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Business urges the Cabinet of Ministers not to complicate the calculation of average wages

22/ 02/ 2021
  On December 24, 2020, the Mineconomy published on its official website a clarification for the updated procedure for calculating the average wage in connection with the entry into force of Resolution №1213. For reference,  the vacation, sick leave, business trip payments need to be considered for the calculation of the average wage. The adopted document changed the formula for calculating the average wage. According to the EBA member companies, this formula has become much more complicated for accounting, and the business community is not ready for this. For a better understanding, we would draw an example. According to the current legislation, if an employee goes on leave from June 1, an employer will have to pay him/her vacation entitlements three working days before the leave starts. At the same time, if the company pays bonuses to its employees, lets say, every six months, then the amount of vacation payment must be recalculated, and the company shall pay the difference in the amount. However, according to the old formula, the amount of vacation payment should not be recalculated, because their size was determined at the time of the employee going on leave, not six months later. Thus, accrued bonuses were taken into account when calculating subsequent leave, and the employee in any case did not incur any losses. This situation creates difficulties for business in matters of administration because 3-4 thousand payments will have to be adjusted monthly in companies with tens of thousands of employees. In addition, in such a situation, an employer cannot calculate the salary fund for the year because the amount of recalculation (for example, the amount of bonuses that depends on the employee’s performance) is unknown. As of today, there is no accounting administration software that can conduct such calculations. This means that companies have to hire an extra employee exclusively for the manual recalculation of the average wage. Also, professional outsourcing providers will be forced to raise tariffs for their accounting administration services to avoid loss caused by mass recalculations. Therefore, the business appeals to Denys Shmyhal, Prime Minister of Ukraine, to return the old formula for calculating the average wage in Resolution №1213 in the part concerning the payment of bonuses for two or more months. After all, it is obvious that this new formula is not viable, and companies will have difficulties in this context. So, it is important to avoid confusion in the beginning and return to a completely working calculation format that has worked for years.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

On December 24, 2020, the Mineconomy published on its official website a clarification for the updated procedure for calculating the average wage in connection with the entry into force of Resolution №1213.

For reference,  the vacation, sick leave, business trip payments need to be considered for the calculation of the average wage.

The adopted document changed the formula for calculating the average wage. According to the EBA member companies, this formula has become much more complicated for accounting, and the business community is not ready for this.

For a better understanding, we would draw an example. According to the current legislation, if an employee goes on leave from June 1, an employer will have to pay him/her vacation entitlements three working days before the leave starts. At the same time, if the company pays bonuses to its employees, let’s say, every six months, then the amount of vacation payment must be recalculated, and the company shall pay the difference in the amount. However, according to the old formula, the amount of vacation payment should not be recalculated, because their size was determined at the time of the employee going on leave, not six months later. Thus, accrued bonuses were taken into account when calculating subsequent leave, and the employee in any case did not incur any losses.

This situation creates difficulties for business in matters of administration because 3-4 thousand payments will have to be adjusted monthly in companies with tens of thousands of employees. In addition, in such a situation, an employer cannot calculate the salary fund for the year because the amount of recalculation (for example, the amount of bonuses that depends on the employee’s performance) is unknown.

As of today, there is no accounting administration software that can conduct such calculations. This means that companies have to hire an extra employee exclusively for the manual recalculation of the average wage. Also, professional outsourcing providers will be forced to raise tariffs for their accounting administration services to avoid loss caused by mass recalculations.

Therefore, the business appeals to Denys Shmyhal, Prime Minister of Ukraine, to return the old formula for calculating the average wage in Resolution №1213 in the part concerning the payment of bonuses for two or more months. After all, it is obvious that this new formula is not viable, and companies will have difficulties in this context. So, it is important to avoid confusion in the beginning and return to a completely working calculation format that has worked for years.

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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