What is salary indexation: essence, types, features and rules of conducting

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Each employee of any organization wants to receive a good, optimal salary that will correspond to his status and material needs. At the same time, any person should understand what wage indexation is, when it is carried out, and also how it differs from the usual increase in earnings. In state organizations, the procedure is mandatory, but in commercial companies, it is the employer who decides whether this process is necessary.

What is salary indexation?

The procedure is represented by an increase in the wages of employees, for which the inflation rate and changes in prices for various consumer goods or any services are taken into account. A process is in place to ensure that employees across organizations retain their purchasing power.

The process can be implemented using different methods. If the price level for previous periods is taken into account, then such indexation is called retrospective. Expected indexation focuses on how the prices of various goods will increase in the future.

Why is it done?

Employers and employees of different companies should know not only what salary indexation is, but also for what purposes it is carried out. The process must be economically viable. The main goal of the implementation of the procedure is to preserve the purchasing power of all employees of enterprises.

Leaders of various companies must constantly monitor changes in the inflation rate in order to increase the salary of their hired specialists if necessary.

Process types

Salary indexation in organizations can be different:

• Negotiable. This procedure is independent of changes in consumer goods prices or inflation. For its implementation, an appropriate decision is made by state bodies. It is transferred to lower levels, as a result of which the salary of employees increases by a certain percentage. This type of indexation is often used in European countries.
• Planned. In another way, the procedure is called automatic, since its implementation does not require any decisions to be made or meetings to be held. The indexation is fixed at the legislative level by issuing a special regulatory act. At some point in time, all employers must increase the wages of their employees by a specific factor.
• Expected or retrospective. When determining these types of indexation, prices for goods or services for past periods or forecasted indicators are taken into account.

In Russia, leadersdifferent budgetary organizations apply planned indexation. This process is their responsibility. In commercial enterprises, the management independently decides whether there will be an indexation of salaries, since the standard increase in earnings is most often used in such organizations.

Legislative regulation

In art. 134 of the Labor Code establishes the obligation of employers to index the salaries of their employees. Salary indexation for state employees is implemented on the basis of federal or regional regulations.

Commercial organizations take into account the provisions of their own documents. These documents include the following:

• collective agreement governing the cooperation of the enterprise with all employees;
• local regulations, fixed on the basis of the order of the head of the enterprise;
• individual contracts drawn up with each employee of the company;
• statutory documentation;
• various Regulations developed by the employer.

Commercial firms are not required by law to index the salaries of their employees, but managers often indicate the need for this process in their regulatory documents. In this case, salary indexation in commercial organizations becomes mandatory. Typically, such Regulations are introduced only in large firms that have a collective labor agreement, the clauses of which apply to all employees.

Provided by whom?

Indexation of salaries for state employees is carried out annually by the management of these state institutions.

In commercial companies, it is the manager who decides on the need to implement this process. It does not take into account the organizational form of the organization. Even a private entrepreneur who employs hired employees can engage in indexing.

Who is it for?

All employees of companies, whether private or public, should know what wage indexation is and who it is for. In budgetary institutions, the procedure is implemented for absolutely all employees.

In commercial firms, indexation is carried out for all persons working in the organization on the basis of a standard employment contract. But the manager can choose for this only some employees who have any merit or awards.

Reason for holding

Indexation of salaries of civil servants is implemented annually without taking into account various external factors. Therefore, this process does not require any good reason.

If the decision to increase the wages of employees is taken in a private company, then usually it is due to good reasons. This is usually associated with the following points:

• increasing the level of income of the direct company that becomes a market leader or makes high profits, so forincreasing the motivation of employees, as well as to encourage experienced specialists, their salaries are indexed taking into account price increases and inflation;
• indexation can be carried out on an individual basis for any employee who excelled at work, so an increase in his earnings is associated with high results;
• The process is required to retain experienced professionals who do excellent work, but who also expect to receive a salary in line with rising prices and inflation.

In private organizations, the indexation procedure is implemented only after the issuance of an appropriate order by the head of the enterprise.

When not applicable?

Indexation of salaries in Gazprom or other state institution is carried out only for employees with whom a standard employment contract has been concluded.

There is no process for employees working on the basis of civil law agreements. This is due to the fact that such hired specialists are not subject to the requirements of labor legislation, therefore they cannot require their employers to comply with the provisions of Art. 134 TK.

Frequency

The frequency of indexation is established on the basis of the content of regulations or a collective agreement. Every employee of the enterprise should have access to this information. All information must be communicated in a way that is understandable to everyone.human form.

Indexation is implemented when the consumer price index exceeds 101%. In this case, the process is carried out from the beginning of the next month. Calculations are carried out by the State Statistics Committee, which provides information by the 10th day of each month.

In many companies, salary indexation is carried out only once a year.

Features for public institutions

Indexation of the salaries of the military, as well as civil servants, is regulated by the provisions of federal and regional legislation. Last year, it was carried out from the beginning of 2018, and also amounted to 4%.

The process is carried out annually, for which inflation is taken into account.

Rules for Businesses

The head of a private company independently sets how often indexation will be carried out, as well as by what coefficient the salary of employees will increase. He can be guided by the position of the TC, but this is not his responsibility.

Some employers refuse to carry out indexation, so they simply periodically increase the salary of their employees by a certain amount of money. If the director decides to use periodic indexing, then information about the implementation of the process will certainly be fixed in the company's regulations. In this case, the employer must comply with the procedure, otherwise he will be held accountable.

If employees discover that the head of the company violates their rights, therefore, does not raisetheir salary based on rising inflation and consumer prices, they can file a complaint with the labor inspectorate, the prosecutor's office or the court.

Employer responsibility

All heads of budgetary organizations are required to index. Owners of commercial enterprises also have an obligation if the need to increase earnings is enshrined in regulations.

If the management of any enterprise violates the rights and interests of its employees, refusing to increase their earnings, then citizens can receive support from the labor inspectorate. If, on the basis of the audit, violations are indeed revealed, then the head of the company is held accountable. Individual entrepreneurs and officials pay a fine from 1 to 5 thousand rubles. Legal entities pay a fine from 30 to 50 thousand rubles.

Additionally, after the discovery of such a serious violation, the company will have to face an increase in periodic reviews.

How is it done?

Indexation of salaries for military personnel or other citizens is implemented in the standard sequence of actions:

• if the procedure is carried out in a private company, then the rules for its implementation are fixed in the regulatory documentation;
• all employees are familiar with this document;
• during a set period of time, the director issues an order, on the basis of which the salary of employees increases;
• all hired specialists should be familiar with this order;
• changes are being made to staffingschedule;
• Additional agreements are added to the labor agreements for employees, which indicate the increased amount of earnings.

In budgetary institutions, when raising the salaries of specialists, managers take into account the coefficient established at the state level. Owners of private companies independently calculate this ratio.

Recommendations for private employers

Since there is no clear information in the legislation on how to perform indexation for owners of private companies, this often leads to the fact that the heads of organizations simply refuse to implement this process. If the employer decides to carry out the process, then the following recommendations are taken into account:

• information about such a procedure is necessarily fixed in the collective agreement;
• a special Regulation is issued containing information about when indexation is carried out, how it is calculated, as well as other features of the process;
• most frequently implemented procedures at the beginning of each calendar year.

Heads of state bodies carry out indexation based on legal requirements.

Conclusion

Indexation - an increase in the salary of each person based on rising inflation or prices for various consumer products. It is mandatory only for budgetary institutions. Heads of private enterprises may refuse to implement it.

If a private firm indexes the salaries of its employees, then information aboutthis process must be fixed in the internal regulatory documentation.