Provision of housing to an employee is not subject to insurance fees

The practice of compensating expenses or providing material support to employees related to renting accommodations when they are transferred to work at another location has become widespread. In particular, some companies provide housing to the heads of regional subdivisions, and other companies compensate employees’ rent expenses and hotel costs while they search for living accommodations at the new place. Such support has a positive impact on the employees being ready to move and is an important part of the company’s personnel motivation system.

At the same time, such payments often lead to disputes with the Russian Pension Fund. According to the position of the territorial bodies of the fund, payments to employees compensating their housing expenses and in-kind payments in form of a service on providing housing are part of the salary and accordingly are subject to insurance fees.

As a result, the Russian Pension Fund, convinced that the insurance base for charging insurance fees is being understated, held organizations granting such support to employees liable and imposed penalties and fines.

However, currently there is court practice according to which payments related to provision of housing to employees are of a social nature, are not subject to insurance fees and are not to be included in the base for charging the insurance fees. In particular, the courts note concerning such payments that “in spite of the fact that they are made in connection with labor relations, they cannot be attributed to salary in the understanding of Article 129 of the Russian Labor Code…” (Ruling No.304-KG15-5008 of the Russian Supreme Court dated 16.09.2015, Ruling No.304-KG15-5000 of the Russian Supreme Court dated 22.09.2015, as well as in Resolution No.F04-2402/2016 of the Commercial Arbitration Court of the West-Siberian Circuit on case No.А67-7145/2015 dated 21.06.2016)

To strengthen the position of employers and minimize the risk of a dispute with the Russian Pension Fund, it is recommended to determine in a collective agreement, internal regulatory act or employment agreement, where the procedure and amount of compensation of expenses for employees are established in the event of moving to other locations for work purposes, that payments made as part of the said compensation:

a)    are not included in the employee’s salary as they are not part of remuneration for work;

b)    are not incentive payments;

c)  do not depend on the employee’s qualification, complexity, quality, amount and terms and conditions of work performed by such employee;

d)    are of a social nature and are compensation in the event of moving for work purposes.