How to reduce staff costs – practical aspects #coronavirus #remote work
Our clients have recently enquired quite a lot about the possible legal options for reducing costs. These requests are motivated not only by the coronavirus but also by the current economic situation both in Russia and in the world. We have compiled and answered below the top HR questions raised by our clients.
Question: How can staff costs be reduced in challenging situations without resorting to employee dismissals?
Answer: The most obvious ways of reducing staff costs besides dismissal are:
- Putting some employees on standby (downtime);
- Switching full-time employees to part-time.
Question: What is the procedure to put employees on standby and how much will this cost the employer?
Answer: Standby or downtime is a temporary suspension of work for economic, technological, technical or organizational reasons (Article 72.2 Russian Labor Code). A single employee, a group of employees or all employees of a subdivision or organization may be put on standby. The wages paid during downtime for reasons beyond the control of the employer and the employee cannot be less than 2/3 of employees’ salaries (Article 157 Russian Labor Code). To put employees on standby, it is necessary to:
- Issue an order specifying the reasons for the duration of standby;
- Notify the employment service within 3 working days of the issuance of the standby order if the entire company is put on standby; and
- Familiarize all employees put on standby with the standby order.
The law specifies no notice period for standby, so standby may start, for example, from the day following the issuance of the standby order provided that the employees are familiarized with the order.
Question: How to switch an employee to part-time or a shorter work week?
Answer: Employers may switch their employees to part-time with their employees’ consent (for example, shorter working day or week). In such case, wages will be calculated in proportion to the time worked by the employee. To switch to part-time, employers should get employees to sign an additional agreement to their employment contract (Article 93 Russian Labor Code).
In some cases the duration of working hours may be reduced unilaterally by employers (based on changes in organizational or technological working conditions (Article 74 Russian Labor Code)), but when employers do so, they must notify their employees in writing at least 2 months prior to the intended reduction in working hours.
So, given the requirements of the law and based on our experience, we believe that the most effective way of reducing staff costs is to agree upon a reduction in working hours with employees under an additional agreement. Doing so would accommodate the interests of both parties: employers will retain qualified employees who will be able to continue working full time in the future, while employees retain part of their salary and job throughout difficult times.
Question: Can employers reduce wages unilaterally due to a lack of work and a crisis?
Answer: No, if employees do not agree, then employers are not entitled to reduce wages without changing working hours.
However, each individual case presents certain nuances that should be considered when preparing any HR documents in order to avoid significant costs and prevent reputational loss in the future.
At your request, we would be pleased to advise you on any HR issues that you may have.
If you have any questions or would like to discuss the above, please feel free to write to Julia Talagaeva or Mika Kokkonen.
Truly yours,