Federal Labor and Employment Service Has Re-Affirmed That It Is Unlawful to Set and Pay Salaries in Foreign Currency

Federal Labor and Employment Service Has Re-Affirmed That It Is Unlawful to Set and Pay Salaries in Foreign Currency

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The Federal Labor and Employment Service of Russia (further “Rostrud”) repeatedly stated in 2006 – 2009 that employers are not permitted to set and pay salaries in foreign currency (Letters No.1688-6-1 dated  10.10.2006, No.1729-6-0 dated 28.07.2008, No.1145-ТЗ dated 11.03.2009 and No.1810-6-1 dated  24.06.2009). Although Rostrud used to hold this position to avoid salaries automatically dropping below the minimum wage in case of decrease in foreign exchange rates, this position was upheld in November 20, 2015. In its letter No.2631-6-1, Rostrud indeed reaffirmed that salaries may be set and paid only in rubles. This position held by Rostrud means in practice that:

• If employment contracts provide for salaries in (а) foreign currency, (b) the ruble equivalent of an amount in foreign currency or (с) in conventional units, such employment contracts do not comply with the requirements set out by state authorities;
• Employers may be brought to administrative liability for the above violation in the form of a warning or a fine from RUB 30,000 to RUB 50,000 for each violation of the requirements for labor contract set by law (Article 5.27(1) Russian Code of Administrative Offenses).

RECOMMENDATION

We recommend verifying that the employment contracts with your employees comply with the law and position held by Rostrud. BRICS Consulting lawyers would be pleased to assist with such verification, as well as in making appropriate changes to employment contracts, if required. We would also be pleased working out a salary payment system that would take into account exchange rate fluctuations and meet the interests of both your company and employees.

The content of this alert is provided for information only and is not a substitute for legal advice which can be duly provided only based on the current and specific circumstances of the situation at hand.