What are Employee Benefits?
Employee benefits are non-monetary compensation granted to employees as a part of their employment contract.
Employee benefits may vary as per law, the risk connected with the work or industry, or as per the regulations of the country where the employment is held or offered by the employer voluntarily. The employee benefits include healthcare, vacation time, sick leaves, sabbaticals, etc.
Compensation Laws in Russia
Companies in Russia must provide some compensation laws and guaranteed employee benefits. For instance, all Russian citizens and foreign employees are entitled to free governmental medical services, but employers can also offer a private plan.
If companies do not have sufficient time and resources to offer pre-made medical plans to their employees, they can offer them a monthly health management stipend. Some other compensation laws employees are entitled to are:
- Child care assistance
- Child education assistance
- Housing assistance and reimbursement
- Mobile and WiFi connection assistance
- Development and ongoing learning opportunity assistance for employee
- COVID-19 provisions
How to Design an Employee Benefits Program for Employees in Russia?
Managing employee benefits is a challenging task for employers. While employers are required to provide law-mandated benefits like social security contributions, health insurance, unemployment insurance, etc., many other benefits are completely voluntary.
Hence, selecting, designing, and applying for these benefits is important. Mentioned below are some steps you can keep in mind while designing your employee benefits program:
Step 1 – Identify the company’s benefits objectives and budget
Identifying company objectives will allow you to determine what kind of workforce you need and what your expectations will be from them.
Step 2 – Conduct an employee needs assessment
Once you have identified what kind of workforce you need, you should be able to provide employees with appropriate resources and benefits.
Step 3 – Formulate a benefits plan program
Formulate a program to maximize the comfort of your employees like paid leaves, maternity leaves, education leave, etc.
Step 4 – Run it by the employees and take feedback
As you are developing a plan for the benefit of your employees, remember to run it by them and gain feedback. They would be a better judge of it and benefit from it directly.
Types of Guaranteed Benefits in Russia
A slew of compensation and benefits in Russia ensures that workers are protected in various ways. Minimum salaries, social insurance, redundancy, termination, severance pay, working hours, vacation leave, maternity and paternity complications, and more are all covered by compensation packages in Russia.
Collective or trade union agreements cannot undermine statutory and mandatory minimums but can improve employee benefits in Russia.
Minimum Wage
From January 2021, the national monthly minimum is (RUB) 7,500, but it varies between major cities. The yearly minimum wage in Russia remains around $2,812.00 in International Currency. the work is dangerous or takes place in a difficult climate.
Social Insurance
The Russian social security system is supported by the government and contributions from employers. The Pension Fund, the Social Security Fund, and the Federal Medical Insurance Fund are all funded by Russian corporations and foreign legal organizations.
Employers are required to pay insurance premiums prescribed by law as soon as the employment contract is signed. Retirement, disability, the death of a breadwinner, illness, injury, an industrial accident or occupational disease, pregnancy, and childbirth, as well as maternity and paternity absences till the child is 1.5 years old, are all considered insured events.
Working Hour
The working week should not be longer than 40 hours, whether a five-day week with two days off or a six-day week with one day off. Internal laws and collective or trade union agreements can determine the start and end of the working day, breaks from work, shift work, and part-time work.
Healthcare and Insurance
Employers in Russia pay insurance premiums to the Obligatory Health Insurance Fund, which funds mandatory health insurance for all citizens starting at birth. Employers also pay Social Insurance Fund premiums to cover the risk of workplace accidents.
Many employers offer their employees supplementary medical coverage for their job duration. In certain cases, this coverage is extended to family members.
Leaves and Holidays
Following the law of leave benefits in Russia, paid vacation time is required for 28 days each year. After six months of service with their new company, employees are entitled to the entire allowance.
Employees working in the Northern areas, in a hazardous workplace, or with “irregular working hours” are eligible for additional annual paid leave. Annual leave should be taken in the year it is earned, and unused days should be carried over to succeeding years without restriction.
Maternity Leaves
The basic maternity benefits in Russia are for 70 calendar days before and after the due date. For multiple births, mothers are given 84 days before their due date. In the case of problems, 86 days are allowed post-natal, while 110 days are allowed for multiple births.
Paternity Leaves
According to law, there is no mandatory paid paternity leave in Russia.
Sick Leave
An allowance is paid to the employees instead of their wages during sick leave (confirmed by a medical certificate). The allowance is paid at the expense of the Social Insurance Fund, except for the first three days, which the employer pays.
Termination and Severance
The Russian Labor Code specifies the grounds for dismissal, redundancy, and severance pay. Employees are entitled to two months’ pay if they are laid off, or the company is liquidated.
Employees who are unable to find a job within two months of being fired can apply to the Employment Fund for a third month’s wages.
Employee Benefits for Expatriates
- Foreign citizens who are employed and have permanent or temporary residency status in Russia are entitled to pension benefits, temporary disability benefits, maternity and child allowances, and free medical care comparable to that provided to Russian citizens.
- Foreign people who are regarded as temporarily staying in Russia, those who arrived via visa or visa-free but do not have residency status in Russia, are not currently covered by the mandatory social insurance program. In this regard, foreigners who fall into this group are not eligible for a state pension, associated benefits, or free medical treatment. The only thing they have a right to is free emergency medical treatment.
How Are Employee Benefits Taxed in Russia?
The income tax rate in Russia varies from 0% to 35%. The average tax rate (i.e., the ratio of tax and taxable income) in Russia is progressive, which means that when taxable income rises, the average tax rate (i.e., the ratio of tax and taxable income) rises as well.
The tax year begins on January 1 and ends on December 31. Individuals engaged in employment or civil contracts must make social security contributions to one of the four funds, Pension Fund of the Russian Federation, Social Insurance Fund, Federal Obligatory Medical Insurance Fund, and local Obligatory Medical Insurance Fund.
Personal income tax rates are13% on income received by tax residents and30% on income received by tax non-residents on the territory of the Russian Federation. A35% is also levied on certain kinds of income and 6% on income in dividends.
A non-resident of the Russian Federation may be exempt from taxes by the Russian tax authorities if they present (forwards) to the Russian tax authorities’ official confirmation that they are a resident of a state with which the Russian Federation has a double taxation treaty.
Additionally, the company also pays for the leasing of an apartment for a foreign employee. The latter must pay personal income tax at a rate of 13% or 30%, depending on how long the employee stays on Russian Federation territory.
Restrictions for Russia Benefits and Compensation
Maternity Benefit
A maternity benefit of 100% of the mother’s earnings is set at RUB 2,300 per day ($31), and contributions to the Social Insurance Fund must have been made.
Unemployment Benefit
Unemployment benefits are paid on a sliding scale depending on past pay levels. Applicants must be re-assessed and re-apply for assistance after 12 months. Additionally, when a person loses their work, they must inform the Employment Service within 14 days.
Supplemental Benefits for Employees in Russia
Medical insurance, group life, accidental death and disability, injuries, critical sickness, and pensions are all common supplemental employee benefits in Russia.
Group Voluntary Medical Insurance (VMI)
In Russia, a prominent component of multinational and local firms’ employee benefits is voluntary medical insurance (VMI) based on commercial clinics. It allows employees to access high-quality health care along with an opportunity to choose well-equipped and advanced clinics.
However, VMI does not include life-threatening conditions like cancer and organ transplantation. All the employees are covered under VMI. Some additional benefits under VMI might vary depending on the organization’s seniority.
The Group VMI plan can also be extended to include dependents. VMI group plan covers the following things:
- Outpatient care at almost all clinics
- Dental treatments
- Ambulance services
- Home visits to the doctor
- Medical care while traveling
- 24/7 call center access to medical aid
Life and Personal Accident Insurance
All employees are usually covered by a group life insurance plan and medical benefits for employees in Russia, which are funded entirely by the company. Group life (GL), accidental death (AD), total permanent disability (TPD), injury benefits, and critical illness coverage may be included in the plans.
The total permanent disability rider benefit is normally connected to the state’s disability evaluation, and the following is a typical benefit structure:
- For group I, 100% of the money insured is covered.
- For group II, the insured is covered between 70% and 80% of the sum.
- For group III, the amount covered ranges from 50% to 65% of the total amount insured.
Pension and Retirement
The Russian pension system is multi-tiered. Employees are eligible for a 1st Pillar state-managed pension, supplemented by the ‘insured’ portion and funded by the social tax. Despite the low amount of state pensions, employers are currently not required to set up supplementary/corporate pension plans.
The requirement for such corporate pension insurance schemes in Russia is not significant. Such voluntary pension insurance systems are only used by small organizations (typically top multinational corporations). Usually, only senior employees are eligible to join a pension plan.
However, some organizations may offer coverage to lower-level employees as well.
Employer payments vary, although they commonly range between 3% and 5% of total pensionable salaries (higher for senior executives). The more generous plans pay out between 5% and 10% of total pensionable earnings. Employee contributions, which typically range from 2% to 3% of pensionable salary, are required in nearly 75% of schemes.
How Can Multiplier Help With Benefits Management in Russia?
It can be a little daunting to understand the compensation and benefits policy in Russia in one sitting. Hence, do not worry and take time to understand the process step by step. You can also hire Multiplier to take care of everything related to hiring international employees while you focus on expanding your business overseas.
The Multiplier can look into things like hiring and onboarding, advertising job openings, background checks, employee contracts, and more.