The goal of this article is to outline the most important payroll regulations in Russia, including calculation and payment of salaries, social benefits, and other expenses. The following information will primarily serve as a guide for companies which recently established or plan to start their business in Russia. You can also find key facts in our infographics.
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The minimum wage is presently:
- RUB 7,500 per month in general in the country (RUB 7,800 starting from July 1, 2017)
- RUB 17,561 per month, concerning Moscow
Please note that these amounts would usually fall significantly below the market salary levels at which to attract any qualified staff.
Taxation and social security contributions (social tax)
The personal income tax (for Russian residents, citizens, and foreigners) is a flat 13% for all levels of income. For non-residents (those who spend less than half the year in Russia) the rate is 30%, but a relevant double taxation treaty between Russia and a foreign state can entail a different rate.
Foreign residents who receive a work permit as a so-called ‘highly-qualified specialist’ pay 13% on income tax, notwithstanding the number of days spent in Russia. The employer must withhold the personal income tax and submit it to the tax authority.
The employer is liable for a social tax (social security insurance contributions).
The general rule is that the insurance contributions are paid at a rate of 30% for an annual income of up to RUB755,000. For any income exceeding this limit within the same calendar year, lower rates apply.
The exact rule is as follows:
- The social contributions are divided into three categories, each of which has a different rate and slightly different limits.
- Pension contributions are paid at 22% for any income up to RUB 876,000 per annum, and income exceeding this limit is charged at10%.
- Temporary disability and maternity contributions are paid at 2.9% up to a limit of RUB755,000; after this limit is attained, no more contributions are charged.
- Medical contributions are paid at 5.1% without limit.
Income received by foreigners possessing the work permit for highly-qualified specialist is exempt from social tax. On behalf of other foreigners, non-citizens, the rate would be 22% up to the mentioned limit – after that 10%. In addition, 1.8% is paid in the form of temporary disability and maternity contributions (which was mentioned above as 2.9% for Russian citizens).
Properly documented expense reimbursements(and similar costs directly paid by the employer) are not included in the tax base, as a general rule.
Benefits paid out from mandatory social security (regulated employee benefit by the government):
- Sick leave
- Maternity leave
- Retirement pension
The employer is liable (as a general rule) to compensate only the first 3 days of an employee’s sick leave. The 4th and subsequent sick leave days are compensated by the Social Security Fund. The amount of compensation payment is calculated based on the employees’ income during the last 2 calendar years and their pension insurance record.
Maternity leave encompasses a period of 70 days before child delivery(84 days when expecting twins) and 70 days after delivery (110 days when twins). After that, the employer must provide child-care leave which lasts 1.5 years. The maternity and child-care leave compensations are paid out of social security.
A woman may choose to extend the child-care leave until the child reaches 3 years. For this period a significantly smaller contribution is paid (RUB 50 per month), again out of social security.
Thus, maternity leave does not represent a cost for the employer, but the employer must reserve the job position for the affected woman.
Compulsory work hazard insurance
In addition to the social security contributions, the employer must also pay for compulsory work hazard insurance managed by the state social security fund. The rates are 0.2% to 8.5%, depending on the nature of the work. For office workers, the rate is in general 0.2%. Salaries for any kind of employee groups, including foreigners and highly-qualified specialists, are subject to taxation under this kind of social contribution.
Voluntary medical insurance
In addition to mandatory social security insurance, employers frequently take out voluntarily insurance for additional health care protection, mainly for the benefit of visiting private clinics. Travel insurance may also be taken out for the relevant category of employees.
Annual leave is granted for 28 calendar days (including Saturdays and Sundays). This is at the employer’s expense.
Companies can hire a separate employee for calculation of salaries and other payments (as well as preparation and submission of reports to authorities) or choose an outsourcing firm that provides payroll services.
You can find more information on Russian tax and labor law in our business guides
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