Salaries of senior managers are now required to correlate with salaries of their subordinates
Publications \ 03.02.2017

According to recent amendments to Clause 145 of Russian Labour Code, which have been effective as of January, 1st, 2017, salaries of senior managers of state and municipal institutions now must be calculated on a different basis. The salaries’ volumes must correlate with earnings of the rest of the company’s personnel. The marginal ratio between earnings of an executive manager and his subordinates must stay between 1 and 8. Excess of the ratio is not allowed.

An article from the journal “Klub Kadrovikov” (“The Club of HR Professionals”), which specializes in human resources management, provides a detailed discussion of various experts on the amendments and their impact on Russian legislation system as well as on business society.
Experts believe that the passed law will allow to reduce the volumes of earnings of senior managers of state and municipal institutions, increase efficiency of governmental expenditures and lower social tensions.

Tatyana Modeeva, CEO of Acsour, shared her ideas: “State and municipal institutions will face difficulties in evasion of the requirements. Since the correlation ratio is based on the volume of a real average pay instead of the volume of a position salary it will be quite complicated for senior managers to add perks and fringe benefits”.As for potential conversion and expansion of the amendments into private sector, Tatyana

With regards to potential conversion and expansion of the amendments into private sector, Tatyana Modeeva emphasizes complexity of its implementation: “On the one hand, companies need to give a fair estimate of an employee’s contribution to overall development of an organization. On the other hand, it is necessary to take into consideration various levels of responsibility and complexity of delegated tasks. Moreover, organizations have to use labor market as a benchmark. Therefore, potential expansion of the law into private business is very unlikely, since companies will face a variety of difficulties”.

Link to the full text of the article in “Klub Kadrovikov”