

Remote work is not linked to the employee’s place of residence. It can be performed anywhere, but outside the employer’s location and the employee’s permanent workplace. This work is carried out using information and communications networks, including the Internet, and communication tools. This allows the fact to be determined that work has been performed and that there has been interaction with the employer. The outcome is often a result of intellectual activity or a non-material item (the preparation of reporting, consulting, information analysis, etc.).

Be careful when registering employment relationships with the specified categories of employees. This is because the corresponding types of work are regulated by different provisions of the Labour Code of the Russian Federation.

• Do not forget to review the procedure for documenting employment relationships with those employees who already work remotely.

If you have switched your employees to a remote working mode during the period of the coronavirus infection (spring 2020), then it is now necessary to decide: in what format will such employees continue to work. Regardless of the chosen mode, it is necessary to draw up an additional agreement to the labour contract and familiarize the employee with it.

ORGANIZATION OF REMOTE WORK

From the moment when the new changes enter into force, the employer may stipulate in the labour contract such conditions of work for a remote employee as:

• working hours;
• payment for labour;
• the duration and frequency of performance of job functions by the employee (in a case of temporary remote work);
• the conditions and procedure for calling a remote employee to the office to perform job functions at a permanent workplace;
• the procedure for transmitting work results and a report on such results (at the request of the employer).

It is also important to remember that:

1. The remote employee has the right to determine his or her work and rest schedule independently, unless the labour contract provides otherwise.
2. The performance of remote work by an employee may not be a basis for reducing the amount of his or her salary. The time of his or her work and the procedure for calculating salary will be determined in the same way as for employees working in the office.
3. The procedure for granting leave to an employee working under a permanent mode of remote work is determined according to the standard procedure. If the remote work is temporary, then this is done according to the rules of Chapter 19 of the Labour Code of the Russian Federation.
4. The time of the remote employee’s interaction with the employer is included in his or her working time. This means that if the employer contacts the employee on labour issues during his or her rest, such time will be included in his or her working time.
5. Remote employees are subject to the provisions of employment legislation and other documents containing rules of labour law. 

COMPENSATION FOR EXPENSES ON ORGANIZING REMOTE WORK

In order for an employee to be able to perform their work, the employer has to provide him or her with the appropriate tools and equipment: computer equipment, software, mobile communications, an Internet connection, expendable materials and office supplies (paper, printing cartridges, and so on). There are two methods to do this.

Method 1. Provide the technical means already available to the employer, or purchase their missing components and transfer them to the employee for use.

With this method, all technical resources will be listed in the company’s books. It is very important to fix in internal regulatory documents the procedure for their transfer, to ensure the safety of such items and to make sure that the transferred equipment, as well as other items, are used by the employee for their intended purpose.

Method 2. The employee’s use of personal property for work. In this case, the equipment used is the property of the employee; therefore, the employer does not need to ensure the safety and control of the items in question.

The employee will be able to work from his or her own computer only with the consent or knowledge of the employer. And if the two parties have come to such an agreement, then the employer has an obligation to compensate the remote employee’s expenses incurred using the property.

The grounds for the payment of compensation are a collective or labour contract, a supplementary agreement to the labour contract, or an internal regulatory document. It is recommended that the documents reflect the list of the employee’s property used for performing his or her job functions, as well as the amount of compensation. The amount of compensation can be determined either by the calculation method (for example, based on the amount of wear and tear of the equipment), or in the form of a fixed amount. The legislation does not establish any restrictions in this respect.

For example, there may be two such amounts. The first one is established if the employee uses the company’s property (after all, despite the fact that the equipment used is not the employee’s property, there are other expenses that the employer can compensate on its own initiative: electricity, communications, the Internet, and so on). The second one is compensation for the use of the employee’s personal property and his or her additional expenses.

Also, when filling in the documents, it is recommended to take into account the following:

1. Determine the period during which the employee will receive a compensation payment. Try not to miss this period; otherwise, you risk paying a fine of 1/150 of the key rate of the Central Bank of the Russian Federation on the unpaid amounts for each day of the delay (article 236 of the Labour Code of the Russian Federation).
2. Duplicate a certain amount of compensation in the supplementary agreement with each employee, or make a reference to this amount indicating the relevant clause of the Internal policies and procedures (IPP) in order to prevent conflicts with your personnel and with supervisory authorities.
3. Provide for circumstances to exist that may reduce the amount of the compensation payment. For example, if such a payment is set at a fixed amount, and your employee is on sick leave or on vacation, you can pay 50 percent of the set amount. Just do not forget also to stipulate this condition in the documents.

For more information on the procedure for reimbursing compensation for the expenses of remote employees, see the table below.

Type of expense	Procedure for determining compensation	Documentary confirmation
Computer equipment	Determining the amount of compensation: based on the calculated amount of depreciation on the equipment used (in accordance with Resolution No. 1 of the Government of the Russian Federation dated January 1, 2002);by setting a fixed amount.	Documents confirming the purchase (for example, a check) or a lease of the equipment (lease agreement).
The Internet	Determining the amount of compensation: taking into account the number of days and hours of the employee’s working time spent on the Internet (based on reports from providers);by setting a fixed amount.	A contract with a provider, certificates of the provision of services, invoices or slips for payment for services.
Mobile communications	Determining the amount of compensation: by selecting work calls from the total number or calculating their percentage in the total amount of calls (based on printouts of phone calls);by setting a fixed amount.	Certificates of the provision of services, invoices or slips for payment for services.
Electricity	Determining the amount of compensation: taking into account the number of days and hours of the employee’s working time;by setting a fixed amount.	Slips for payment for public utility services.
Expendable materials and office supplies	Determining the amount of compensation by setting a fixed amount.	Payment checks

TAXATION OF THE EXPENSES OF REMOTE EMPLOYEES

Compensation for the use of personal property during work is one of the requirements of the legislation of the Russian Federation. The condition for such compensation to be paid should be specified in the labour contract or a supplementary agreement. Companies have the right to take into account this amount of such compensation as part of the payroll expenses on the basis of clause 25 of article 255 of the Tax Code of the Russian Federation.

At the same time, the Ministry of Finance of Russia allows such compensation to be accounted for as part of other expenses on the basis of sub-clause 49 of clause 1 of article 264 of the Tax Code of the Russian Federation.

In addition, it is not necessary to withhold income tax from this amount, or to tax it with insurance premiums, since this type of payment is not an economic benefit for the employee.

However, in order for the company to be able to apply such provisions of the Tax Code of the Russian Federation, it should:

• confirm that the costs were reasonably incurred;
• prove that the expenses incurred are associated with the performance of the employee’s work duties.

To do this, it is necessary to have the relevant supporting documents and to carefully stipulate the conditions for organizing remote work in the labour contract or a supplementary agreement to it (Letters No. 03-04-06/96913 and No. 03-03-06/1/6672 of the Ministry of Finance of Russia dated November 6, 2020 and February 4, 2020 respectively, and Letter No. SD-4-11/1705 of the Federal Tax Service of Russia dated February 12, 2021). Otherwise, the company may face disputes with supervisory authorities, and financial risks.