Payment of severance pay in case of staff reduction in 2021 - Calculation example

The legislative framework

The main legislative act regulating the relationship between employee and employer is the Labor Code of the Russian Federation.

So, according to paragraph 1 and paragraph 2 of Art. 81 of the Labor Code, an employment contract may be terminated at the initiative of the employer if:

1. termination of the organization's activities (its liquidation);
2. personnel optimization or staff reduction.

The procedure for calculating, accruing and providing payments is also a strictly regulated procedure, the rules for which are prescribed in Chapter. 27 of the same legal act.

So, according to current legislation, layoffs of employees are possible in several situations:

• when the total number of staff decreases;
• when changing the staffing table (reducing certain positions);
• upon complete liquidation of the enterprise.

Important: It is a big mistake to equate the concepts of reduction and dismissal at the initiative of the employer. These expressions differ fundamentally both in essence and in the consequences for the dismissed person.

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Which categories of citizens cannot be laid off?

The loss of a main job is always accompanied by a deterioration in financial situation, which is why legislation limits the possibility of layoffs for certain categories of citizens, such as:

• single mothers raising children under 14 years of age (when raising a disabled child (first, second or third group), this period is extended until the age of 18). This right can be exercised by fathers or guardians in the absence of the mother or deprivation of her parental rights;
• mothers raising a child under three years of age;
• the only breadwinners in a family raising a child with a disability (until the latter reaches adulthood);
• parents on parental leave;
• employees who were injured or injured while working in this organization;
• workers who became disabled while participating in hostilities;
• temporarily disabled employees.

Important: According to the Labor Code of the Russian Federation, the reduction of minor employees is carried out exclusively with the permission of the labor safety inspectorate and guardianship authorities.

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Calculation of benefit amount

The calculation of severance pay is based on determining the average daily income of a dismissal employee for the last year worked.

In general, the formula for calculating severance pay is as follows:

• VP=SD×RD, where
• SD – average daily income for the previous year;
• RD – the number of working days in the paid period.

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Calculation of average daily income

The average monthly income, in turn, is calculated using the formula:

• SD=OD/FOD, where
• OA – total income received during the billing period;
• FOD – the number of days actually worked in the billing period.

Thus, the OA includes the wages accrued to the employee for the last year worked, excluding vacation pay, sick leave and other compensation provided for by the organization’s local regulations.

Example. Petrova T.V. For the last year before the layoff, income was accrued in the amount of 457,836 rubles, of which 28,456 rubles were vacation pay, 5,956 rubles were payment for sick leave, 7,867 rubles were financial assistance for the purchase of medicines for an employee, provided for by local acts of the organization . Thus, when calculating the average daily earnings for the past year, an amount of 415,557 rubles (457,836 – 28,456 – 5,956 – 7,867) will be taken into account.

The FDF includes only days actually worked, excluding periods:

• being on study leave;
• temporary disability;
• annual basic and additional leaves;
• leaves without pay;
• parental leave for children up to one and a half or three years;
• downtime due to the fault of the employer or reasons beyond the control of the employee.

Example. Boykov S.S. resigns due to staff reduction on 03/23/2018. For the period from March 23, 2017 to March 23, 2018, Boykov was on annual main leave from May 25, 2017 to June 16, 2017, and on sick leave from September 8, 2017 to September 14, 2017. Thus, the billing period according to the production calendar has 248 working days. From this period we exclude periods of absence from work - 16 working days of vacation and 5 working days of incapacity for work. So, the calculation of S.S. Boykov’s benefit. will be made on the basis of 227 working days.

Summarizing the above information, let's consider an example of calculating severance pay for M.S. Rebrova, who was dismissed due to staff reduction on March 18, 2018.

So, M.S. during the billing period, she was on maternity leave until October 8, 2021; during her work, Rebrova received income in the amount of 187,347 rubles (before tax). Thus, the length of time actually worked during dismissal is 105 days (59 in 2021 and 46 in 2018). Average daily earnings of M.S. is 187,347/105 = 1784.25 rubles. There are 24 working days in the paid period (from 03/19/2018 to 04/19/2018), which means that the first payment to the retrenched employee will be 1784.25×24 = 42822 rubles. If the employee does not get a job in the next few months, the employer will transfer M.S. one more payment in the amount of 32,116.5 rubles (from 04/20/2018 to 05/20/2018). The size of the third payment will be 41,037.75 rubles.

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Dismissal due to staff reduction: compensation 2019/2020 (calculation)

Compensation for leave during layoff is calculated according to the same rules as compensation for dismissal for other reasons. For the purposes of calculating this payment, the reason for termination of the employment contract does not matter.

As for severance pay, the calculation period for it is 12 calendar months before the month of dismissal (clause 4 of the Regulations, approved by Decree of the Government of the Russian Federation of December 24, 2007 N 922). That is, if you dismiss an employee, for example, on February 19, 2020, for the calculation you will need to take the period from February 2021 to January 2021.

To calculate the average monthly salary paid for the period of employment, you can use the same formula. Moreover, the last indicator in it will be equal to the number of working days in the month after dismissal for which the average earnings are calculated.

Taxation

Payment of severance pay in case of staff reduction is material compensation, which means it is not subject to income tax. In addition, social and pension insurance contributions are also not deducted from this benefit. In this case, we are talking about an amount not exceeding three average monthly earnings (for workers in the Far North and areas equivalent to it - six average monthly earnings).

In other cases, both personal income tax and insurance premiums will be withheld from compensation for an amount exceeding the legally established limit.

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How to calculate the funds due upon dismissal?

The main value with which calculations are made when reducing all funds allocated in this case is the average daily earnings (ADE). To calculate it, you must sum up all the payments that the employee received over the last 12 months .

This money supply does not include vacation pay, sick leave, and business trips. Salaries, bonuses, bonuses for qualifications and other conditions are summed up.

Average salary and its impact on the amount of payments

Expert opinion

Zakharov Nikita Evgenievich

Practicing lawyer with 7 years of experience. Specialization: family law. Member of the Bar Association.

The main indicator that forms the money supply when calculating the special tax rate is the average salary. It directly affects the amount of payments - the larger it is, the more significant the compensation and severance pay .

Employees who agreed to receive part of their salaries in envelopes find themselves hostage to a short-sighted situation. If they are laid off, they expect minor payments, which are significantly lower than their actual average monthly earnings.

Payment procedure

The procedure for paying material compensation when staffing is reduced involves the following algorithm of actions:

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Issuance of an order

Immediately after the relevant decision is made by the management of the organization, competent employees develop and issue an order to reduce the number of staff. An accompanying document to the above is an order for the payment of severance pay in case of layoffs. This document does not have a strictly established form, but contains the following mandatory items:

1. date of preparation of the document and its number;
2. name of the order;
3. the essence of the order;
4. signatures of the manager or the laid-off employee.

The management of the enterprise can develop the form of the document independently or use the example below for an order for the payment of severance pay in the event of a layoff.

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Employee notification

Approval of an order to reduce the number of staff is the basis for notifying employees.

According to current legislation, the management of the organization is obliged to notify laid-off employees in writing about the fact of termination of the employment contract no later than 60 days before the date of dismissal and the last working day of the laid-off employee.

The employer must attach to the notification letter a list of vacant positions that the person being dismissed can occupy.

If the latter agrees, a transfer to another position is formalized; refusal to transfer is the reason for termination of the TD,

Important: The management of the organization provides those being laid off with a constantly updated list of vacancies immediately before the date of dismissal of the employee.

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Dismissal

After two months from the date of delivery of the notice to the employee, the organization’s management issues a dismissal order, with reference to a previously issued order to reduce the number of staff.

This document can be issued before the expiration of the specified period, with mutual consent of the employer and employee.

On the last working day, an entry is made in the work book of the redundant person indicating the termination of the employment contract, reflecting a reference to the Labor Code of the Russian Federation, namely clause 2, part 1, art. 81.

The employee is issued or transferred so-called settlement notes, containing:

• wages for actual time worked;
• compensation for unused vacation;
• severance pay.

Important: On the day of dismissal, the completed work book is returned to the employee, but if the latter is not at the place of work, the document is sent by mail to the home address of the dismissed person or directly to his place of work.

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Payment of severance pay

The procedure for paying severance pay during layoffs is strictly regulated by current legislation.

Yes, Art. 178 of the Labor Code of the Russian Federation indicates a specific period for which the employer undertakes to support a laid-off employee after dismissal - 3 months.

The first benefit payment is made directly on the day of dismissal and represents the employee’s average monthly income, then, if in the subsequent month the employee was unable to officially find employment, a second severance pay is accrued upon layoff.

The procedure for paying it requires a written application from the dismissed person accompanied by a work book.

This payment is made no earlier than 60 days from the date of dismissal.

To receive a subsequent cash payment, a laid-off employee must:

• be unemployed for three months after dismissal;
• within two weeks after the layoff, register with the employment center;
• provide the former employer with a certificate stating that the citizen is registered and does not have official employment.

Important: The employment service is looking for work for the laid-off worker, constantly providing the latter with an updated list of vacancies. Refusal to take the offered job will not allow the citizen to apply to the employer for payment of the third average monthly salary.

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How much salary is paid during layoffs?

The employee's rights include receiving one salary as severance pay. There are exceptions here: for example, seasonal workers are entitled to only half of their earnings, that is, money earned in fourteen days. All additional payments must be specified in the terms of the collective agreement.

If sixty days have already passed since the layoff and the person has not found another job, he can receive another salary.

People working in the Far North, that is, beneficiaries, have the right to compensation that is different from all others. They are entitled not only to the statutory benefit in the amount of one salary, but also to payments for ninety days of job search, that is, another 3 salaries, and in some situations – even 5.

Features of severance pay for certain categories of citizens

The above information is relevant in most cases, however, for some categories of employees the procedure for paying severance pay during layoffs may differ slightly:

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What to do if the employer does not pay severance pay?

So, compensation in the amount of average monthly earnings must be paid on the last working day of the person being laid off.

Subsequent transfers are made according to the rules established by local acts of the organization.

Since internal regulations cannot violate the Labor Code of the Russian Federation, payment of the second severance pay in case of staff reduction can be made at a time or divided into several transfers (such as an advance and basic salary).

If, during the process of reduction, the management of the organization violates the current legislation, the dismissed person has the right to apply to:

1. court with a statement of claim;
2. the prosecutor's office;
3. labor safety inspection;
4. commission for resolving labor disputes.

Violation of the paperwork for dismissal of an employee leads to the dismissal being declared invalid and the employee being reinstated in his position.

In this case, the employer undertakes to maintain the average salary from the moment of dismissal until the day the citizen is reinstated at his last job.

If a violation is committed in terms of payment, the management of the organization bears several types of civil liability:

• Administrative. According to Art. 5.27 of the Administrative Code of the Russian Federation, upon the first violation, the management of the organization is warned of the need to pay monetary compensation. If the rights of a redundant person are repeatedly violated, the employer will suffer a financial penalty of up to 50,000 rubles.

Important: Current legislation provides the management of the organization with 2 months to make the payment. After this period, failure to pay severance pay during layoffs is reclassified for the employer as a criminal offense.

• Criminal. If the person being laid off has already received at least half of the due amount, and the employer evades payment of the remaining funds for more than 90 days, the management of the organization may be imprisoned for up to 12 months. If the payment was not made in principle, according to the Criminal Code of the Russian Federation, the organization’s management must pay a fine of up to 500,000 rubles or be imprisoned for up to three years.

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When it's not supposed to

There are cases when a dismissed employee is not entitled to financial assistance from the employer.

In particular, when a person resigns of his own free will or under an article. After all, this payment is compensation for the time until he can find a new job. In all other cases, he has the right to demand financial assistance.

If the employer refuses to fulfill its obligations, you should contact the labor inspectorate.