The Constitutional Court issues an opinion on practice on cancellation of bonuses

In Ruling No. 32-P of 15 June, the Constitutional Court of the Russian Federation determined p.2 of Article 135 of the Labor Code as non-corresponding to provisions of the Constitution. This article envisages right of employers to independently establish remuneration systems, as well as approaches to calculation of certain types of payments. In the court’s opinion, current labor legislation allows employers to reduce total remuneration of employees imposed with disciplinary actions, regardless of the quantity and quality of their work and other objective criteria.

It needs to be mentioned that the Constitutional Court examined the case in which regular bonus was cancelled to an employee throughout the period of disciplinary sanction in action, which is not a common market practice. However, despite the court does not dispute an employer’s right to cancel the bonus as a one-time measure with regards to the period, when disciplinary sanction was imposed, it clarifies that in this case an employer must comply within the 20% limit on deductions from an employee’s salary.

The court also stated that from now on bonus practices must comply with this position and that current legislation must be amended accordingly in the shortest time possible.

Our People Advisory Services group has a wealth of experience with employee compensation and will be glad to provide support in transforming company bonus systems.