According to the general rule enshrined in the Labor Code of the Russian Federation, upon termination of the employment relationship, the employer is obliged to make a final settlement with the subordinate, paying them a salary for the period worked and compensating for days of unused vacation.
However, in certain cases, employees have the right to compensation payments equal to several average salaries (salaries). We’ll talk about when such payments are the employer’s responsibility in the article.
What payments are due upon dismissal by agreement of the parties under the law?
Labor legislation stipulates that the employer is obliged to make the following payments on the day of dismissal:
- wages for the period he worked;
- compensation for unused vacation days;
- bonus amounts, if the employee is entitled to them.
Article 178 of the Labor Code also allows for the payment upon dismissal of other severance benefits provided for by a collective or labor agreement. Thus, if the employer has established in local regulations the payment of compensation in the amount of 3 salaries, then the employee has the right to claim it upon dismissal by agreement of the parties.
When should multiple severance payments be paid?
The Labor Code establishes the employer's obligation to pay severance pay equal to three or more average monthly salaries upon termination of employment relations with the director or deputy director of the enterprise, as well as with the chief accountant of the company (Article 279 of the Labor Code of the Russian Federation).
Article 349.3 of the Labor Code of the Russian Federation establishes certain restrictions regarding the payment of compensation payments in connection with the dismissal of certain categories of employees.
Severance pay, the amount of which is equal to the average monthly salary, must be paid to all dismissed employees if the basis for termination of employment with them is:
- dismissal due to organizational and staffing measures, as a result of which the number or staff of the company is reduced;
- liquidation of a legal entity.
In the same cases, the employer is obliged to pay the dismissed employees the average monthly salary during the second month from the date of termination of the employment relationship, and in certain situations the right to maintain wages extends to the third month after dismissal.
The employer's obligation to pay several salaries upon termination of official legal relations can also be enshrined in the local regulatory documents of the enterprise regulating the labor relations of the employer and subordinates.
Sometimes there are situations when a manager refuses to provide compensation upon dismissal, so it is important to know what to do if wages have not been paid, and how to file a claim for its recovery, what to do if compensation for unused vacation has not been paid, and whether it is included in her calculation of sick leave, as well as what compensation you can expect in case of delay in payments. Read also about what to expect when terminating an employment contract at your own request, including whether vacation pay will be issued in this case, and at the initiative of the employer.
What does “Dismissal by agreement of the parties with payment of compensation of 3 salaries” mean?
The amount of compensation upon dismissal, upon mutual agreement of the parties, must be fixed in the relevant written agreement. The law does not establish a strict amount of severance pay. Based on this, the employer has the right, when establishing it, to be guided by local documents or to specify the amount in the agreement on termination of the employment contract.
Therefore, the employer can even set its own compensation amount for a specific dismissed citizen: 2, 3 or more salaries. If the parties have agreed to pay three salaries, then the severance pay must be specified in the agreement, calculated and paid along with the amounts that are paid upon mandatory dismissal.
Is it possible to ask for 4, 5 or 6, what quantity can you get?
Since the legislator does not determine the amount of compensation paid to an employee in the event of termination of an employment contract by agreement of the parties, the employer and employee have the right to independently determine its amount. Local acts may indicate how much is allocated for payment of compensation:
- in the amount of several salaries of the resigning employee (two, three, etc.);
- in a fixed amount of money.
In practice, most often the amount of compensation is equal to the amount of three average salaries of the person whose employment contract is terminated by agreement of the parties.
An employee has the right to demand that the employer pay four, five or six salaries, however, if such an amount of compensation is not specified in the collective agreement or other documents of the enterprise, the employer may refuse to assign the requested compensation, paying, for example, 2 salaries or not paying anything. In this case, the refusal of compensation payments will be lawful.
The parties to an employment contract may decide on the need to conclude a dismissal agreement in accordance with Article 78 of the Labor Code of the Russian Federation for various reasons. Most often, such a decision is beneficial for both the employee and the employer.
For example, an employer needs to get rid of an unwanted employee. In order to minimize losses to the company’s reputation in this case, the parties should come to an agreement to pay a certain amount of compensation.
In some cases, the employer dismisses employees by agreement of the parties , although in fact there is a reduction in the number or staff of the company. To prevent dismissed persons from contacting the relevant authorities, the head of the enterprise may also offer them compensation in a certain amount.
Often the increased amount of compensation is caused by the reluctance of the parties to labor relations to make public any nuances related to work or directly to the dismissal of a person. This only applies to situations where the amount of compensation payments is not specified in the employer’s local regulations.
Pros and cons for the employee
This method of dismissal has its advantages and disadvantages for the employee. Therefore, you should know the following points:
- an employee can safely demand severance pay even if it is not stipulated by a collective agreement or labor agreement, if the initiative to terminate the employment relationship comes from the employer;
- the employer does not have the right to demand a two-week working period; dismissal occurs on any day;
- all conditions of dismissal are necessarily fixed in the appropriate agreement indicating compensation payments, so in case of violation of its terms, the employee will be able to defend his rights in court.
Negative aspects are also present:
- It becomes impossible to withdraw a resignation letter even if the employee changes his mind about quitting. But this rule only applies if the employee has already signed the agreement;
- if you go on sick leave, the employment contract will be terminated on the date specified in the agreement;
- Any preferential category of employees can be considered for dismissal by agreement of the parties: maternity leavers, pensioners, large families or single mothers. Having signed the agreement, they accept its terms and leave on a general basis. The employer can thus “buy out” the job for 3 salaries, which it will pay as severance pay.
Who can claim payments
According to labor legislation, only employees who have entered into an employment contract with the employer have the basic package of rights - vacation, sick leave, payments after dismissal, etc. It is this category of workers that can receive the compensation listed in the article.
But civil contracts provide only for payment for work done. This means:
- Contracts;
- Rent agreements;
- Supply contracts;
- Service agreements, etc.
If you work on the basis of one of these contracts, you will not be able to receive additional payments and compensation: this is not provided for by law.
How to bargain with an employer?
Since the law does not establish strict obligations regarding severance pay to a person dismissed by agreement of the parties, its amount depends on how much the parties were able to agree. It usually makes sense to bargain when the employer becomes the initiator of the process.
When an employee quits, he loses his source of income until he is hired for another job. And the ability to survive until this day depends only on the person himself. It’s good if the parameters of severance pay are already provided for in the organization’s documents. Otherwise, the best option is a competent dialogue with the employer, outlining arguments in your favor and payment of compensation based on the average monthly earnings for six months.
More often, the mechanism works when the manager has a desire to replace this employee with another and there is already a candidate. All that remains is to make room. Then he, in fact, buys him out by paying the severance pay that the fired person asks for.
When and how are payments made after settlement?
According to the general rule, enshrined in Article 140 of the Labor Code of the Russian Federation, all amounts due to the employee at the time of dismissal are paid on the last day of his work at the enterprise. This requirement applies to all cases of dismissal, regardless of whether it is carried out on the basis of an agreement of the parties, on the initiative of the employee, or whether the employer initiates the termination of the employment relationship.
At the same time, in certain cases, the employee retains the right to receive average monthly earnings:
- for the second month from the date of dismissal;
- for the third month from the date of dismissal.
Such payments are provided upon dismissal due to:
- with a reduction in the number or staff of the company;
- with the liquidation of an enterprise, termination of the activities of an individual entrepreneur.
In order to obtain the right to maintain average earnings for the third month from the date of dismissal, the employee must register with the employment agency within the first two weeks after the termination of the employment relationship. The second mandatory condition for maintaining earnings is the inability to find employment, despite the measures taken by the employment agency.
So, in a number of cases, employees who quit for certain reasons are entitled to receive severance pay in the amount of several salaries. This situation can be either directly enshrined in labor legislation (Article 279 of the Labor Code of the Russian Federation) or regulated by regulatory documents applied at the enterprise. If such payments are not provided for anywhere, the parties can agree on them in an individual agreement.
Are 3-personal income tax and contributions subject to tax?
According to paragraph 3 of Art. 217 of the Tax Code in 2021, the amount of severance pay not exceeding 3 times the average monthly earnings is exempt from personal income tax. Thus, upon dismissal by agreement of the parties and the amount of 3 salaries is established as such a benefit, the accounting department should not calculate and withhold income tax from it.
A similar position is applied when calculating insurance premiums from severance pay (clause 2 of Article 422 of the Tax Code of the Russian Federation).
1. Insurance premiums are not subject to taxation for payers of LLCs, individual entrepreneurs and individuals...
2) ... with the dismissal of employees, with the exception of compensation for unused vacation, the amount of payments in the form of severance pay and the average monthly earnings for the period of employment in the part exceeding in general three times the average monthly earnings or six times the average monthly earnings for employees dismissed from organizations located in the regions of the Far North and equivalent areas, as well as compensation to the head, deputy heads and chief accountant of the organization in a portion exceeding three times the average monthly salary;
Deadlines for calculating compensation
Article 140 of the Labor Code of the Russian Federation requires the employer to make final payments to the dismissed employee on the day of termination of the employment relationship.
On this date the following are paid:
- salary is proportional to the period worked;
- compensation for unused vacation time;
- severance pay.
Compensation payments due upon termination of an employment contract, regardless of whether they are established by agreement between the subordinate and the employer or are specified in the local acts of the enterprise, are, as a general rule, not subject to personal income tax (clause 3 of Article 217 of the Tax Code of the Russian Federation). The main thing is that their total amount should not be more than three times (six times for workers in the Far North) the average salary of the dismissed person.
When dismissing by agreement of the parties, it is important to correctly draw up the work book. You can read about this, as well as about the calculation of severance pay, on our website.
Calculation of benefits and its amount
A one-time payment as severance pay must be calculated and paid on the day the employee is dismissed along with other mandatory amounts (Article 140 of the Labor Code). If the agreement does not establish a fixed amount, then the calculation is made depending on the average daily earnings and the number of days specified in the agreement. When calculating average daily earnings, one should be guided by Art. 139 TK.
If, by agreement of the parties, it is established that the employer undertakes to pay 3 salaries to the employee upon dismissal, then the amount of severance pay will be:
VP = Ok × 3,
- VP – severance pay;
- Ok - salary according to the position, according to the staffing table.
As a rule, the employer agrees to provide an ordinary employee with benefits in the amount of no more than three salaries. But, if the organization’s regulations do not provide for this type of payment upon dismissal, then you should only rely on your own gift of persuasion and the loyalty of the manager.
In the same boat
Given all these difficulties, employers try to reach an understanding with employees, counting on their loyalty in the future. However, all relationships regarding “gray” payments remain outside the scope of the law, which leads to mutual threats, extortion, blackmail and other crimes.
How should an employer behave? The most reasonable solution is to pay severance pay. If this is impossible to do, then it is important, under any other conditions, to come to an agreement with the dismissed employee and find a compromise. Here is one of the arguments that allows the employer not to find himself in a difficult situation. Obviously, contacting the tax authorities is likely to reduce the employee’s savings - after all, personal income tax was not withheld from “gray” payments.
In writing, the former employee will be provided with a recalculation for the last year, taking into account personal income tax withholding from the entire amount of his earnings. It is easy to calculate that at a tax rate of 13 percent, severance pay equal to 100 percent of salary will not fully cover the amount of the annual tax withholding. As a result, the employee will owe the budget approximately half of the amount he claimed: 13% × 12 months: 100% = 1.56.
Since, in accordance with Article 226 of the Tax Code, the employer, as a tax agent, is obliged to either withhold tax from the employee or notify the tax authority of the impossibility of withholding, then claims will be addressed to the employee. The Federal Tax Service just wrote about this in letter No. 3-5-04/1774 dated December 2, 2009, which caused a resonance among interested parties. It states that an employee who received income from which personal income tax was not withheld by the employer is obliged to independently declare such income at his place of residence before April 30 of the next year and independently pay the tax by July 15.
