Deloitte Legal 2018 exclusive study: A global look at dismissal costs and issues

The survey begins with six cost comparisons, which reflects the dismissal cost in all participating countries. The survey data represents three separate cases with different seniority and remuneration packages―as well as examining the difference between a voluntary and involuntary dismissal circumstances in each of these scenarios.

The survey covers the country specific dismissal rules of 45 countries and the compliance formalities required in the upcoming legislative changes.

New 2018 study noteworthy additions:

• Two new comparative tables bringing more insight to overall cost implications
• Expansion that includes the Latin America and Asia Pacific regions
• Sixteen new countries, including: Albania, Bosnia and Herzegovina, Brazil, China, Colombia, Cyprus, Ecuador, Japan, Kazakhstan, Montenegro, Myanmar, Serbia, Singapore, South Korea, Thailand, Vietnam

Some of the survey’s key findings include

• Dismissal costs in surveyed countries differ substantially
• Generally, dismissal costs in Western-Europe are higher than Central-Europe.
• Dismissal costs are highest when an employee is dismissed without reason
• In most countries, the legal grounds for an employer to dismiss employees are restricted and subject to strict formalities
• In general, there is little or no difference in the cost of dismissal for individual reasons, compared to dismissal for economic reasons
• Since the last International Dismissal Survey, some countries have substantially changed their dismissal regulations, in response to court decisions, or for simplification and increase of labor flexibility
• In all surveyed countries, seniority within the company is the key factor in determining the level of dismissal cost

Dismissal Survey: Russia

In accordance with the Russian labor legislation, there are several types of grounds for termination of an employment contract: 

• Termination of the employment contract at the employee’s initiative
• Termination of the employment contract upon mutual agreement of the employer and the employee
• Termination of the employment contract under circumstances beyond the parties’ control.
• Termination of the employment contract at the employer’s initiative (dismissal)
• Other reasons for termination of the employment contract

Reasons for dismissal are the following:

1. liquidation of the company;

2. staff reduction;

3. unsuitability of the employee for his/her position or for the tasks which need to be performed (due to insufficient qualifications, confirmed by the results of an attestation).

4. change of the company’s owner (only applicable to the head of the company, deputy heads of the company, and to the chief accountant);

5. repeated failure by the employee to perform his/ her duties without good cause, provided that such employee has been disciplined;

6. single gross violation by the employee of his/her duties, such as, in particular:

• absence at work without good cause for over 4 consecutive hours within a working day;
• appearance at work under alcoholic, narcotic, or other toxic intoxication;
• disclosure of the secret protected by the law (state, commercial, service and other) that became available to the employee as a result of execution of his/her labor responsibilities, including the divulgence of personal data of another employee;
• the commission at the place of work of the theft (including petty theft) of others’ property and the misappropriation and intentional destruction or impairment of such property where these acts have been established by a court verdict or a ruling of a judge, body or official authorized to examine administrative offence cases which has entered into legal force;
• a violation of labor protection requirements by the employee which has been established by a labor protection commission or a labor protection agent if that violation has resulted in grave consequences (an industrial accident, breakdown or disaster) or was known to create a threat of the occurrence of such consequences;

7. culpable acts committed by an employee directly in charge for funds or goods, if these actions provide grounds for the employer to lose confidence in such employee;

7.1. failure to take measures by the employee on conflict of interest prevention or its settlement, failure to provide or provision of incomplete or false information on income, expenses, property and obligations of property nature with regard to the employee, his/her spouse and infants, information on opening accounts in foreign banks, storage of cash and valuables in foreign banks, possession 

7.2. and (or) usage of foreign financial instruments by the employee, his/her spouse and infants in cases prescribed by the Russian legislation, if these actions provide grounds for the employer to lose confidence in such employee;

8. commission of an immoral offense incompatible with the labor duties, if performed by an employee performing educational functions;

9. unjustified decision by the head of the Branch, his/ her deputies or the chief accountant, that resulted in damage to the property, its unlawful use, or other detriment to the property of the company;

10. single gross violation committed by the head of the Branch or his/her deputies of their labor responsibilities;

11. presentation of false documents or information known to be false to the employer at the conclusion of the employment contract;

12. in instances envisaged by the employment agreement with the director of an organization and members of a collective management body of an organization;

13.  in other cases stipulated by the Labor Code and other Federal Laws.

The effective Russian legislation stipulates different notice periods for different grounds for termination of the employment contract at the employer’s initiative, in particular:

• In the event an employment contract is terminated due to staff redundancy or liquidation of the company, the employees must be personally notified of such termination not less than 2 months prior to actual termination against written receipt. Upon the employee’s written consent the employer can terminate the employment contract for the foregoing reasons without a 2 month notification provided that the employee is paid additional compensation equal to the employee’s average salary calculated in proportion to the time remaining until the expiry of the redundancy notice period.
• In the event that a fixed term employment contract concluded for a period under 2 months is terminated at the employer’s initiative, the employer should notify the employee of the contract’s termination 3 days prior to the termination.
• During the probation period the employment contract can be terminated at the employer’s initiative for reasons of unsatisfactory employee’s performance with a 3-day written notice to the employee, specifying the reasons of unsatisfactory results during the probation period.

The notice of dismissal of an employee is valid only if it is made in written form, and the employee was acquainted with it against his/her signature. However,  the effective Russian legislation does not contain any particular requirements for such document (i.e. no special form is prescribed by the law). The termination of an employment contract (dismissal) shall be formalized by an order (instruction) of the employer. On the day of dismissal the employer shall be obliged to issue the employee his/ her work record book and other employment-related documents and to make a fi  settlement with him/her.

There are some additional legislative requirements providing additional obligations for the employer with regard to dismissal. Some of them are stated below.

• In case of staff reduction the employer shall offer the employee another position relevant to the employee’s qualifications (should there be any suitable vacant positions within the company).
• In the event that an employment contract is terminated due to staff reduction or liquidation of the company, the employees must be personally notified of such termination not less than 2 months prior to the actual termination against written receipt.

In case of termination of an employment contract for the reason of unsuitability of the employee for his/her position due to insufficient qualification, the lack of qualification needs to be confirmed by the attestation committee, specifically formed in the company for such purpose.

The dismissal at the employer’s initiative is not allowed (except in case of liquidation of the company) during the period of the employee’s temporary disability (sick leave) and during the period of the employee’s vacation. In some cases (for example, dismissal due to staff reduction or due to unsuitability of the employee for his/her position or for the works which need to be performed), the employer has to offer a vacant job (position) in the company or its separate subdivisions.

Besides the particularities mentioned above, a special protection against dismissal exists for certain groups of employees.

An employment contract can be terminated for such reasons as staff reduction and unsuitability of the employee for the position due insufficient qualifications, only if the employee cannot be transferred to another position upon his/her consent. Moreover, in the events of staff reduction the following equally skilled employees shall retain employment:

• those having families with two or more dependants (disabled family members totally supported by the employee or receiving assistance from him, which is the main source of their means of subsistence);
• the only independent earners in the families;
• employees who sustained severe labor injury or professional disease in the company;
• people disabled during the Second World War or in State defense actions;
• employees undergoing on-the-job professional development upon the employer’s direction.

Employment contracts with pregnant women cannot be terminated at the employer’s initiative in any cases other than liquidation of the company.

Employment contracts with women having children under 3 years old, single mothers having children under 14 years old (in case of the child’s disability – under 18 years old) or other custodians in the absence of a mother cannot be terminated at the employer’s initiative except for the particular reasons stated in the effective legislation.

An employment contract with the employee under 18 years old can be terminated upon the employer’s initiative only upon consent of the State Labor Inspectorate and the Commission for Protections of the Minors (except for the case of liquidation of the company).

If the dismissal was not allowed or the employer has breached the rules for a particular case of dismissal and obligatory prerequisites (i.e. notification period) were not observed and fulfilled, the employee may  file a lawsuit to court within a period of 1 month from the date of dismissal and claim that the dismissal was not valid. In this case, the employer has to expose and prove that all obligatory requirements of the dismissal

have been performed in compliance with the legislative requirements when explaining the dismissal. In case the prerequisites were not fulfilled, the employment contract shall be recovered and the employee has the right to reinstatement of employment. Moreover, the employer who has violated the required procedures of dismissal will have to pay a compensation reimbursing the period of forced absence at work.

In accordance with the effective Russian legislation the employer has to pay severance pay in the amount of 1 average monthly salary in case of dismissal at the initiative of the employer due to staff reduction or liquidation of the company. Please note more than 1 month average salary can be established in the employment contract. Moreover, in these cases of dismissal the employer is also obliged to pay to the employee his average monthly salary for the period of his/her new job-seeking, but not exceeding 2 months.

Besides what is mentioned above, the employment contract with the head of the company (i.e. general director) may be also terminated due to the following:

• dismissal of the head of a company – debtor in accordance with legislation on insolvency (bankruptcy);
• decision on termination of an employment contract with the head of the company taken by an authorized body of a company or the owner of property of the company;
• cases envisaged in the employment contract with the head of the company.

The decision on termination of an employment contract with the head of the company taken by an authorized body of a company or the owner of property of the company, including one made as result of change of the company’s owner does not require prior notification of the employee.

In case of termination of the employment contract with the head of the company, deputy heads of the company and the chief accountant due the change of the company’s owner, a compensation in the amount of not less than three monthly salaries should be paid to them.

In case of termination of the employment contract with the head of the company (in the absence of his culpable actions) under the decision of the authorized body of the company, the employer will have to pay to such employee a compensation in the amount set by the employment contract, but in any case not less than his/ her three average monthly salaries.