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Frequent
Legal Issues for Contractors on VIII. Extreme North Considerations Presented by Denis Marchenko, senior associate attorney in the Yuzhno-Sakhalinsk branch office of Russin & Vecchi. Mr. Marchenko has been advising clients on various issues of Russian law since 2001, specializing in corporate formation and labor matters. Mr. Marchenko has worked on the preparation of legal opinions related to the prevention and liquidation of emergency situations for Exxon Neftegas Limited and various issues related to construction of pipelines by Sakhalin Energy Investment Company. He has also provided legal advice on issues pertaining to real estate leases on Sakhalin. Mr. Marchenko graduated from the International Institute of Economics and Law (Moscow, Russia) in 1997. In addition to the numerous guarantees and benefits provided by the Labor Code, some of which are set forth above, employees working in certain regions of Russia are entitled to special “Extreme North” benefits as a result of working under hardship conditions. Benefits exist for regions that are approaching the Extreme North and for actual Extreme North areas. Extreme North Benefits Related to Employee Salaries The Labor Code requires salaries of employees working in Extreme North areas and areas approaching the Extreme North to include amounts determined by area coefficients and step increases. For example, for areas in the north of Sakhalin Island, the maximum amount of area coefficients and step increases (96) amount to 160% above an employee’s basic salary. The Labor Code defers to separate federal laws to provide the specific amount of such coefficients and increases and the procedure for their payment, however, such federal laws have not been adopted to date. (97) In the absence of such laws, various, often contradictory, regulations of the former USSR and subjects of the Russian Federation continue to regulate these issues. Area Coefficients An area coefficient is the amount by which the base salary of an employee working in a location approaching the Extreme North or in the actual Extreme North is multiplied in order to obtain the increased salary rate for that particular region. Coefficients differ depending on their region. One subject region of the Russian Federation may have several coefficient rates applied in its various geographical areas. For example, there are two rates of coefficients on Sakhalin Island. A coefficient of 1.8 is applied in the Nogliki and Okha districts, which are actual Extreme North areas, and a coefficient of 1.6 is applied in the remaining districts of the Island including the city of Yuzhno-Sakhalinsk, which are areas approaching the Extreme North. (98) As a result, in Nogliki and Okha districts, as a result of application of the area coefficient, an employee is entitled to his base salary plus 80% of his base salary, and in the remaining districts of the Island, an employee is entitled to his base salary plus 60% of the base salary. Clearly, these increases are significant and should be considered when determining employee base salaries. Step Increases In addition to area coefficients, employees working in Extreme North areas and areas approaching the Extreme North are entitled to step increases, or increases over time, to their basic salary. The amount of step increases also differs depending on the region of application. By way of example, in Nogliki and Okha districts, which are actual Extreme North areas, step increases reach their maximum at 80% of the basic salary. (99) In the remaining districts of the Island, which are areas approaching the Extreme North, step increases reach their maximum at 50% of the basic salary. (100) These increases are separate from and in addition to the area coefficients described above. Step increases are granted over time, and in the Extreme North reach their maximum after five years of employment. The schedule for granting increases is different in Extreme North areas and in areas approaching the Extreme North. For the first three years of work in Nogliki and Okha districts, the employer must increase the employee’s salary by 10% every six months. After both the fourth and fifth years of work in these areas, the employer must increase the employee’s salary by an additional 10% each. (101) In all the remaining districts of Sakhalin an employee’s right to the step increase arises in one-year increments, 10% for each year of work in areas approaching the Extreme North until the full benefit of 50% is achieved. (102) Employees under thirty years of age, who were residing in either Extreme North areas or areas approaching the Extreme North for at least five years before their employment and who are employed for the first time are entitled to the full step increase from the first day of their employment. (103) Additional Vacation Employees working in Extreme North areas and areas approaching the Extreme North are entitled to additional paid vacation beyond the standard 28-calendar day vacation afforded to all employees in Russia under the Labor Code. Such additional vacation is 24 calendar days in Extreme North areas and 16 calendar days in areas approaching the Extreme North (104) , resulting in 52 and 44 calendar days, respectively. Travel Expenses An employee working in Extreme North areas or in areas approaching the Extreme North is entitled, every two years, to round-trip company funded vacation travel within the territory of Russia and to 30 kilograms of luggage transportation. Employers must also pay the travel expenses of those members of the employee’s family who do not work. An employee’s right for company funded vacation travel arises after 12 months of work and lapses if not exercised within 2 years, from the time which vacation was due. (105) Employees from other parts of Russia and foreign employees, as well as members of their families, are also entitled to company funded travel to the location of their new employment within Extreme North areas and areas approaching the Extreme North and to luggage transportation of up to 5 tons per family. Luggage transportation for these purposes is limited to the railroad tariffs. Furthermore, employees traveling to these regions for new employment are also entitled to compensation in the amount of a one time double monthly salary payment, and a one time half monthly salary payment for each family member traveling with such employee. Additionally, such employees are entitled to a 7-day paid vacation for settling. (106) Upon termination of a labor agreement for any reason (including the employee’s death), with the exception of dismissal for misconduct, the employee and family members are entitled to company funded travel to their new place of residence located in another part of Russia and to transportation of up to 5 tons of luggage per family. Luggage transportation for these purposes must also be paid within railroad tariffs. (107) Accommodation An employee, working in areas approaching the Extreme North and Extreme North areas is entitled to company funded accommodation. If a company cannot provide such accommodation, it must reimburse the employee’s expenses related to lease or purchase of accommodation. (108) Other Extreme North Benefits There are other Extreme North benefits including, but not limited to, the following: Women working in Extreme North areas and areas approaching the Extreme North are entitled to a 36-hour workweek. This is four hours less than the 40-hour standard workweek required for all employees under the Labor Code. Salaries for these women may not be less than salaries paid for a full 40-hour workweek. (109) Employees working in Extreme North areas and areas approaching the Extreme North are entitled to one non-paid day off per month if they have children under the age of 16. Such day off must be provided only for one of the parents. (110) Employees in these regions are entitled to use unscheduled annual vacation to accompany a child under 18 years old entering an educational establishment located in another area. (111) Employees in these
regions who are terminated due to liquidation of the employing company
or reduction in staff, are entitled to receipt
of their monthly salary while they are looking for a new job, for a time
period not to exceed six months from the date of their firing. (112) This
is three months more than the standard three-month period provided for
all
employees under the Labor Code. (96) Labor
Code, Article 315. |
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