Art. 178 of the Labor Code of the Russian Federation guarantees resigning employees financial resources to support them during the period of employment - severance pay. The goal is to financially support a former employee while he is looking for a new job, if he had to leave the old one not through his own will or fault. The employee receives this payment on the day of dismissal.
Question: How to calculate and take into account severance pay and average earnings during the period of employment for an employee dismissed due to staff reduction? View answer
In the article we will look at the subtleties regarding the calculation of this benefit, the procedure for its payment, its relationship to taxes and contributions, and also analyze who has the right to count on it and in what amount, and who does not have to count on this financial support.
What is the procedure for paying severance pay in case of early dismissal during layoffs ?
Who pays severance pay upon dismissal?
An employer - a legal entity is obliged to guarantee the payment of severance pay to dismissed employees, except for the grounds for dismissal listed in the law.
Question: How to include a provision for severance pay upon dismissal in an employment contract, including by agreement of the parties? View answer
If the employer is a private entrepreneur , then the issue of payment of severance pay remains at his discretion. These points are discussed during hiring and must be reflected in the employment contract. If the main document, which is intended to regulate the concluded labor relations, does not address this issue, the dismissed person may be left without severance pay, and this will be legal.
Question: Is severance pay subject to personal income tax upon dismissal in connection with the liquidation of an organization, reduction in the number or staff of employees in the amount established by Art. 178 of the Labor Code of the Russian Federation (clause 3 of Article 217 of the Tax Code of the Russian Federation)? View answer
What does the payment mean and how much is the amount?
Severance pay is awarded in case of layoffs, regardless of most reasons. Article 178 of the Labor Code of the Russian Federation establishes the grounds for issuing funds and the specific amounts of compensation in a given case. The legislation specifies only a number of cases where such payments are higher. Such conditions are written down in the contract or collective labor agreements without fail.
The amount of benefits for some categories of specialists has some restrictions. An example is senior managers. Three times the average monthly salary will be the maximum compensation provided for such situations.
Dismissal by agreement of the parties is a popular situation that also deserves separate consideration.
At the same time, the payment is considered both remuneration for the agreement to terminate the agreements and compensation. Such accruals are prohibited only for managers and their deputies and chief accountants. Attention! The only reason when a refusal to pay benefits is fair is if it was the employer who initiated the dismissal.
The Supreme Court of Russia issued an explanation that confirms this. When determining sizes, managers need to take into account some nuances:
- During the first two months after termination of the contract, citizens must receive the average salary.
- For the third month, employees receive compensation if problems arise with employment, even if the person is registered with the employment service.
The amount of payment often also has a direct connection with the reason for which the dismissal occurred. The amount of remuneration for labor also matters. Managers have the right to draw up employment contracts that stipulate in advance not only the financial assistance itself, but also the situations in which it is paid. It is allowed to increase the amount of severance pay.
It is also useful to read: Do I need to pay insurance premiums from vacation pay?
Dismissals with benefits
When a dismissal order is issued, it indicates the basis for releasing the employee from his position and the corresponding article of the Labor Code. Each reason has its own procedure for terminating employment agreements, which in many cases includes the accrual of “severance” benefits. It is based on the following grounds:
- liquidation of an enterprise, organization, firm;
- reduction in staff or numbers;
- professional unsuitability for medical reasons (if there is no other suitable vacancy or the employee’s desire to take it);
- complete loss of ability to work (according to a medical report);
- reluctance to continue working in changed working conditions;
- disagreement with transfer to another location following the employer;
- conscription into the army or substitute service;
- leaving maternity position;
- cancellation of an incorrectly drawn up employment contract;
- vacating a position for an employee who previously occupied it, who was wrongfully dismissed and reinstated by a court decision or labor inspectorate.
NOTE! Severance pay is available to almost any employee forced to leave their position, as long as they are in compliance with the law and the provisions of the employment contract.
Table of benefit amounts depending on the circumstances of dismissal
| Grounds for dismissal | Benefit amount |
| Liquidation of a company | In the amount of average monthly earnings for all categories of workers, with the exception of those specified in Art. 178 Labor Code of the Russian Federation:
|
| Reduction in headcount or staff | __//__ |
| Refusal to transfer for medical reasons | Average earnings for two weeks |
| Conscription into the army or alternative service | __//___ |
| Due to the reinstatement of an employee who previously performed work, by a court decision or labor inspectorate | __//___ |
| Refusal to transfer together with the organization to another location | __//___ |
| Recognition based on a medical report as completely incapable of performing relevant duties | __//___ |
| Refusal to work under new conditions | __//__ |
| Violation of the rules for concluding an employment contract established by law, which occurred through no fault of the employee, if such a violation precludes transfer or continuation of activity | Average monthly earnings |
Managers also quit
And, accordingly, they have the right to an honestly deserved severance pay, but only on the condition that there are no illegal actions on their account or they did not make decisions that negatively affected the finances of the enterprise. In what cases are labor benefits accrued to top managers:
- if they are removed from office by the decision of the founders without any guilt (clause 2 of Article 278 of the Labor Code of the Russian Federation);
- the boss, his deputy, the chief accountant, whom the new owner of the business decided to fire.
FOR YOUR INFORMATION! If, by a court decision, a person (whether a manager or an ordinary employee) has been prohibited from engaging in certain types of activities, then, upon leaving this position, he also has the right to a “severance” payment.
Calculation and accounting entries
As mentioned earlier, the tax rate on employment contracts for residents of the Russian Federation is 13%. Non-residents are subject to an increased tax of 30%. If citizens have applied for tax deductions or other social benefits, they must be deducted from their salaries, and personal income tax will be withheld from the final amount.
Let's look at practical examples:
A citizen has been working at the company for 3 years. Previously, he received a tax deduction, according to which 1,000 rubles are deducted from the tax amount every month. In May 2022, he decided to quit. The salary for the period worked was 30,000 rubles, compensation for several days of unused vacation was 15,000 rubles. In total, an amount of 45,000 rubles is used to calculate personal income tax and other contributions. How personal income tax is calculated:
45,000 x 13% = 5,850 rub.
After withholding personal income tax, 39,150 rubles remain. Insurance premiums and payments to the Compulsory Medical Insurance Fund must be paid from this amount. They are transferred by the employer from the enterprise budget.
39,150 x 22% = 8,613 rubles. – the amount of contributions to pension insurance.
39,150 x 5.1% = 1,996.65 rubles. – payment to the Compulsory Medical Insurance Fund.
The second example is the payment of state contributions for a non-resident of the Russian Federation:
A foreign citizen works at the enterprise for 2 months, i.e. less than 183 days. This alone does not give him the right to be considered a resident. The decision to resign was made by him in November 2022. He does not yet have the right to leave, so no compensation will be paid. Only wages for the period worked are subject to transfer. In a month, a citizen earned 50,000 rubles. From this money, the employer must withhold 30% of personal income tax - the tax is paid from the employee’s funds. Also, 22% is withheld for the insurance part of the pension, and 5.1% for the Compulsory Medical Insurance Fund. The last two payments are made from the organization's budget.
50,000 x 30% = 15,000 rub.
50,000 – 15,000 = 35,000 rub. – the foreigner finally received it.
35,000 x 22% = 7,700 rub. – transferred by the company towards pension contributions.
35,000 x 5.1% = 1,785 rubles. – the amount of contributions to the Compulsory Medical Insurance Fund.
Accounting entries
In the postings, the accountant reflects all payments as follows:
| DT 44 Kt 70 “F.I.O. employee" | Payroll |
| DT 70 (full name of the employee) Kt 68 Personal Income Tax | Tax withholding |
| DT 70 (full name of employee) Kt 50 (51) | Issuance of wages |
| DT 68 Personal income tax Kt 51 | Transfer of tax to the budget |
Who will be left without benefits?
There are several reasons why those being laid off are not legally required to pay severance pay. In most cases, they imply the own will or the guilty actions of the dismissed employee. The exception is short-term contracts.
These grounds do not imply corresponding payments:
- care according to one’s own desire (clause 3. part 1 of article 77 of the Labor Code);
- the employee failed to complete the probationary period (Part 1 of Article 71 of the Labor Code);
- agreement of the parties;
- initiative of the employer, if the misconduct of the dismissed person provides for an extreme measure of administrative liability (Article 81 of the Labor Code);
- inconsistency with the position held by the employee;
- when a contract concluded for 2 months or less comes to an end.
What amounts can you expect?
The amount of accrued severance pay is calculated in accordance with the following factors:
- Average monthly earnings.
- The number of days in the compensated period, excluding weekends and holidays.
- Territorial location of the enterprise.
ATTENTION! Since the essence of this payment is support in the first two months of new employment, only working days are taken into account. The more weekends and holidays there are in the compensated month, the less the benefit will be.
Payment can be made for a period of 2 weeks, a month or 90 days after dismissal.
Salary for 14 days is due to the following categories of dismissed:
- upon dismissal due to medical reports;
- conscripted into the armed forces;
- if you refuse to move to a new location if the organization moves there;
- when a former employee is reinstated;
- if you are unwilling to work in changed conditions;
- “conscripts” during which the enterprise is liquidated or its staff is reduced.
Earnings for 1 month are based on:
- upon cancellation of employment contracts executed with certain violations;
- upon complete dismissal due to the cessation of the organization's existence.
3 monthly salaries will be received by:
- managers, their deputies and chief accountants who leave their positions by decision of business owners.
IMPORTANT! The employee will be paid the amount of average earnings for another 2 months after hour X, if during this time he fails to find a new job. In some situations, the Employment Service decides to extend the payment for another 1 month (if the dismissed person applied to this body within 14 days and did not find a job after 2 months).
Some regions of Russia are in special conditions, for example, the Far North and areas equivalent to this region. If the enterprise from which the employee leaves is located in a similar zone, then all payments are calculated differently, for example, the period for maintaining wages during the job search period can be increased to six months (Article 318 of the Labor Code of the Russian Federation).
To calculate labor benefits, it is enough to calculate the average daily salary and multiply it by the number of days subject to compensation.
How is compensation for unused vacation calculated?
The minimum duration of annual paid leave for citizens working under employment contracts is 28 calendar days. For some categories of persons, additional days of rest are provided.
How compensation is calculated:
- The number of days of non-vacation is established. To do this, the personnel officer determines the product of the number of days of rest due to the employee for each month worked and subtracts the days already used.
- The resulting number of vacation days is multiplied by the citizen’s average daily earnings.
For example, if a quitter is entitled to 14 days of vacation, and the average daily earnings are 1,500 rubles, the calculation will be carried out as follows: 14 x 1,500 = 21,000 rubles. – the total amount from which personal income tax will be withheld.
21,000 x 13% = 2,730 rub. – personal income tax amount.
21,000 – 2,730 = 18,270 rubles. - the total is in the hands of the employee.
18,270 x 22% = 4,019.4 rubles. – the amount of contribution to the insurance part of the pension paid by the employer.
18,270 x 5.1% = 931.77 rubles. – the amount of payment to the Compulsory Medical Insurance Fund from the employer’s funds.
Examples of calculating labor benefits
- The LLC where S.M. Galuzinsky worked is being liquidated. The employee earned 8,000 rubles. per month. We calculate the average earnings per day: the number of working days for the year was 220, multiply the salary by 12 months and divide by the number of days worked: 8000X12/220 = 436.36 rubles. The basis for dismissal involves the accrual of S.M. Galuzinsky. amounts equal to one average monthly salary. Next month there will be 20 working days (no holidays). Thus, Galuzinsky S.m receives 436.36X = 8727 rubles.
- Salary of Denisova V.A. – 10,000 rub. per month On January 11, 2016, she was fired due to staff reduction. For the previous accounting year, she had 249 working days, she earned 12x10,000 = 120,000 rubles, which means an average of 120,000/249 = 481.9 rubles per day. Next month (from January 12 to February 12, 2016) there will be 23 paid days. January 11 Denisova V.A. received severance pay in the amount of 23X481.9 = 11083 rubles. A week later, she contacted the Employment Center, but she was unable to get a job by February 12, and benefits were awarded to her again. From February 12 to March 12, 21 days without days off, minus March 8, so she is entitled to 20x481.9 = 9638 rubles for this period. If she had not involved the Employment Service or registered after January 24, this payment would have been her last. In the work book of Denisova V.A. There was no record of a new place of work for the next month either. Since she contacted the Employment Service on time, she is entitled to one more, final financial assistance. In the third billing month (from March 12 to May 12, 2016) there are 19 working days (except Saturdays and Sundays, May holidays are also excluded). Denisova V.A. will receive 19X481.9 = 9156 rubles. She is not entitled to any more payments.
IMPORTANT INFORMATION! The Labor Code of the Russian Federation provides a minimum of guaranteed financial support for those who have lost their jobs. The amount of the benefit may be revised upward if such a possibility is noted in the collective agreement or local regulations of a particular enterprise.
Income tax and severance pay
Let's consider the issue of accounting for severance pay for profit tax purposes.
According to Art. 255 of the Labor Code of the Russian Federation, severance pay is taken into account in labor costs. And in this case, on the contrary, the size of the benefit does not .
However, one should not forget one very important point - the economic feasibility of expenses.
For example, a company is being liquidated, there are a lot of debts to creditors, and it has been decided to pay severance pay to the financial director in the amount of 10 salaries. This may raise questions from inspectors. And in case of a dispute, you will prove your case in court. This is indicated by letters from the Ministry of Finance of Russia dated 03/18/2020 No. 03-03-06/1/20894, dated 03/19/2019 No. 03-03-07/17871, dated 02/11/2019 No. 03-04-06/8796, dated 04/25. 2017 No. 03-04-06/24848, No. 03-04-06/24850, No. 03-04-06/24853 (clause 3), dated 08/19/2016 No. 03-03-06/1/48797, dated 07/24 .2017 No. 03-03-06/1/46887.
What about tax payments?
This payment, received on the last working day, constitutes the income of an individual, but such income, as Art. 217 of the Tax Code of the Russian Federation, is not subject to income tax if the amount is accrued in the amount established by law. Insurance and pension contributions for the amount of benefits specified in the Labor Code are also not made.
If an enterprise, by its own will, enshrined in the relevant documentation, increases the minimum payable prescribed by law, then the excess is subject to taxation. Insurance premiums and personal income tax will have to be paid on the amount that exceeds the usual payments.
Is it subject to taxation?
If the employee quit by agreement of the parties, then insurance premiums are not applied to the part that does not exceed three times the average monthly salary. The amount is increased to six times the average monthly earnings when it comes to the Far North and other territories of equal importance. The opinion from the Supreme Court presented similar conclusions.
Reference! Contributions for “injuries” are not subject to severance pay under the same conditions as already described above.
