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Payroll in Russia: Comprehensive Guide for Businesses

Ever since the downfall of communism about three decades ago, Russia has slowly become synonymous with relative economic stability. Such stability has helped make this country a high-priority target for various industries and sectors looking to expand and influence international markets. One factor equally instrumental in shaping the Russian economy is its foolproof payroll system.

Therefore, this goes without saying that Russian employers emphasize dedicating their time and resources to their payroll operations. Multiplier hopes to help our Russian employers enjoy the best services concerning payroll in Russia so that they can successfully navigate the payroll rules and regulations in Russia.

Here are the details about Russian payroll requirements, how to do payroll in Russia, and what an error-free payroll in Russia looks like. Let us get started!

How Is Payroll Calculated in Russia?

Payroll is when an employer pays its employees an agreed-upon amount. But this process is not entirely simplistic. Each country and business follows a different payroll protocol. Thus, payroll in Russia is slightly different than payroll processes in other countries.

A complex web of components is involved in designing effective payroll policies and procedures in Russia. From minimum monthly wages and payroll tax in Russia to social security contributions and other expenses, payroll rules and regulations in Russia include various elements to hit the payroll compliance checklist in Russia.

A brief outlook of how to do payroll in Russia includes these primary factors:

  1. Calculating employees’ salaries, bonuses, and other company benefits.
  2. Taxation
  3. HR payroll in Russia
  4. Attendance reports
  5. Inclusion of reports concerning federal tax services and additional budgetary funds
  6. Social security calculations
  7. Expense reimbursements

The following factors should be considered when setting up a payroll in Russia:

Taxation

Thirteen percent of personal tax is applicable for all income levels. However, for non-residents, the tax rate is 30 percent.

Social Security Contributions

Depending on the categories and the gross salary, the rule for social security contribution can vary between 2 and 22 % of the gross wage.

Sick leave

Employees are entitled to compensation for their employers’ first three days of sick leave. Their social security fund (SSF) compensates for the subsequent leave days.

Maternity leave

A period of 70 days before and 70 days after the child’s delivery is applicable for maternity leave, which ear paid from SSF. Employers must also reserve the position for their female employee until she joins back. 

Work Hazard insurance

A work hazard insurance rate between 0.2% and 8.5% should be paid to employees engaged in a hazardous occupation. 

Voluntary medical insurance

Employees can also take voluntary medical insurance for additional healthcare concerns.

Important Elements of Salary Structure in Russia

There are numerous elements in salary structures in Russia. The Constitution of the Russian Federation ensures that each employee receives a salary higher than the federal minimum wage. Thus, one needs to begin with the minimum monthly salaries to gain necessary insights into payroll in Russia.

Minimum Wage

Minimum wages depend on various factors and differ according to the federal and regional levels. Based on the median salary, the minimum wage is a value that considers 50% of working places are paid lower, and 50% are paid higher than that value.

This median salary is reviewed every five years. The ratio of the minimum wage in Russia is 42%. The minimum wage is around 20,589 RUB per month in Moscow and 19K RUB per month in Saint Petersburg for 2021. In general, the minimum wage is around12,792 RUB per month. In general, the minimum wage is around12,792 RUB per month.

Overtime allowance

Employees in Russia must receive an overtime allowance that should be paid at 150 percent of the hourly rate for the first 2 hours and an additional 50 percent for any time beyond that. 

Notice Period

A minimum of seven days’ notice period must be given to the new employees before the commencement of their probationary period. 

Leaves

Employees in Russia are entitled to take at least 28 days of paid annual leave, during which they are entitled to their mean earnings. 

How to Set Up a Payroll in Russia?

Since payroll processes demand employers to invest their time and resources on a month-to-month basis, these procedures could quickly become tedious due to their multi-component nature. In short, it is sometimes easier to miss out on granular details, which may also eventually lead to non-compliance issues -something which any employers wish to avoid.

Fortunately, Multiplier is your global solution to help you adhere to local rules and regulations associated with payroll in Russia. 

A Step-by-Step Process of Payroll Processing in Russia

Dealing with salary-related operations by Russian employers can be difficult due to the complexities associated with payroll policies and procedures in Russia. This is where the payroll solutions chip in.

Outsourcing a business’s payroll has become one of the most helpful accounting services. The process of payroll in Russia can be divided into three stages.

Pre-payroll stage

The pre-payroll stage includes defining payroll policy and gathering inputs from the employers and various departments (e.g., HR payroll in Russia, Tax payroll in Russia, etc.) to calculate the net payroll.

Actual payroll stage

The data is aggregated, verified, and fed into the payroll system in the actual payroll stage.

Post-payroll stage

At last, the post-payroll stage includes adhering to statutory compliance, payroll accounting, and final payout. An in-country bank account is necessary to set up payroll in Russia.

Leave, total attendance, and the LOP data are also significant elements in the payroll in Russia. Thus, tracking and keeping a record of these data is extremely important. The following registrations to tax and social security authorities are required to process payroll in Russia:

  1. Tax Inspectorate of Federal Tax Agency
  2. Pension and Social Insurance Fund of the Russian Federation
  3. Registration with the Centre for workplace Quotas is subject to regional legislation.

Payroll Contributions:

According to the Russia Payroll requirements and payroll rules and regulations in Russia, the employer and employees have to both contribute to the payroll in Russia. Here is how companies and their employees contribute to the Russian payroll process.

Employer contribution

The payroll tax structure in Russia is similar to other neighboring countries. The employer’s taxation is comparable to other countries in the same region. Some employers deduct the tax amount early on, and the employers are expected to withhold the personal income tax and submit the report to the tax authority.

However, the social contributions paid by employers from employees’ gross salaries are relatively higher than in other countries. While the employers can apply a personal tax of 13% on their employees, employers registered under the small and medium businesses could also use a lower social contribution of 15%.

The payroll rules and regulations in Russia allow a lower social security contribution after limits, resulting in employers paying lower contributions if their annual salaries exceed 912K RUR.

Services

Employer’s contribution in %

Health Insurance

3-5%

Accident Insurance

0.2-8.5%

Old-Age Pension Insurance

3-10%

Social contributions

13-15%

Employee contribution

The personal income tax for Russian residents is 13% for all income levels. Non-residents who spend less than half the year in the country are expected to pay a personal income tax at the rate of 30%, which is subject to the relevant double taxation treaty between the employer’s native country and Russia.

Other foreign residents with work permits also pay 13% on taxation and are not contingent upon the number of days spent in Russia.

Social Security Contributions

Social security contributions are divided into three different categories, and their rates and limits vary depending on the category.

Category

Rate and Lower Limit

Rate and Upper Limit

Social Contribution to Pension Fund or SCPF

 

22% on annual gross salary lower than 1,150,000 RUR

10% on an annual gross salary higher than 1,150,000 RUR

Social Security Contributions or SSC

2.9% on annual gross salary lower than 865,000 RUR

0% on annual gross salary exceeding 865,000 RUR

Medical Insurance Fund Charges (MIF)

5.1% on annual gross salary

No limit

Payroll Cycle

Effective from October 2016, the Russian legislation passed a resolution that establishes that employers are required to pay employees at least every two weeks and should not exceed 15 calendar days. So, if your company pays your employees an advance on the 20th, they must receive their salary no later than the fifth day of the following month.

According to the Russian payroll guide and the payroll rules and regulations in Russia, the payroll cycle should range between the 1st and the 5th. The payment date needs to be explicitly mentioned to ensure a payroll compliance checklist in Russia.

Russia Payroll Options for Companies

There are multiple routes you can take when performing the payroll in Russia. These include:

Internal Payroll in Russia

You can run your payroll operations as a company. However, this option can be relatively expensive given that it would require you to hire necessary payroll experts.

Remote Payroll in Russia

Sometimes, other subsidiaries having a large parent company may add all Russian employees to the remote payroll of the parent company. In this case, both sets of employees must follow and adhere to specific employment compliance laws.

Russia payroll processing company

Other payroll options in Russia include outsourcing your payroll operations to a local Russian payroll processing company.

Russia payroll processing outsourcing

If the above options do not fit your business, you can always outsource your payroll with Multiplier. We are highly adept at handling payroll processing and compliance issues.

Entitlement and Termination Terms

The most appropriate way to employee hiring includes designing an employment contract that lists the term and nature of the employer-employee relationship. Likewise, informing the employee about the entitlement and termination terms will save you from non-compliance issues. These are the pointers that you need to keep in mind when designing an employment contract:

  1. If you initially hire new employees under the probationary period contract, you must give them a minimum of seven days of the notice period.  
  2. According to Article 74 of the Russian Federation Labor Code, the employer must notify its employees two months before any expected entry of changes.
  3. Make sure you know your employee well in advance, as entitlement terms vary depending on the nature of your employee type. For instance, employers are not entitled to pay insurance contributions for foreign employees on work permits and working as highly-qualified specialists (HQS). 

Notice Period

Position/Termination Reasons

No Notice Period

Contract terminated due to a cause

Three days 

Terminated due to expiry of a fixed-term contract

Two weeks 

General Employee doing a secondary job role

1-2 month notice period

Chief Executive Officer/Board Member

Russia Payroll Processing Company

Despite the availability of many payroll-processing companies in Russia, Multiplier has quickly become one of the best and most trusted providers concerning payroll in Russia. Expert staffs of our company are constantly a call and an email away from resolving your payroll-related queries.

From helping you the internal documentation to providing concrete resolutions to complex labor disputes, Multiplier is ready to assist your company with the best outsourcing payroll services that religiously follow the payroll policies and procedures in Russia.

How Can Multiplier Help With Global Payroll?

Payroll in Russia is indeed a complex and time-demanding accounting operation. It is easy to fall victim to issues concerning non-compliance with your employees without realizing it. This has catapulted various outsourcing accounting services mushrooming recently to aid employers with their payroll processes.

To help reduce your financial workload burden, Multiplier favors outsourcing your payroll operations. Our services concerning payroll in Russia offer errorless solutions, which include calculating salaries, perks and compensations your employers are entitled to, taxation, and social security calculations, among many others. Some of the primary services include:

  • Registration and termination of employees
  • Payroll processing and report preparation/filing
  • Payment order preparation
  • E-payslip preparation and income tax other tax return preparation
  • Social security calculation, among others

Frequently Asked Questions

In Russia, new hires typically serve a seven days probationary period. Under no circumstances the probationary period should exceed six months unless mandated by the federal legislation of Russia. 

According to Russian laws, the standard working week should not be more than 40 hours over five working days. Employers can seek overtime work from their employees, which is limited to a maximum of 120 hours annually. 

Yes, it is required for any employers to have an in-country bank account, and all the payroll-related transactions are made in Russian Rouble. 

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