Salary indexation. Salary Indexation Calculation Example

indexation, salary, consumer price index This is an official explanation presented in .

What did we ask the Ministry of Social Policy? “Is it possible to get rid of the need for indexation of salaries in such cases:

1) if you increase the official salaries of employees once every 3 months, while the amount of increase in salaries covers the amount of possible indexation;

2) if the increase in official salaries is carried out before the onset of the right to indexation, while the amount of increase in official salary will be, for example, 1 UAH.? ”

AT letter of the Ministry of Social Policy of 04.29.2016, No. 234/10 / 136-16officials did not give direct answers  to the questions posed, but only duplicated the norms of the well-known to all   Clause 5 of Order No. 1078 *. However, as alternative option  instead of indexing suggestedtake advantage of the mechanism increase income  workers leading way  taking into account forecast inflation rate. In other words, indicated the possibility of replacement  indexation on the "outstripping" increase in income. What is this mechanism? Should the employer use it? We figure it out for ourselves.

The “ahead-of-forecast” path: is it necessary?

The main regulatory guide here is   Abs. 8 - 10 p. 5 of Order No. 1078. An example of calculating the indexation amounts for the “leading” option is given in annex 5   to that Order.

For illustrative purposes, we have provided a parsimonious regulatory requirement.   p. 5   Order No. 1078for the "leading" way:

So, while we are dealing with another “white spot” in the normative.

In addition to the "indexing" option, alsoin June 2016 an option is possible with the following advance of income, eg, on the  the amount 70 UAH  Then the total income for such a month will be 2070 UAH. (2000 + 70). Increase in 70 UAH. accrued to the employee on a monthly basis and until the next indexation threshold is exceeded simultaneously with exceeding the calculated indexation amount. Suppose, in July 2016, the CPI began calculating on an accrual basis. With a ratio of 4.9% and PMTL at 1450 UAH. the amount of indexation will already be equal to 71.05 UAH. (1450 UAH. X 4.9%). In the month in which we apply such a coefficient (a month after exceeding), we already need to return to indexing by 71.05 UAH again. or again to raise wages “ahead of schedule”. Let us down totalby the “anticipatory” method.

Findings:

- The “leading” way to increase income - right (not a duty) of the employer.

Have to monthly control amounts  possible indexing.

In conditions of deflation or low inflation, the employer carries more costs, because the amount of “anticipatory” increase must be paid from the 1st month and pay it constantly.

As we see, neither the joy nor the good of such a "game of being ahead of the curve" is expected of the employer. It is better for the employer to use the "usual" rules of the game to increase the salary (see below).

Avoid by increasing salaries

Norms   Abs. 1 - 7 p. 5 of Order No. 1078  set for indexing in the usual way. An example of calculating indexation amounts for general cases is given in annex 4   to this Order. To avoid indexingThere are two simple ways to increase salaries:

1) increase when the right to indexation occurs;

2) increase in 1 month by 1 hryvnia (before the right to index).

Let us analyze the attractiveness of each of them.

1st method - increase the salary when the right to indexation occurs. As we already know, the right to indexation depends on the monthly inflation indices published by the State Statistics Service and on the result of the multiplication of these indices on an accrual basis. And we begin to multiply from the month following the month of the last increase in the official salary. It is the increase in salary, and not any other component of the salary, that matters. In the month of increasing salaries, the right to indexation is being reviewed.

In which the shortest time  can this happen? When to increase salaries? We answer - at least 1 time in 3 months.

In conditions high inflation  first of all right  for indexing can  only arise on the 3rd month after salary increase  (see tab. 2). Norms speak about it   Order No. 1078.

It all depends on which month the index will exceed 103% (a new indexation threshold from 01/01/2016). Of course, if inflation is small or even deflation, then you can raise salaries once every six months. This happened in the first half of 2016 for those employees whose last salary was last increased between November 2015 and March 2016. The right to current indexation after such an increase came only in June 2016.

Table 2. Right to Index

Months after salary increase		Actions
	Increased salary  (March 2016)	Do not index
(April 2016)	The inflation index for this month will participate in the calculations. But it will be known only next month (published until the 10th day)	Do not index
	Do not index
(June 2016)	From the 1st day of the month following the month of publication of the inflation index for the 1st month, there is a right to indexation by the amount of growth 3,5 %	Indexing

As we see from the table. 2 if latest salary increaseit was   in March 2016then in June 2016(after 2 months on the 3rd) arises   indexing rightusing coefficient 3,5 % .

If you decide to increase your salaries in June 2016 to get rid of indexing,important to remember:   upon the right of indexation  the main rule here is (   Abs. 4 p. 5 of Order No. 1078) -  increase  official salary should exceed  the amount possible indexing.

Thus, based on the norm   Abs. 4 p. 5 of Order No. 1078  subject to the above conditions, we “Zero” indexing in this monthreplacing it with an increase in salary, affecting other permanent components of the salary.

Example 2 The employee's salary in May 2016 amounted to UAH 2423.64, including the indexation amount - UAH 423.64, determined in March 2016 (the last salary increase of UAH 100 was from UAH 1900 to 2000). In March 2016, indexation was calculated as the difference (from the previous base January 2015): UAH 523.64. (1378 UAH. X 38%) - 100 UAH. \u003d 423.64 UAH. The employee has no allowances and surcharges; monthly bonuses are not provided.

In June 2016, the employee develops the total possible indexation amount - UAH 474.39, consisting of:

The amount of indexation (current) from the base March 2016 in the amount of 50.75 UAH. (1450 UAH. X 3.5%);

The amount of indexation (as a difference) in the amount of 423.64 UAH. (paid since March 2016).

To do not indexsalaries   in June 2016based on the conditions of our example salary in June 2016  should increase not less than 475 UAH.  (amount in excess of proper indexation for June 2016). The employee's salary for June 2016 will consist of a salary of $ 2475. New basic  month for the employee will be june 2016.

If the salary increase is less than the required indexation, then the total amount of possible indexation will decrease by the “missing” value. For example, the owner decided to increase the salary of an employee in June 2016 by 200 UAH. Then the same amount will decrease the amount of indexation, relying on accrual in June-2016. At the same time, June 2016 will also become the new base month. However, under such conditions, in June-2016, the employee's salary in the amount of UAH 2,474.39. will consist of:

Salary - 2200 UAH. (2000 + 200);

Indexation (defined as the difference) - 274.39 UAH. (474.39 - 200).

If a decision is made and in the next month (July 2016) increase salaries by 200 UAH, then for a fully worked month the employee will receive the same salary in the amount of 2474.39 UAH, but consisting of:

Salary - 2400 UAH. (2200 + 200);

Indexation (defined as the difference) - 74.39 UAH. (274.39 - 200).

2nd method - increase the salary before the right to indexation: one hryvnia will work. An increase in official salaries will also help to get rid of indexation of salaries with this method, but such a procedure should be done more often - before the right to indexation occurs.

To do this, it will be necessary to make changes to the staff list more often.

If the employee at all no indexing  (the right to the current has not yet come and there is no retained fixed (as a difference)), then an increase in salary at  such month (before the right came) eliminates the need for indexation of salaries. Please note:   no limitsin the case of salary increases in this case   not installed. Hence, the amount   salary increasecan make up for example 1 UAH

As you can see, this method will allow the employer to significantly save money, because the salary should not be increased by an amount in excess of the possible indexation, but only by “penny” - 1 UAH. and wherein completely avoid indexing.

We demonstrate this on the initial conditions of our example 2.

Example 3   We take as a basis the conditions of our example 2 and continue: in June 2016, the employer increased the employee's salary from 2000 to 2475 UAH. and avoided indexing this month. June 2016 was the base month for the employee.

To avoid further indexing amid high inflationenough after 1 month   raise salaries by 1 UAH.  and repeat it regularly after 1 month.

At the next increase in salary by 1 UAH. (from 2475 to 2476 UAH.) in August 2016 (will be the base), then by 1 UAH. (from 2476 to 2477 UAH.) in October 2016 (the next basic), etc., by legal means, we completely “move away” from salary indexation.

As you can see, for this economical option we will need to increase salaries (rates) in any of the two intermediate months in which indexation \u003d 0. That is, without waiting for the month in which the right to indexation comes, increase salaries by 1 UAH. This will bring its economic benefits to the employer: you won’t have to calculate and compare, and there’s no “trouble” with the accrual of indexation.

Of course, we believe that this option is more attractive. In addition, it is simple and completely legal. In oral explanations, the specialists of the Ministry of Social Policy confirm this, but of course there will be no official explanations.

For clarity, we have provided a convenient comparative analysis of the salary burden for the employer according to the options with accrual of indexation or “avoiding” it by legal means.

Example 4   The base month of the employee was September 2015 (the last time salaries were increased, a fixed amount of indexation to the employee was not established). Salary consists only of salary (bonuses, bonuses and bonuses are not paid). How much do you need to increase your salary so as not to index it?

Table 3. Salary load in the indexation of wages and with the "departure" from it

	Without salary increase, UAH		We increase the salary, UAH.
			according to option 1: "Upon the occurrence of the right to index"	according to option 2: “Before the onset of law, a month later"
		indexing
September 2015
October 2015
November 2015
December 2015
January 2016
February 2016			1520 (1500 + 20 2)
April 2016
			1586 (1520 + 66 3)
Total	15173,87 (15000 + 173,87)
1   The right to indexation did not come. 2   We increase by an amount equal to or greater than the due indexation this month. February 2016 in this case becomes basic. 3 In June-2016, for the base February 2016, the right to indexation sets in (CPI growth of 4.5%, indexation amount of UAH 65.25). Therefore, this month, in order to avoid indexation, we also increase the salary by an amount exceeding the possible indexation, for example, by 66 UAH. June 2016 becomes the base month. 4   We increase salaries in 1 month each time by 1 UAH. It works as follows: the base month is September 2015, then after 1 month (in November-2015) we increase the salary by 1 UAH. (this month will be the base month), then again in January 2016 (the next base month), then in March 2016 (the next base month) and in May 2016 (the last base month). 5   Since we are witnessing a decrease in the CPI (in February-2016 - 99.6%), in March-2016 you can not increase the salary. Indeed, even in May 2016, for the base January-2016, the right to indexation did not come. But how the CPI will behave further is difficult to predict. Already in April 2016, the inflation index amounted to 103.5%, it is possible that it will go up further. Therefore, cautious employers can continue to increase wages by 1 UAH. every 2 months.

After analyzing the table, there is no doubt - by correctly increasing salaries, you can not only get away from the headache with accrual of indexation, but also reduce salary costs.

I think it is no secret to anyone that the prices of goods and services in Ukraine and throughout the rest of the world are constantly changing. Such changes are caused by many different factors, so they occur continuously. Product prices may rise and fall. When goods and services become cheaper, this, of course, is very good, because for the salary that a person receives on a monthly basis, he can buy more. When prices rise (in an unstable economy or crisis, such an increase can be very significant), it is very, very bad, because the purchasing power of an ordinary citizen decreases and he needs to reduce his expenses.

To preserve the purchasing power of citizens in the face of rising prices for goods and services, there is an indexation of cash income. The essence is to increase the nominal income of citizens, depending on the increase in the consumer price index or inflation index. The consumer price index is the main indicator on which the indexation mechanism is based. We, as accountants, are primarily interested in the indexation of wages, which we will talk about in this article.

The article will consist of two parts. The first part is theoretical, in which the main regulatory acts governing indexation issues and the main points of this issue, which are determined by the regulatory framework, will be presented. The second part is practical, it will highlight the methodology for indexing wages, and the calculation of indexation coefficients will be considered and laid out in very detail. A couple of useful links will also be provided that greatly facilitate wage indexing.

The main regulatory documents defining the concept of cash income indexation and the mechanism for its implementation are:

The Law of Ukraine "On the Indexation of Cash Incomes of the Population" N 1282-XII, 07/03/1991 - defines the concept, objects, grounds, sources of financing indexation. This law is very general, but it is the main (in its legal force) normative document on this topic.

“The procedure for indexing cash incomes of the population” approved by the Cabinet of Ministers of July 17, 2003 N 1078 - defines the mechanism for indexing.

Of course, there are also numerous letters from the Ministry of Labor and Social Policy of Ukraine in which it gives explanations regarding the application of certain provisions of Law No. 1282 and Order No. 1078, and we will talk about them later.

Who should index wages?

Clause 1 of the Procedure determines the circle of business entities that must conduct indexation. These include enterprises, institutions and organizations, regardless of ownership and management, as well as individuals who use the labor of employees.
  So, wage indexation should be carried out by all employers without exception, regardless of the form of ownership and management, whether it is an enterprise - a legal entity or a private entrepreneur - an individual.

When, in what cases should indexing be carried out?

A.1.1. The procedure shows that indexation should be carried out in the case when the value of the consumer price index has exceeded the indexation threshold, which is set at 101%.
  Indexing is carried out from the first day of the month following the month in which the consumer price index is officially published. It is calculated by the State Statistics Committee and no later than the 10th day of the month following the reporting period is published in periodicals.

So, if in August it is exceeded, then the salary for October is subject to indexation according to the index for August. Because the consumer price index for August is published before September 10.

Which revenues are indexed and which are not, and from which sources

According to paragraph 2 of the Procedure and Article 2 of the Law   indexation subject:
  - Pensions;

- Scholarships;

- Payment of labor (cash security);

- Cash support for military personnel;

- Amounts of payments made in accordance with the legislation on compulsory state social insurance;

- Amounts of compensation for harm caused to the employee by injury or other damage to health, as well as amounts paid to persons entitled to compensation in case of loss of the breadwinner.

Not subject to indexing:

- Income from the rental of property, from shares and other securities, peasant (farmer) and personal subsidiary plots, entrepreneurial activities, which is a source of income for citizens from property;

- Payment of the first five days of temporary disability at the expense of the employer, temporary disability benefits such as those taken into account when calculating average earnings;

- One-time payment of unemployment assistance for organizing unemployed business activities, one-time assistance in the event of permanent loss of professional ability to work or death of the victim as a result of an industrial accident or occupational disease;

Using such tables is very simple. It is only necessary to determine the base month. We look at the cell with the base month and see the index coefficient is ready there.

Using the indexing calculator is even easier than using tables. One has only to enter the base month and salary. After clicking on the magic button, the calculator will calculate all the necessary coefficients for you.

Findings . Of course, you can not bother or even understand the methodology for calculating indexation coefficients, which were given in the previous sections of the article. You can just use ready-made tables and calculators. Usually everyone does. However, in my opinion, it is necessary to know how the coefficients are calculated.

3 (60%) 2 votes

On the basis of Article 134 of the Labor Code of the Russian Federation, all organizations, without exception, should conduct indexation of wages.

Its binding is beyond doubt. Although unscrupulous managers ignore this legislative norm and for several years in a row do not increase people's wages.

Conflicting indexing

Indexation of salaries is imputed to companies by law, but so far there is no single regulation for its implementation.

The ambiguity of the issue gives rise to many disputes leading to conflict situations between the employee and the employer, the employer and regulatory authorities.

Due to the lack of a single regulation, the indexation mechanism is not clear:

• What exactly to index: a constant component of the salary or a variable part too?
• What should be the frequency of indexing?
• What indicators to take to calculate the indexation coefficient?
• How to legalize such an increase in earnings?

Only one thing is clear that indexation must be carried out necessarily for all employees of the organization, without exception.

Differences between salary increase and salary indexation

Many employers mistakenly believe that if they annually increase salaries at the enterprise, then there is no need to index wages.

The fact is that increasing salaries and indexing earnings are two different things. After all, the salary can be increased by one or all employees. Someone will receive an increase of 10% of the salary, and someone will receive a 50% increase. With an increase in salary, an order is issued, a new staffing table is approved, additional agreements to labor contracts are signed. The purpose of the salary increase is to interest a particular employee in further cooperation.

The purpose of salary indexation is to bring workers' earnings in line with current consumer prices and, at the very least, to fix their quality of life at the same level.

The indexation of wages, in contrast to the increase in salaries, is carried out simultaneously by all employees by the same coefficient.

Due to the lack of a unified procedure, we recommend that all organizations adopt an internal document regulating the procedure for indexing salaries to comply with labor laws. This will protect the company from troubles in the event of verification of compliance with labor law and allow performers to have a clear idea of \u200b\u200bits procedure.

Items that the local indexing regulation should contain:

1. Frequency of salary indexing: monthly, quarterly, every six months, annually. Once a month or quarterly, indexing is undesirable, since it is a very time-consuming process, especially in enterprises with a large staff. It is important that indexation is carried out at least once a year, for example, annually from January 1.

1. Indexing level. Due to the uncertainty of the question, it is permissible to attach this coefficient:

• to the consumer qualification index a specific period in the region where the company is located or in Russia as a whole;
• officially recognized federal or regional inflation rate;
• to increase for the able-bodied population the living wage of the all-Russian or regional;
• to the growth of the minimum wage in the whole country or region.

If none of these indicators suits, then there is no indication anywhere that it is impossible to establish a specific coefficient by which wages will be regularly indexed.

It is important that a document governing the indexation of earnings is necessarily developed and approved and its requirements are met in an unquestioning manner.

What components of earnings should be indexed

To conduct mandatory indexation of wages, it is enough to index its constant part - salary, tariff rate, piecework rate. In most companies, all other parts of earnings - allowances, bonuses, as a rule, are tied in percentage terms to the constant component. Therefore, their increase naturally pulls along with an increase in everything else.

But it must be taken into account that if bonuses and bonuses in an enterprise are fixed in labor, collective agreements or in the Regulation on Remuneration of Labor in a specific figure, then their indexation in this case will not entail the indexation of bonuses and bonuses. And then the indexation of earnings will be partial. Therefore, one cannot assume that due to rising consumer prices, workers did not lose wages.

Therefore, in organizations in which bonus payments and bonuses are paid in fixed amounts, it is advisable to include them in the local regulatory document on earnings indexation for full indexation.

The dependence of the amount of wages on the selected indexation coefficient

When choosing a coefficient on the basis of which the organization will periodically adjust the salaries of employees, it is necessary to first calculate what workers will be able to receive in the end.

Example # 1. Options for calculating salary indexation

Consider how the employee’s earnings will change in 2016 at Alpha LLC compared with 2015 if he fulfills all the planned targets and does not violate the work schedule. For clarity, the calculation results are summarized in the table below.

Ivanov in 2015 set a salary of 30,000 rubles. Every month he receives a bonus of 15% for the implementation of the plan and 5% for the absence of violations of the work schedule.

We calculate the size of the salary for different coefficients of salary indexation (options 1-3).

Salary recalculation takes place annually on January 1, he is indexed salary at the level: (click to expand)

• Option 1: minimum wage set for the new year compared to last year.
• Option 2: at the officially set inflation level for next year
• Option 3: by the index of earnings index -1.05 established by the organization.

Ivanov's earnings in 2015 will amount to 36,000 rubles, taking into account the allowances.

Calculation according to Option No. 1

The minimum wage in the Russian Federation in 2015 amounted to 5965 rubles. For 2016, it is set at 6,204 rubles.

Consequently, the coefficient of increase in earnings depending on the growth of the minimum wage is:

6204 / 5965 = 1,04

Ivanov's earnings in 2016 under option 1 will grow by 4%:

36000 x 1.04 \u003d 37440 rubles

Calculation according to Option No. 2

For 2016, the authorities laid down the inflation rate of 6.4%. Earnings will grow by this percentage:

36000 x 1.064 \u003d 38304 rubles

Calculation according to Option No. 3

In 2016, earnings according to the 3rd option will be:

36000 x 1.05 \u003d 37800 rubles

	Earnings in 2015, in rubles		The amount of real growth in the increase in wages, in rubles
Option 1	36000	37440	1440
Option 2	36000	38304	2834
Option 3	36000	37800	1800

The example clearly shows that the level of indexation of wages directly depends on the chosen indexation index.

The dependence of the amount of wages on the selected indexation coefficient and the adopted method of material incentives for employees

Employees may be encouraged either as a percentage of salary, tariff rate or piecework rate, or be a constant value.

Example # 2. Calculation of salary indexation with premium and allowances

Consider the situation when Ivanov is not paid monthly allowances as a percentage of salary, but a fixed premium of 6,000 rubles is paid for the same indicators. And we assume that only salaries are indexed at the enterprise. All other data will be left unchanged.

The result of the event is shown in the table below. (click to expand)

Option	Earnings in 2016, in rubles	The amount of real growth in wage increases, in rubles
Option 1	37200	1200
Option 2	37920	1920
Option 3	37500	1500

From this example, it is obvious that with a similar method of bonus and indexation of only salaries, workers seriously lose in earnings.

The choice of indexation coefficient as a way of protecting the rights of workers

We examined only 2 examples. In fact, there are many options. The conclusion suggests itself. The level of indexation depends on the specific parameters prescribed in the Regulation on Remuneration and Material Incentives, and in the normative act on indexation of earnings.

The team of any enterprise has the opportunity to influence the level of indexation through the wage system and the index of its indexing.

The employer can direct his duty in the direction necessary for himself, increasing the interest of employees and reducing staff turnover.