What part of the salary should the company pay employees for forced downtime?

At a time when your company is forced to stop working and declare downtime, it is important to know how to properly formalize labor relations and pay your employees so that you don’t have any problems in the future.

Today we will talk about the concept of “downtime” and what an enterprise should do with its employees in such conditions.

Read also: How To Properly Transfer Your Employees To Remote Working?

What is downtime in a company?

The Labor Law explains the downtime as forced suspension of work due to force majeure circumstances. That is, the downtime in an enterprise is caused precisely by the fact that there are neither technical, nor organizational conditions for working, or by force majeure circumstances.

For example, it can be power outages, late delivery of goods by the counterparty, an accident at the enterprise, faulty equipment and the like. Under current conditions, the cause of downtime in the enterprise may be the introduction of quarantine.

It is important to correctly determine the amount and process of payment for downtime, because it depends on the cause of work stoppage.

You may also like: More About The Force Majeure Certificate Issued By The Ukrainian Chamber Of Commerce And Industry

What is the reason to specify for paid downtime in the enterprise?

Downtime shall be paid when it is not the employee’s fault. Article 113 of the Labour Code clarifies that downtime for the quarantine period occurs with no employee’s fault and therefore it shall be paid at the rate of two thirds of the employee’s salary.

A joint letter of the Ministry of Labor and the Ministry of Social Policy of Ukraine specifies the following algorithm of actions:

  1. An act specifying the reason for the work stoppage shall be drawn up;
  2. A company order about downtime shall be issued.

Read also: How To Financially Support A Business During Quarantine?

How to determine the amount of payment for downtime during quarantine?

Since quarantine is a force majeure event and is not considered a production situation in which the average wage is maintained, it shall be paid at least 60% of the employee’s fixed wage.

If a collective labor agreement stipulates a higher rate of payment for downtime, the payment shall be calculated according to the amount specified in this agreement.

Example:

The monthly wage of a full-time (8 hours) worker is UAH 50,000. Downtime lasts exactly one month. Thus, the employee must be paid two thirds of his/her salary for the period of downtime - UAH 33,333.

Formula:

  • 50,000 х 2: 3

If downtime lasts a couple of hours instead of the whole day, then the payment calculation starts with the payment for working hours (which the employee has worked full time), and then the hours of downtime shall be counted.

Example:

The employee’s wage per month is the same UAH 50,000. Downtime lasts 10 days (which is half of the working days of the whole month). The amount to be paid to an employee will be: 1) for the days he/she has worked full time - UAH 25,000, 2) for the days of downtime - UAH 16,666. (Total - UAH 41,666).

Formula:

  • Full days: 50000: 20 х 10;
  • Downtime days - ((50 000 х 2: 3): 20 х 10).

Please note!  During today’s quarantine, taxes on wages during downtime must be paid in the general order. That is, you will have to pay the single social tax, the personal income tax and the military fee.

The only thing employers are exempt from in this situation is immediate penalties. The total percentage of payroll tax during downtime will be 22% (single social tax) + 18% (personal income tax) + 1.5% (military fee) = 41.5%.

If you have any questions about the calculation of employees’ wages during the company downtime, don’t hesitate to contact us. We will help you with all calculations and legal formalities.

Publication date: 16/04/2020

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