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. Last Updated: 07/27/2016

New Labor Code Goes Into Force

Employers can now hire and fire workers at will, employees can no longer be told to work more than 40 hours a week without extra compensation and only one trade union can represent a single company.

Those are some of the rules outlined in the new Labor Code that came into force Friday, replacing a 30-year-old Soviet-era document that never envisioned Russian companies operating in a free-market economy.

Deputy Prime Minister Valentina Matviyenko praised the long-disputed code Friday as legislation that gets rid of many "senseless bureaucratic barriers" and will make relations between employers and workers "civilized."

The code was five years in the making and finally approved, despite vocal Communist opposition, by the State Duma last year. The final version was a compromise hammered out by the Kremlin, Duma, companies and labor unions.

Parts of the code, such as the fixing of the minimum wage at subsistence level, currently about 1,400 rubles a month, are to be adopted in stages.

Effective as of Friday, however, is the new work week of 40 hours. Employees who work overtime must agree in writing to do so, and their bosses must provide overtime pay that increases the longer the employee works. Banned is forced labor, which includes the late or partial payment of salaries.

Opponents of the Labor Code had particularly decried the part that gave companies the right to fire workers, saying workers needed some kind of safety net and unemployment rates could grow.

However, Oleg Yeremeyev, general director of the coordinating council of the Employer's Union and vice president of the Union of Industrialists and Entrepreneurs, said large-scale sackings are probably not on the cards.

"The only reason for any mass firings will be if an enterprise is unprofitable, in which case the firings will be caused by a bankruptcy," Yeremeyev said in a telephone interview.

As for wage arrears, Yeremeyev said the problem mainly concerns the state, which, taking into account state-owned joint-stock companies, employs about 50 percent of the nation's workforce.

Arrears could be cleared without raising taxes, if the government continues to have budget surpluses, as it has over the last two years, he said.

The Labor Code provides fines for employers who do not pay on time, and this should serve as an incentive to pay promptly, he added.

All wages are to be brought up to subsistence level in stages over the next five to seven years. The timeframe is needed because an abrupt increase in the wages of all state employees would be difficult for the government to bear. State Duma Deputy Anatoly Lukyanov, an outspoken critic of the code, has put the cost at more than 2 trillion rubles.

Dmitry Kuprov, an aide to State Duma deputy and labor leader Andrei Isayev, said he does not expect large changes in the structure of unions as a result of the legislation.

The code states that new contracts between workers and an employer could be made with one union only, rather than with several unions as was the case until Friday, Kuprov said in a telephone interview. The code provides for the union to be chosen by a majority vote of the workers. Instead, the union should become more responsive to workers, Kuprov said.