"Golden parachute" payments to top managers are limited

What does the law say about golden parachutes?

The term “golden parachute” itself comes from the English Golden Parachute and implies an impressive “golden” bonus that allows an employee, usually a top manager, to “land softly” after dismissal. Modern Russian legislation contains the term “severance pay”; its amounts and terms of payment are regulated by the Labor Code, are understandable and are not difficult to calculate. However, Art. 178 and art. 181 of the Labor Code of the Russian Federation establishes that upon dismissal, increased severance pay can be paid, as well as compensation - it is they that appear in business customs, and are also understood by judicial practice as “golden parachutes”, and their calculations sometimes cause serious disputes in the courts.

How to get a golden parachute

If the authorized governing body of the company, usually consisting of business owners, decides to dismiss a top manager (manager or other senior official), then he is entitled to monetary compensation. Only those persons with whom the employment contract is terminated not due to their guilty actions (inaction) can count on receiving payment.

The specific amount of severance pay must be specified in the employment contract. The conditions under which the “golden parachute” should be used or its use should be denied should also be spelled out. It should also be remembered that in some cases such severance pay may be demanded back. For example, if during the bankruptcy procedure of an organization it turns out that the actions of the director or chief accountant caused harm and losses. In practice, this often occurs during bank resolutions.

To whom and in what cases are they paid?

Based on the norms of Articles 178 and 181 of the Labor Code of the Russian Federation, increased severance pay and compensation are paid to:

upon termination of employment relations with any employee, if his employment contract or collective agreement provides for additional payments of severance pay, as well as increased amounts of severance pay are established. The reason for terminating an employment contract can be different, including agreement of the parties and the employee’s own initiative;
upon termination of labor relations with the head of the organization, his deputies, as well as with the chief accountant due to a change in the owner of the organization’s property. In this case, the new owner is obliged to pay compensation to these employees in an amount not less than three times the employee’s average monthly earnings;
upon termination of employment relations with the head of the organization in connection with the adoption by an authorized body of a legal entity, or the owner of the organization’s property, or a person (body) authorized by the owner of a decision to terminate the employment contract - not less than three times the average monthly salary of the employee.

Social protection for the rich: what kind of “golden parachutes” do officials receive?

The real bomb was the information released on September 29 by the Nezygar telegram channel (this channel is known for publishing various leaks from government agencies). It was reported that on September 15 and... O. Deputy Governor of the Voronezh Region, 60-year-old Yuri Agibalov, was relieved of his post and retired. Thanks to this, he received the severance pay of 23 salaries provided for such officials by regional law and a pension supplement in the amount of 75% of average earnings. And two days later, on September 17, Yuri Agibalov was hired again. For the same position. O. Deputy Governor Moreover, as Nezygar reports, with an increased monthly monetary reward.

After this, Voronezh found itself in the center of attention of the federal media. Judging by the reviews of political scientists, Alexander Gusev has a chance to start his career with a reprimand from Moscow. After all, the federal authorities do not need such scandals. Russians, dissatisfied with raising the retirement age and rising prices, are clearly not happy that officials receive bonuses in this way.

What are “golden parachutes” for officials?

How do people of different professions retire? Some receive a thank you note or a bouquet of flowers from management. Most just have a work book in hand. It’s a completely different matter for employees of the regional government and its structural divisions, the mayor’s office, the apparatus of the City Duma and the Regional Duma. In the rich 2000s, officials in all regions legislatively (in regional laws and decrees of the regional government) provided for themselves the so-called “golden parachutes” - first of all, this is the procedure for calculating a special pension for long service (a supplement to the regular pension) and a one-time monetary reward.

The higher the position, the greater the amount of remuneration, which is calculated in the number of salaries. The managers themselves have few of them. The salary of the vice-governor, for example, is 11,189 rubles. The remuneration to Yuri Agibalov amounted to 23 salaries. According to the regional government, the lump sum payment he received amounted to 223,892 rubles (the amount is given minus the 13 percent tax).

The main “golden parachute” for officials is actually not even one-time remuneration, but the pension supplements they are entitled to by law. Those who have worked in the regional government for a long time can count on an increase upon retirement in the amount of 75% of the average earnings for the last year of work. True, the law has conditions: only those who do not work after retirement receive the bonus. In addition, the bonus should be no more than 7 salaries for senior management, no more than 5 salaries for middle managers and no more than 4 salaries for chief specialists. In the case of a vice-governor, 7 salaries is about 80 thousand rubles. That is, judging by the text of the law, such former managers can receive more than 900 thousand rubles as a pension supplement in just one year. By the way, the average pension in Voronezh, according to Voronezhstat, is 12,365 rubles per month.

Social protection for the rich

In addition to salary, the monthly earnings of officials consist of monthly monetary remuneration, allowances, financial assistance, and bonuses. Judging by the declarations of members of the regional government, unlike many Voronezh residents, they are able to save for their old age. Thus, the annual income of Vice-Governor Yuri Agibalov in 2017 amounted to 4 million 818 thousand rubles, in 2016 - 4 million 727 thousand rubles. That is, on average his monthly income was 400 thousand rubles. (By the way, today the average salary in the region is 30,478 rubles.) The head of the regional economic development department, Anatoly Bukreev, received an income of 4 million 834 thousand in 2020. Head of the Construction Policy Department Oleg Grechishnikov - 5 million 408 thousand rubles. The list could take a long time.

Ironically, the long-service pension and one-time monetary remuneration are paid to officials from the regional budget by the social protection department. This is a kind of social protection for people who, in general, do not need it. Of course, we are now talking about managers, and not about ordinary employees.

Governor: “Agibalov will not be included in the new government”

On Monday, October 1, Governor Alexander Gusev met with journalists to explain the situation with Yuri Agibalov. According to the head of the region, Agibalov initially asked to be fired due to his retirement and did not plan to continue working in the regional government. But after the documents on all payments due to Agibalov by law were signed, Gusev himself asked his deputy to work until October 8, until a new composition of the regional government was formed. As Gusev noted, during this transition period it was necessary to draw up a large number of documents, and he really counted on Agibalov’s experience. Yuri Agibalov will not be part of the new government, the head of the region emphasized.

“It would probably be more correct to draw up the documents with all the payments due to Agibalov when there is already a decree on the appointment of a new government, and this is most likely our mistake,” admitted Gusev. - But there is a legal subtlety - this would be repeated dismissal. But this situation is not clearly stated in the law.

As for the “golden parachutes,” then Alexander Gusev actually came to their defense. According to the governor, financial incentive is one of the main ones for attracting qualified specialists to high-ranking official positions. And if now, against the backdrop of emotions, we cancel all these payments, we can end up with people coming to the regional government “on a residual basis” who were unable to realize themselves in other areas, the governor expressed his opinion.

Governor Alexander Gusev at a press conference on October 1

Photo from the regional government website

The governor was asked how he felt about the fact that there was a “mole” in the regional government who “leaked” information to the media.

“I think there is no need to look for anyone now,” said the head of the region. “Most likely, these people (or maybe one person) did it out of villainous motives. Well, they did it and did it. I don’t see anything wrong with the fact that this information has become available to the public.

And regarding the continuation of work in the regional government of a possible “mole,” Gusev said this: “Let him work, maybe he is an exceptionally talented person who is indispensable in the current activities of the government.”

At the same time, the head of the region admitted that he was sincerely sorry that Yuri Agibalov decided to retire. According to Gusev, this is “an exceptionally qualified person with enormous experience, which would be useful right now, at the stage of large-scale changes in the government.” But at the same time, the governor refused to comment on the reasons why his deputy made such a decision: “Probably, if Yuri Vladimirovich wants, he will tell it himself.”

We would be happy to give the floor to Yuri Vladimirovich himself on the pages of the newspaper, but, unfortunately, he was unavailable for comments on Monday. Agibalov also did not come to the governor’s press conference held about the scandal.

Is there any reason for society not to believe that Yuri Agibalov was going to leave on October 8? Unfortunately, there is. After all, Alexander Gusev has been heading the region since December 2020. The outcome of the gubernatorial election was essentially a foregone conclusion. And in 8 months, Alexander Viktorovich, in theory, had to decide who would join his new team. And if he really decided to retire Yuri Agibalov, he could well have found a replacement for his deputy long before September 15, and not asked Agibalov (two days after his dismissal) to “work” for another three weeks. This explanation does not sound very convincing and rather suggests that, in fact, Yuri Agibalov was going to work in retirement for a long time. But now, after the publicity, the regional authorities need to somehow minimize the consequences of the scandal. Moreover, such cases are not isolated.

Loud stories with “golden parachutes” in Voronezh

Officials leaving office to receive “golden parachutes” have already happened in the Voronezh region. The hero of the loudest story was the chairman of the regional election commission, Vladimir Selyanin. As the prosecutor's office found out, on December 7, 2020, the powers of the head of the regional election commission as a civil servant were terminated. As a pensioner, he was assigned an additional payment to the insurance part of the pension and was paid a one-time monetary reward. In 2020, additional payments were stopped, since in May Selyanin was again elected head of the commission. At the same time, the regional election commission hid that Vladimir Selyanin was leaving his post, and all this time on the election commission’s website they wrote about him as the chairman of the commission. The media suggested that Selyanin formally resigned in 2020 amid talk of increasing the retirement age for civil servants in order to receive a lump sum payment and then return to his post.

Then the head of the Central Election Commission, Ella Pamfilova, commented on the personnel changes: “What happened, if you call a spade a spade, is a forgery, it is leapfrog. This amounts to misconduct."

In addition, discussing the situation with Vladimir Selyanin at a meeting of the Central Election Commission, she said: “There is a law on pensions. If you are satisfied, you need to work; if you are not satisfied, that means no. Otherwise they receive 400 thousand rubles as a “golden parachute”, and then return to their post. At the very least, it’s indecent.”

On November 12, 2020, when Alexander Gusev was the head of the city, Elena Muromtseva, who also reached retirement age, left the post of head of the financial and budgetary policy department. And on November 25, she returned to work. But already as the acting head of the same department. And for three years now he has been working with the prefix “i. O.".

Taking this opportunity, we reminded Alexander Gusev of this episode at his press conference on October 1.

When asked whether it is still possible under the law for a situation where an official is escorted into retirement with all the payments due to him, and then he returns to his position again in the status of “acting”, Gusev answered this:

- Firstly, it is not illegal. And secondly, if I had made the decision to appoint Muromtseva to this position 10 more times, I would have accepted it. It is difficult to find a better head of the financial department in the city. An extremely conscientious person.

As far as MY! correspondents know, there are other officials in Voronezh who received payments according to the same scheme.

You can read the editorial opinion on this scandal in a special section of the portal “MY! Online"

What restrictions are set for golden parachutes?

Until 2014, Russian labor legislation did not contain restrictions on such payments to employees. However, in 2014, appropriate changes were made to the Labor Code regulating the size of “golden parachutes” and the conditions for their payment:

Restrictions concerning any employees are established by Art. 181.1 of the Labor Code of the Russian Federation, which prohibits any agreements and decisions relating to labor relations from providing for the possibility of paying benefits or compensation to employees, as well as other payments in any form, if the labor relationship has terminated due to disciplinary action or other guilty actions or inactions.

Restrictions have also been introduced for:

managers, their deputies, chief accountants and members of collegial executive bodies of state corporations, state-owned companies, as well as business entities who have entered into employment contracts, as well as business entities, more than 50% of the shares (shares) in the authorized capital of which are in state or municipal ownership;
managers, their deputies, chief accountants of state extra-budgetary funds of the Russian Federation, territorial compulsory health insurance funds, state or municipal institutions, state or municipal unitary enterprises.

Restrictions for the last two categories of workers are the amount of severance pay: it cannot exceed three times the average salary, and agreements on termination of employment relations by agreement of the parties should not contain conditions for any additional payments due to the employee.

Moreover, if the employment contract was concluded before April 13, 2014, then its provisions that contradict these restrictions are considered not to comply with the law and are not applied.

What is written in the Labor Code

Meanwhile, the question “golden parachute” upon dismissal - what is it? does not appear out of thin air, but is based on very real and valid legislative norms. Article 279 of the Labor Code of the Russian Federation provides that the head of an organization has preferences upon dismissal compared to ordinary employees. This, in particular, is compensation in the amount of three months' earnings. And this is the minimum, because the maximum can be established by an employment contract and is not regulated at the legislative level (with some exceptions). The following severance pay rules apply to senior management:

general directors;
executive directors;
deputy heads;
manager;
chief accountants;
financial directors.

The larger and richer the company, the more “golden parachutes” its top managers have. Traditionally, banks and state corporations are among the leaders. True, for some persons from government organizations (chief accountants and managers), the norms of Article 349.3 of the Labor Code of the Russian Federation establish a limit on the amount of such severance pay. Its size cannot exceed three times the average monthly earnings of these workers. In this case, the legal minimum and maximum are equal. This restriction applies to all organizations in which more than 50% of the shares (shares) in the authorized capital belong to the state (municipality).

Some world and Russian statistics

The minimum and maximum sizes for the “golden parachute” (unless this applies to the corresponding restrictions for a number of employees and cases of a minimum guaranteed by law) are not established.

If we consider world practice, the average size of the “golden parachute” for top managers of large corporations can reach three annual salaries.

In Russia, the case of a “golden parachute” payment to the head of Rostelecom, Alexander Provorotov, in the amount of 230 million rubles, received wide publicity. Subsequently, the court declared this payment unlawful. As the General Prosecutor's Office pointed out, “payments of such compensation by companies with state participation in amounts inadequate to the level of general well-being of the population create a threat to the stability of public relations and undermine citizens’ trust in the government.”

Is it possible not to pay the “golden parachute” legally?

If the provision of a “golden parachute” is specified in the employment contract with an employee holding a management position, the company is obliged to fulfill it and pay the “golden” severance pay. Otherwise, based on the norms of Art. 394 of the Labor Code of the Russian Federation, the court will decide to recover the amount of the “golden parachute”, interest and moral damages.

Important!
When setting the amount of the “golden parachute”, the results of the manager’s work are taken into account. The amount of compensation should not include annual and quarterly bonuses paid depending on the achievement of specific labor indicators, if these indicators were not actually achieved.

“Golden parachute” is paid to you in the following cases provided for by current legislation:

If the dismissal occurred at his own request (if the manager himself wished to leave the company, he is not entitled to compensation, since he deliberately deprived himself of high earnings and independently made the decision to leave).
If the manager improperly performed his duties and was dismissed due to disciplinary action (see Article 181 of the Labor Code of the Russian Federation).
If the company is in an unfavorable financial situation (the amount of severance pay must be adequately correlated with the company’s profit and salary fund).

Taxation

In accordance with tax legislation, severance pay and compensation provided for by law are not subject to personal income tax within the established limits:

three monthly earnings - for all employees;
six - for workers in the Far North and equivalent areas.

The Ministry of Finance and the Federal Tax Service adhere to this position in their explanations.

At the same time, in Letter No. 03-04-06/69183 dated November 23, 2016, the Ministry of Finance indicates that payments upon dismissal of an employee of an organization that are not established by law and the collective agreement of the organization are subject to clause 3 of Art. 217 of the Tax Code of the Russian Federation does not apply and the specified income is subject to personal income tax in the prescribed manner. Judicial practice on this issue is ambiguous, but it is inclined to believe that personal income tax in this case must be calculated. At the same time, the Ministry of Finance emphasizes that the letter is of an informative nature and does not prevent taxpayers, tax authorities and tax agents from being guided by the norms of the legislation of the Russian Federation on taxes and fees in an understanding that differs from the interpretation set out in the said letter.

Taxation of “gold” payments

The “golden parachute” category benefit, paid taking into account the current criteria of labor legislation and on the basis of executed labor agreements, is taken into account by enterprises in expense items to determine the amount of income tax (Article 255 of the Tax Code of the Russian Federation). Amendments to the Tax Code of the Russian Federation allow the following to be included in expenses for dismissals:

individual or collective agreements;
separate (additional) agreements between the parties to the production contract, including agreements on termination of the employment contract;
internal regulations.

Personal income tax taxes are provided for compensation in an amount of up to 3 times the monthly earnings or 6 times the monthly earnings for those who worked before dismissal in enterprises in the Far North (Article 217 of the Tax Code of the Russian Federation). The non-taxable minimum indicator does not depend on the employee’s position or on the reasons for terminating the industrial relationship.

Important! In a situation where “parachutes” are paid several times during one calendar year, the non-taxable minimum for personal income tax applies to each case of payment (letter of the Ministry of Finance of Russia No. 03-04-06/14970, 04/29/2013).

Payments to the manager, his deputies, and chief accountants are subject to insurance premiums in the amount of more than 3 times or 6 times (for the territory of the Far North) the average monthly salary (Federal Law No. 212, July 24, 2009).

What about us?

In Russia, “parachute” practice was formed in very unstable economic conditions. Only in August 2009, amendments to the law “On Joint Stock Companies” were introduced by the Federal Service for Financial Markets. As a result, compensation began to be allowed for general directors and members of the board of directors with whom their employment relationships were terminated early. It is clear that today it is too early to talk about ideal legislation in this regard. This is why there are still a number of problematic issues that organizations that decide to issue golden parachutes to top managers have to face.

Based on Russian legislation, we note that currently the “golden parachute” is a condition for material compensation in the event of termination of an employment relationship, which is prescribed in the employment contract or drawn up in the form of an additional agreement between the employee and the employer. In this case, compensation is paid in the following cases:

— dismissal by agreement of the parties who signed the employment agreement (Article 78 of the Labor Code of the Russian Federation);

— dismissal due to staff reduction (Article 81, clause 2 of the Labor Code of the Russian Federation);

— liquidation of the company (Article 81, paragraph 1);

— dismissal of an employee at his own request (Article 80);

— change of owner of the company (also applies to the chief accountant, manager and persons replacing him; Article 81, paragraph 4).

In reality, the official registration of so-called compensation in Russia is not very common. This mainly happens when foreign employees or domestic specialists of the highest class with experience working abroad are dismissed. At the same time, a standard Russian problem is the difficulty in providing material compensation in connection with the calculation of wages under the so-called gray schemes.

How much is the “golden parachute” paid?

After amendments were made to the Federal Law “On Joint Stock Companies” in 2009, Russian legislation began to allow the payment of compensation to enterprise management in the event of early termination of an employment contract. Since then, disputes about the size of the “parachute” have increasingly been heard in the courts, and therefore it was decided to limit the amount of such compensation at the legislative level, which was done in 2014.

The specific amount of severance pay is established by the provisions of the employment contract, but the amount of compensation cannot be less than 3 times the average monthly salary of a manager (see Article 279 of the Labor Code of the Russian Federation). Based on the norms of Federal Law No. 56 of April 2, 2014, the amount of severance pay for municipal and state employees was limited to 3 times the average monthly salary in order to avoid the issuance of unreasonable seven-figure sums

If we are not talking about dismissed members of the management team of a municipal or state institution, the size of the “parachute” is allowed to be limited in court (see Resolution of the Plenum of the Armed Forces of the Russian Federation dated June 2, 2015 No. 21).

It is worth keeping in mind that the total amount of the “golden parachute”, limited to three times the average monthly earnings, does not include the payments listed below:

average monthly earnings saved for the period of subsequent employment;
salary for the last month of work before dismissal;
compensation for unused annual leave;
compensation for expenses incurred while on a business trip;
compensation for the costs of moving to work in another region.

Example "Golden Parachute"

The average monthly salary of the general director of OJSC “LudiVlast” is 200 thousand rubles

.
The general director was fired by agreement of the parties and on the last day of work received a total of 990 thousand rubles
, of which:

the “golden parachute” amounted to 600 thousand rubles
(3 times the average monthly salary);
390 thousand rubles
– salary for the last month of work, compensation for unused vacation and reimbursement of expenses incurred while on a business trip.

What is it for?

The compensation measure in question is introduced mainly to satisfy the dissatisfaction of the dismissed top manager. In addition, it is believed that more than substantial incentive payments will prevent fraud within the company, such as the withdrawal of assets. Another important point: the “parachute” causes negative consequences for the party that takes over the legal entity and softens the blow to dismissed employees.

In Western countries, it is quite common practice to include a clause on compensation in the event of early termination of employment. It is noteworthy that American and European employers provide severance pay not only to the company's top management, but also to middle management.

Answers to common questions about what a golden parachute is when leaving a job

Question #1:

The director of the non-budgetary fund resigned of his own free will. The employment contract contains a clause regarding the need to pay a “golden parachute” in the event of dismissal of management personnel. Should the fund pay such compensation?

Answer:

No, when leaving at your own request, a “golden parachute” is not paid as severance pay, even if there is a corresponding clause in the employment contract.

Question #2:

Can the unfavorable position of a company whose director is expected to receive a golden parachute upon dismissal serve as a basis for refusing such severance pay?

Answer:

Yes maybe. This is due to the fact that directors, their deputies and chief accountants are hired by the company for the purpose of conducting successful profitable activities. If the company goes through difficult times when a manager is fired, it is his fault.