Regulating Social and Labour Relations in the Context of the Crisis


In the context of the global financial instability, nearly all companies are facing the need to cut costs. In this connection, the most typically addressed issue by employers to consulting firms is the procedure and possible options for reducing staff numbers.

It should be noted that, rather than deal with staff reduction issues, forward-thinking employers prefer to explore the possibility of revising the terms of their employees’ additional benefits or working schedule, etc. They understand that, once the financial situation stabilizes, this policy will allow them to retain key employees and fully resume operations as quickly as possible. This approach may partly be recognized as correct.

Meanwhile it is not only by cutting salaries that many companies are trying to economize during the crisis but also by reducing compensatory and other incentive payments by revising existing programs and ones planned by employers before the crisis, including, in particular, non-state pension coverage (development of a corporate pension program), voluntary medical insurance and life insurance, bonuses and fitness programs, meal, accommodation, mobile communications and other allowances.

Employers adopted the above list of programs before the crisis because they were aware of the company’s image, reputation, and compatibility on the services market. They were tools for attracting greater numbers of qualified specialists. The changed situation on the financial market has resulted in changes on the labour market, too, and has consequently affected employers’ priorities.

In rushing to reduce costs, employers’ decisions often disregard the requirements set in the labour and tax legislation.

Salary payment delays remain the most frequent violation. In addition, however, an in-kind system of payment, involuntary transfers of employees to part-time work, forced leave without pay, “enveloped” salary payments, etc. have become wide- spread, the purpose of said methods possibly being reduced taxes.

The practice of substituting employment contracts with civil law agreements, such as various types of contract for purchase of services (e.g., an outsourcing contract, etc.) has become more common. Fixed term employment contracts have become more frequent. Many employers from small and medium-sized businesses prefer to economize by not formalizing employment relations at all.

Yet, as per the statistical data of the Ministry of Health and Social Development, unemployment continues to rise.

In view of the current rise in the unemployment rate, the Government of the Russian Federation has developed a number of measures aimed at stabilizing the situation on the labour market and, in particular, providing for the right of the Ministry of Health and Social Development to propose to the Government of the Russian Federation ways to reduce both the amount of foreign labour needed as established for the current year and the quotas for issuing work permits and invitations to foreign employees in order to ensure the pre-emptive right of Russian citizens to employment.
For employers, this means only that now, within the framework of a procedure that is already far from easy, it will be much more difficult to justify the need to engage foreign staff.

The Employer must bear in mind that, in addition to greater competition among employees, these employees usually have a good knowledge and awareness of the law. Furthermore, government authorities have strengthened control over employers’ compliance with the provisions of the effective legislation, regulating, inter alia, the relations between the parties of a social partnership or their representatives in the employment sphere and issues associated with employing specific categories of employee (e.g. pregnant women, disabled persons, etc.) and so on.

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