Employers to be fined for depriving employees of choosing their bank for salary payment

By Lyudmila Savinkova, Head o HR Outsourcing Department

A proposed bill to impose penalty on employers who do not allow their employees to choose their own bank for payment of salary will be considered by the State Duma in October. The fact that the Russian Ministry of Labor has started working on this draft law has already been posted on the federal portal for laws and regulations.

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Lyudmila Savinkova
Head o HR Outsourcing Department
at Intercomp

After adoption of this law, employers preventing employees from choosing a credit institution for transfer of their wages will be subject to the same liability as that for salary violations in the form of warning or fine. The fine for such violations is currently from RUB 10,000 to RUB 20,000 for company officers and from RUB 30,000 to RUB 50,000 for legal entities.

Employees are entitled to choose a “payroll” bank not only upon hiring, but they can also change it before each salary payment. To do so, they need to notify their employer of the change of bank details. Such notification should be made in writing at least 5 days before payment.

“In addition to the threat of direct material punishments, this bill may entail a number of additional costs for employers. Many large companies will need to engage additional resources to transfer wages to several banks at once. An increase in labor costs is expected, as well as in paperwork, which usually results in errors and inaccuracies. An increase in cash collection, payment and storage costs can also be added to all of the above” considers Lyudmila Savinkova, Head o HR Outsourcing Department at Intercomp.

But this bill is not that dreadful as employees are even now entitled to choose their “payroll” bank under the Russian Labor Code. It is just that not everyone hurries to use this rule. Employees prefer the “benefits” of payroll projects that banks eagerly offer to companies over the freedom to choose their own credit institution. Conditions for consumer loans or mortgages are significantly more attractive for payroll project participants than for other bank customers.

In addition, money may be credited to accounts in different banks with a time difference from 1 to several days. And when it is a matter of loan repayment or other urgent payments, even a single day of delay is of great importance. Considering this and the expenses that employees would have to incur to open and maintain a personal bank card, it is doubtful that many employees will change “payroll” banks.