Payroll Accounting

Salary is the key incentive for labor. Adequate wage computation and appropriateness directly affect the staff performance and good faith fulfillment of duties. For any company, a wage is the main type of expense.

As per the Russian Labor Code, a wage include:

• Salary (main portion of a wage);
• Compensation (additional disbursements);
• Remuneration (bonuses and benefits).

Payroll is processed on the grounds of an employment agreement and internal regulations. The final payroll document is prepared by an accounting department and must be stored for 5 years. To prepare a payroll sheet, accountants use a staff schedule, orders, sick slips and timesheets.

Payroll accounting procedure

For payroll accounting, the accounting department will apply special calculation formulae. Calculation may be based on any of the two principal payroll systems:

1. Time-rate system: an employee’s wage will be calculated based on the time worked (wage per month; daily rate; hour rate). Calculation: number of hours or days multiplied by the rate (W=R*N, where R is the rate, N is the number of hours or days worked). If the employment agreement provides for a monthly wage, the employee will get the salary equal to the amount stated in the agreement, regardless the hours worked.
2. Piecework rate system: wage is calculated according to the number of units produced and the price per unit. Calculation: the amount of work completed multiplied by the number of units produced (W = UP*N, where UP is a unit price, N – number of units).
Calculated wage is complemented with bonuses and benefits, remuneration on official holidays or weekends. An employer must deduct the 13% personal income tax from the salary. Total deductions, including pension and insurance contributions, may not exceed 20%. This rule does not apply to alimony and withholdings according to a judicial act.

Payroll period

Pursuant to the Russian Labor Code, payroll calculation must be done every calendar month. Salary must be paid at least twice a month in the form of an advance payment and wage. If the employer delays payments or incorrectly calculates salary, its employee may report to a relevant authority and demand compensation for each day of delay. In such case, the company or organization will suffer losses from payment of fines, as per the laws.

Employees must provide a written salary calculation report to their employees. The report must include all the calculated items, as well as withholdings and tax contributions. Before salary is paid, each employee must be informed of the amount of salary accounted. Adequate accounting will prevent errors in payroll calculation, thus keeping the employer from violation of the employees’ rights.

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