The Ghost of the 1990s: how the authorities want to prevent payroll crisis

The picket with a demand to repay debts due to the delay of salaries in Moscow, 2016

President Vladimir Putin agreed on the usefulness of legislative changes that strengthen the priority of repayment of debts on wages before the mandatory payments such as taxes and insurance premiums. The head of Federation of independent trade unions Mikhail Shmakov, who suggested to Putin the idea, explained that now the “growing wage arrears” is a legitimate way to curb that trend is to establish the priority of payment of wages before the mandatory payments to the budgets and extra-budgetary social funds, when the company does not have enough money to pay for all the requirements. Now the Civil code equates the sequence of wages and taxes (fees), but in practice, employers first of all think about the settlement with the government, not the workers. “In fact taxes and contributions unconditionally deducted by the tax authorities in the first place,” — said Vice-speaker of the state Duma Andrey Isaev.

Why is the government talking about the problems with the salaries?

The fact that the cases are reminiscent of the defaults of the 1990s, says scientific Director of the Institute of Economics RAS Ruslan Grinberg, before the elections to the state Duma this takes on added significance.

For example, on August 22 the miners company “Kingcol” in Gukovo and Zverevo (Rostov oblast) began a mass hunger strike among the main requirements of debts on a salary. The group’s enterprises in the Rostov region are in different stages of bankruptcy, the total debt “Kingcol” before more than 2 thousand former employees exceeds RUB 300 million And on August 29, employees of “Avtovazagregat” too demanding repayment of debts on a salary, blocked the Federal highway M5. “Avtovazagregat” for more than a year is easy, the plant was introduced first stage of bankruptcy, the salaries were not paid for several months. Earlier in August one of the employees of the group “Avtovazagregat” drew attention to this issue at a meeting with Samara region Governor Nikolai Merkushin. In response, the Governor passed the Samara mass media, warned that debts owed to employees will not be repaid “never”.

By the end of 1998 the average wage delays in Russia reached nine months did not pay wages to about 66 thousand enterprises. Now, despite the resonance of recent history, in Russia there is no system of back wages. It is clear that the initiative of Shmakov, supported by Putin, is an electoral character (the election of a new convocation of the state Duma will take place on 18 September) and must demonstrate the concern of trade unions and United Russia about “human labor,” says the high-ranking interlocutor of RBC in the state Duma.

What is the real scale of the problem?

The problem of wage arrears in Russia, it is difficult to call the system. According to Rosstat, which is based on the information of organizations not related to small businesses on August 1, 2016, the volume of overdue wages amounted to 3.67 billion rubles — less than 1% of the monthly wages Fund in Russia. These companies have debts to 73 thousand employees — it is also less than 1% of workers on surveyed kinds of activity. From the total amount of overdue debt on the salary 30% of debt (RUB 1.1 bn) was formed in 2015, 14% (0.5 billion rubles) in 2014 and earlier. A quarter of the total debt (RUB 0.9 billion) — accounts for the organization in the process of bankruptcy.

Almost all debts (99,6%) are associated with the absence of the organizations own funds. Most of arrears to employees — in manufacturing, in the fields of mining, construction and transport, from the data of Rosstat. In regional terms, the largest amount of wage arrears in Primorye (516,6 million rubles), Irkutsk region (171,8 million rubles), Moscow (169,8 million roubles), Khabarovsk Krai (125.2 million rubles) and Moscow region (124,5 mln.).

In the review of social and labor conflict for the first half of this year, published on the website of the Federation of independent trade unions during this period was the growth of labor conflict has begun from-for discontent of workers, declining wages (19% of conflicts), and the share of disputes arising from non-payment of wages has increased (figure not given).

The actual figure of wage arrears is unknown and may be higher than the official, said a senior researcher at the Centre for labour market studies HSE, Anna Lukyanova. “Rosstat data only cover medium and large enterprises. And the bulk of the debt — to those who are engaged in small business and individual entrepreneurs, and the sector no one has explored the subject of debt,” she explains. In addition, the form of wage arrears are only declarative in nature: “If the company decides that it is necessary to inform the authorities about the presence of the debt, it will report”. However, according to Lukyanova, if the problem of arrears of wages was acute, and the Federal state statistics service figures would be higher, as it was in the last crisis.

How did you react to the initiative of the interested agencies?

Government officials quite carefully commented on the initiative of Shmakov. A source in the financial-economic bloc of the government said that while it is difficult to predict impact changes in the payment of taxes. “We need to see how these changes will be submitted,” he says. The Ministry of labor said only that “is willing to consider the idea proposed by the FNPR”.

The representative of the Ministry of economic development did not respond to questions RBC about the possible consequences of this initiative for business and public finances, saying only that “the proposals the Ministry has been received.

The press service of the Ministry of Finance has not yet responded to the request, but Shmakov at the meeting in the Kremlin suggested that “not everyone will welcome this process, in particular, of course, the Finance Ministry, which cares primarily about the budget, not salaries”. “You say that the budget is too wage in the social sector: teachers, doctors, soldiers and so on,” Putin said.

Who will prepare the amendment?

United Russia deputies are ready to work with the Federation to participate in the development of the bill about the priority of wages over taxes, said Wednesday the Vice-speaker of the state Duma Andrey Isaev. But such a priority will not be the General rule: they can use only those enterprises whose accounts contain insufficient funds to pay salaries and taxes, follows from the explanations of the Deputy shown on the website of the Duma faction “United Russia”.

In reality, the law will write to the government, said the first Deputy Chairman of the Duma Committee on budget Sergei Katasonov (LDPR). “The next government will do. The government will develop these laws. The Ministry of labour, [the Minister of labour Maxim] Topilin. If you have the approval of the President, then the government will submit it to the state Duma”, — told RBC Katasonov.

The endorsement of Shmakov President will seriously improve the chances for a speedy adoption of the law: it can be considered by the Parliament as a priority in the coming autumn session, said TASS, the Chairman of the Federation Council Committee on social policy Valery Ryazan. “For us, the presidential installation will, of course, a priority. We accept these laws as a priority,” said the Senator.

That they will change for business and employees?

Shmakov initiative will help employers to repay wage arrears to the employees, calculates the Chairman of the Duma Committee on labor, United Russia Deputy Olga batalina. She called for “operational study” of the initiative (to quote the website of the Duma faction of United Russia).

Will benefit the employees of the budgetary enterprises and those who receive a salary completely white, said the Chairman of state Duma Committee on economic policy, the United Russia party member Victor Zvagelsky. “For them the establishment of priority of wages over taxes is good, because now it turns out that not paying taxes is the enterprise can not, and to delay salary — can. Despite the introduction of employer liability for delay of salaries, it is reported that salaries are often not paid fully,” — said the interlocutor of RBC. For the payment of the same gray wage law will have no effect, indicates Zvagelsky. “Unfortunately, now we have “envelope” wages because of the General financial situation the priority is growing over white” — said the MP. According to him, the number of employers who currently pay at least partially the “envelope” wage already exceeds 70%. Perhaps this law should be implemented when most businesses will go for payment of salaries of white, says Zvagelsky.

For employers, the initiative will not change anything, says Zvagelsky.

The introduction of priority wages before taxes can help employers to avoid liability for late payments on taxes, hopes the Deputy-Eser Mikhail Serdyuk. According to him, in the Khanty-Mansiysk district, which he represents in the Duma, many times there were situations when serving oil companies were unable to pay taxes and fall under the criminal prosecution due to the fact that the oil companies pay for their work in four to six months after Contracting. And in the case of adoption of the initiative the employer can refer to the fact that the priority of salary payments he made, and taxes will be paid when there is money, says the Deputy.

Director of group of companies “Markon” Sergey Cancer mind: no relief for businesses in connection with the introduction of the priority of wages over taxes he doesn’t expect the taxes will still need to pay, and delay of tax payments involves a fine”. In addition, article 199 of the Criminal code envisages criminal liability for tax evasion.

If the initiative to priority wages, they need to limit the maximum amount of wages that can be paid in the priority order, said the Deputy Isayev. “We should talk about that as a priority, has been paid wages, for example, not above the average for the region,” he says. This restriction is, in his opinion, it is necessary to prevent abuse — “not displayed under the pretext of the high salaries of the top managers of the money would go to taxes, fees, pay its creditors”.