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Chairman of the Federation of Independent Trade Unions of Russia Mikhail Shmakov: Mr President, there are a number of issues I would like to discuss with you and in some cases maybe even ask for your assistance. What I mean is that some issues have to be addressed by the authorities.

President of Russia Vladimir Putin: We have not met for quite a while, so it will be my pleasure to hear what you have to say.

Mikhail Shmakov: Specifically, we have a disagreement with the Supreme Court of the Russian Federation on whether compensations and incentive payments should be recorded as part of the salary figure.

The Constitutional Court issued an opinion whereby salaries are salaries, while everything else, for example bonuses for working in the north and the like, should be recorded separately from the base salary. There was a decision by the Supreme Court to the same effect.

But in its latest rulings and under case law, the Supreme Court has changed its take on the issue, since now the Civil Law Board regards these allowances as part of the salary.

First of all, this has caused resentment among the working people, especially public employees. After all, when a person negotiates a certain salary in the northern regions or equivalent areas, he or she expects the relevant bonuses for working in the north to be calculated on top of the salary.

When employers started to act as if this category of compensation was part of the salary, and this is already the case with budgets for salaries for public workers in the regions, people started filing lawsuits. This led the courts to change their position, and they now agree with this approach.

We believe this to be wrong, especially since it runs counter to the opinion issued by the Constitutional Court. It should be specified in the Labour Code more precisely: We believe that it would be advisable for the Government to come forward with this initiative, since we have proposed this approach a number of times, and every time it was overlooked, for one reason or another. Under the current interpretation by the Supreme Court, our legal position needs to be adjusted.

Vladimir Putin: We need to discuss this with the Supreme Court, and also get advice from the Constitutional Court. Do you know that a relevant commission operates in the State Duma? I think that Mr Zhukov chairs it.

Mikhail Shmakov: Yes, of course. There is a commission, and we are working within it.

Vladimir Putin: You will have to work it out with this commission. I will mention this to the Government.

Mikhail Shmakov: This would be very helpful to step up these efforts.

Vladimir Putin: As you know, the Government took a stand that these incentive payments should not be included in the wage figures. But this is what happens.

In fact, when a company hires an employee, it specifies the employee’s salary that, with all the benefits added, reaches a certain level. The company specifies a salary and then calculates the respective benefits.

But what you mentioned does make sense for the many aspects of our people’s financial wellbeing. So we have to be very careful with this. We will work on this further.

Mikhail Shmakov: But it would be good to see that the law is clear on this.

Vladimir Putin: I agree with you. It should be clearly stated in the law.

Mikhail Shmakov: Otherwise the courts could give completely different interpretations of the same situation.

Vladimir Putin: I agree completely.

Mikhail Shmakov: We believe this is an important aspect of employee relations. Workers have been very concerned with this lately. There have been claims filed in court in the Irkutsk Region, the Trans-Baikal Territory. It is a common source of complaint.

Vladimir Putin: I do not think there is any real damage, but it does cause some distress. Or is there damage?

Mikhail Shmakov: There is, indeed. For those workers, whose salary is close to minimum wage, the salary already includes all allowances. Although as a general rule, the minimum wage is supposed to be the minimum pay for work in ordinary working conditions.

Vladimir Putin: I agree.

Mikhail Shmakov: But when working conditions differ from ordinary, when a respective compensation must be paid, a salary coefficient should be applied.

Vladimir Putin: The Government and I believe there are no grounds for these allowances to be included in the wage figures. We need to talk about this with the parties to this issue and put the legal regulations in order.

Mikhail Shmakov: Of course. It would be helpful to see such instructions being given.

Vladimir Putin: Good.

Mikhail Shmakov: Regarding this issue, Mr President, I have a petition for you. I will leave it here along with my correspondence with the Supreme Court.

Vladimir Putin: Ok. At any rate, this must be definitely run by the trade unions and the Government.

Mikhail Shmakov: The parliamentary commission.

Vladimir Putin: Yes, and the State Duma.

We will make sure to give it a nudge and ask our colleagues to take care of the issue as soon as possible. All the more so since the people are concerned.

Do you know that we are increasing the minimum wage to 7,800 rubles starting July 1?

Mikhail Shmakov: Unfortunately, this does not solve the problem.

Vladimir Putin: Yes, because it will not be quite up to the subsistence wage.

Mikhail Shmakov: Frankly speaking, in relative terms the minimum wage is even decreasing compared to previous figures when it accounted for around 78 percent of the subsistence wage.

Unfortunately, now, even after the increase, it will not exceed 76 percent. The cost of living is increasing. Moreover, you know that we have our complaints about the basic formula of calculating the subsistence wage.

At this point, this formula does not take into account any recent changes in compulsory contributions. Specifically, it includes higher taxes due to real estate taxes now being based on the property’s cadastral value. This new regulation is not taken into account.

Also, there has been a relative increase in various sectors, including healthcare, education and even culture. This must be factored into the formula but is not fully included now.

We believe that a fair formula is based on a minimum consumer budget that includes the essentials. This figure is higher than the minimum wage not just by several percentage points but by many times.

Vladimir Putin: We have other proposals too. The Government is discussing an increase in the minimum wage up to the subsistence wage, which would be a serious step towards the necessary changes that you pointed out.

Mikhail Shmakov: Exactly. However, to do that, some conditions were proposed that would be unacceptable to the workers. We cannot approve of them.

Vladimir Putin: Yes, I am aware of the debate. We will not look further into this right now. At any rate, the trilateral commission is still working on this, is that right?

Mikhail Shmakov: Yes, the trilateral commission is discussing this issue. We have not reached an agreement yet.

Vladimir Putin: I see.

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