Russia: COVID-19 impact on employers

This article explores the measures implemented by the Russian government to assist employers during the COVID-19 pandemic, and explains what changes employers can legally make to working arrangements with employees.

Read our labor law overview by Capital Legal Services' Partner Dmitry Churin and associate Maria Aksenova here. 

 

State labor laws during the pandemic

On March 25, 2020, Russian President Putin signed a Decree setting non-working days for the pandemic for the first time. Organisations affected by the Decree were required to continue paying workers full wages during that period.

Per the Ministry of Labor, during this period a worker could only be dismissed for cause.

Employers reducing their impact

Employers have also used the following arrangements to manage their workforce and reduce costs, during the pandemic:

• Most companies arranged remote work, documented through an addendum to the labor contract.
• Some employers also invoked idle time to reduce wage payments.
• If parties agreed, partial workweeks or workdays were introduced. If a worker disagreed the employer could unilaterally make the change with a two months’ notice, after which the worker has the choice of either complying or risks being dismissed for refusing to work under the new conditions.
• Agreed unpaid leave.

State support for business

The state developed certain measures to support employment relations as well as other existing contractual obligations of businesses. Small and medium businesses affected by the pandemic were eligible for subsidies to pay salaries and urgent expenditures for April and May. For de-offshored foreign shareholders, it is good to know that their Russian subsidiaries (regardless of the amount of foreign participatory interest in the share capital of such subsidiaries) may also be considered as small and medium businesses provided that both the company and its foreign shareholders meet the legislative requirements.

Certain tax payment deadlines have been moved for such organisations by 4 to 6 months for payments for 2019 and Q1 and Q2 of 2020. These organisations also enjoy reduced rates for payments to the state insurance funds. Collection of back taxes has been suspended and a moratorium is placed on bankruptcies and administrative fines.

Affected small businesses can also enjoy rent holidays, including for commercial real estate (except residential premises). No fines, interest or other liability measures are to be applied.

A moratorium was also placed on tax inspections of small and medium business. Further, no field tax or scheduled customs inspections could be conducted until July 1, 2020, except for ongoing inspections initiated due to a personal injury, death, etc.

Credit holidays for affected small and medium business were introduced to allow for 6-month deferral under all loan agreements signed before April 3.

Comment

The pandemic has already impacted many workers and employers. Small and medium businesses have suffered considerable damage, especially those in services and retail. Financial losses tied to mandatory salary payments may still lead to bankruptcies.

Although the quarantine is easing, we assume the Russian authorities will continue to provide measures in support of business and will adopt additional measures to try to mitigate the damage from the COVID-19, including for those businesses which were least affected.