Calculation of salaries and USCs (unified social contributions) in case of suspension of employment contracts
As you remember, on March 24, 2022, the Law of Ukraine “On the organization of labor relations under martial law”1 (hereinafter referred to as the Law) came into force, which, among other things, provided for a new institution of “suspension of an employment contract” for labor legislation.
As we described in our previous consultation dated 03.24.2022, the content of this institution includes that if the employer, due to military aggression, cannot provide the employee with work, and the employee cannot perform it, the employment relationship can be suspended by order of the employer, that allows him to not pay the employee a salary for the period of suspension. At the same time, in accordance with the Law, the reimbursement of wages for the period of suspension of the employment contract is assigned to the Russian Federation.
However, since the new institution does not correlate with the norms of the Labor Code and the Law did not detail the conditions for its application, in practice many questions arise regarding the implementation of the suspension of employment contracts. The most fundamental question is: does an enterprise need to calculate wages and, accordingly, USCs in accounting (for the upcoming compensation of the Russian Federation)?
Unfortunately, the Law does not cover the issue of making such assessments by the enterprise. Therefore, today there is no single position on this issue, both among public authorities and, accordingly, among practitioners.
On the one hand, according to the Commentary to the Law2, published by the Ministry of Economy on its website, “when an employment contract is suspended, the employer must continue to keep records in terms of determining and fixing wage amounts,” while “ USCs are not paid.” Representatives of the State Labor Committee maintain the same position on their website3 and in telephone comments: “the employer must continue to keep records in terms of payroll.”
We would like to note that, in our opinion, this approach does not correspond to the concept of “suspension” of an employment contract, that is, a situation where labor relations are “stopped” due to martial law: the employee does not work, but he is not fired. From the point of view of labor legislation, wages are paid for the work done, except when the law expressly provides for the obligation of the employer to pay wages (as in the case of mobilization and in other cases listed, in particular, in paragraph 1 of the Procedure for calculating the average wage4).
Namely, there is no direct legislative basis for payroll during the suspension of an employment contract, and the comments of the Ministry of Economy and the State Labor Committee are not normative acts in themselves, although they demonstrate the “interpretation” of this issue by the relevant authorities.
Taking into account that payroll is impossible without the assessment of USCs, and the tax authority is the competent authority to control the assessment and payment of USCs, we turned to its representatives for comments. Despite the limited mode of operation of this body and the inability today to receive a written response to a request in the general manner, we received a comment on our electronic request that the tax legislation on the issue of assessment and payment of USCs in this part has not changed. Therefore: payroll = assessment of USCs, which automatically entails the obligation to pay USCs.
Namely, today the tax authorities have no legal grounds not to require the payment of USCs during payroll in a situation of suspension of an employment contract: if an enterprise accrues wages and USCs, it will be obliged to pay the corresponding contribution to the budget.
Consequently, the enterprise potentially has two options: to accrue wages in accordance with the position of the Ministry of Economy and the State Labor Committee, but automatically receive obligations to pay USCs, OR not to accrue wages and USCs, that is, to take the risk of receiving claims from the State Labor Committe. Comparing the risks described above, we believe that today it is safer for an enterprise not to accrue wages and, accordingly, USCs during the suspension of employment contracts, since this is not directly required by law.
As for the risks of claims of the State Labor Committe in case of non-compliance with its position on payroll, in order to justify its decision, the enterprise may try to get an individual explanation from the tax authority in its personal electronic account on the obligation to pay USCs during payroll.
As we wrote in our previous consultation, due to the lack of a procedure and mechanism for the implementation of this new institution, as well as the risk of the employer having to prove the circumstances that forced him not to pay salaries, the suspension of employment contracts should be used as a last resort and, if possible, given preference more traditional ways of settling labor relations that we described earlier: leave at own expense and downtime.
And only in the case when the employee does not get in touch or refuses to write a vacation application at his own expense, and it is not economically feasible for the enterprise to pay for downtime – only then you can resort to the suspension of employment contracts.