FIFTEENTH ITEM ON THE AGENDA
Report of the Director-General
Fifth Supplementary Report:
Report of the Committee set up to examine the representation
alleging non-observance by the Russian Federation
of the Protection of Wages Convention, 1949 (No. 95),
made under article 24 of the ILO Constitution
by Education International and the Education
and Science Employees' Union of Russia
1. By letters dated 6 August, 17 September, 6 November 1996 and 6 March 1997, Education International (EI) and the Education and Science Employees' Union of Russia (ESEUR), referring to article 24 of the ILO Constitution, addressed a representation to the Office alleging non-observance by the Russian Federation of the Protection of Wages Convention, 1949 (No. 95).
2. The representation concerns a Convention to which the Russian Federation is a party and which is in force for it.(1)
3. The provisions of the Constitution of the International Labour Organization concerning the submission of representations are as follows:
[Representations concerning the application of a Convention]
In the event of any representation being made to the International Labour Office by an industrial association of employers or of workers that any of the Members has failed to secure in any respect the effective observance within its jurisdiction of any Convention to which it is a party, the Governing Body may communicate this representation to the government against which it is made, and may invite that government to make such statement on the subject as it may think fit.
[Possibility of publishing the representation]
If no statement is received within a reasonable time from the government in question, or if the statement when received is not deemed to be satisfactory by the Governing Body, the latter shall have the right to publish the representation and the statement, if any, made in reply to it.
4. The procedure to be followed in the case of representations is governed by the revised Standing Orders adopted by the Governing Body at its 212th Session in March 1980.(2)
5. In accordance with articles 1 and 2, paragraph 1, of the Standing Orders, the Director-General communicated the representation to the Government of the Russian Federation and brought it before the Officers of the Governing Body.
6. At its 268th Session (March 1997) and on the recommendation of its Officers, the Governing Body decided that the representation was receivable.(3) It set up a committee to examine the representation, composed of Ms. Musulin (Government member, Croatia), Chairperson, Ms. France (Employer member) and Mr. Edström (Worker member).
7. In accordance with article 4, paragraph 1, of the Standing Orders, the Committee invited the Government to send its observations on the representation before 31 May 1997.
8. In a letter received on 28 May 1997 the Government communicated its observations on the representation. The Committee met in Geneva on 11 November 1997 and adopted its report.
Examination of the representation
9. In their communication, Education International (EI) and the Education and Science Employees' Union of Russia (ESEUR) allege the non-payment of wages and the delay in payment of wages for employees in particular in the education sector.
10. The complainant organizations quote the official statistics on delays and non-payment of wages in education provided by the Russian Ministry of Labour as well as the figures compiled by the ESEUR: according to the official statistics, as at 8 April 1996, the total amount of non-payment of wages in the education sector stood at 1,578 thousand million roubles, of which 1,530 thousand million roubles was due to the lack of direct financing from public budgets of all levels; the same official statistics also gave the figure of 20,300 as the number of enterprises and organizations experiencing non-payment of wages in the education sector, among the total of 83,500 such enterprises and organizations in all sectors; the same source gives the total amount of the non-payment of wages in all sectors together of 21,800 thousand million roubles. According to the information compiled by ESEUR, the total amount of non-payment of wages to workers in education as at 17 May 1996 stood at 1,900 thousand million roubles.
11. EI and the ESEUR also refer to a letter dated 27 December 1995 from the Deputy Minister of Labour to the President of the Independent Russian Trade Unions, which they consider a partial recognition of guilt but an attempt to pass major responsibility for non-payments and delays on to the authorities of regional and local levels. According to the said letter, the non-payment of wages out of the federal budget as at 20 December 1995 stood at 952.6 thousand million roubles, of which 622.3 thousand million roubles was outstanding in the education sector.
12. The complainant organizations further indicate in their letter dated 6 March 1997 that there has been no improvement in the situation concerning the non-payment of wages, which resulted in an All-Russia Strike on 13 to 17 January 1997, and then a further action by ESEUR from 17 to 25 February. They state that, during the latter week, 9,566 educational establishments took some strike actions, with the estimated participation of 395,000 ESEUR members, seeking the payment of wages on time and in full. According to the complainant, this last action elicited some promises from both federal and local authorities but as yet no concrete results anywhere.
13. The complainant organizations add that, in some rural areas, local authorities have made arrangements with shops to supply teachers and other staff with food up to a certain value, on the understanding that it will be paid for once salaries come through. They consider that this practice may be getting close to the payment of wages in the form of allowances in kind or in vouchers in lieu of money.
B. The Government's observations
14. In its communication, the Government states that the issue of wage arrears emerged in the first years of reform of the Russian Federation's economy; whereas the arrears were relatively low before the autumn of 1993, the situation started to deteriorate in the second half of 1993. By the middle of 1996 the volume of arrears in industry, agriculture, construction, transport and the social sector (which includes education and health, among others) exceeded the monthly pay bill of these sectors. Estimates suggest that wage arrears were approximately 140 per cent of the monthly pay bill in manufacturing, and about 120 per cent in the public budget sector by the end of 1996.
15. According to the Government, in the course of 1996 wage arrears in the social sector increased by 6.2 billion roubles(4) or by 360 per cent; more specifically the increase was by 310 per cent in education and health services, by 590 per cent in culture and the arts. The number of establishments failing to pay wages increased by 180 per cent.
Principal causes of the delayed payment of wages
16. As regards principal causes of the crisis, the Government considers that the non-payment of wages is a consequence of a sharp deterioration in the financial situation experienced by a majority of enterprises and branches of the national economy. By the end of 1996 the number of industrial enterprises in deficit reached the level of 48 per cent (27 per cent a year earlier), 59 percent in transport (36 per cent in December 1995) and 37 per cent in the building sector (20 per cent in December 1995). The profits generated by industry, construction and transport over ten months of 1996 were decreased by 54 per cent as compared with the corresponding period in the previous years.
17. The Government's view is that the continuing decline in output and the sharp decrease in productivity adversely affected not only the solvency of goods manufacturers but also brought about a considerable reduction in the tax revenue of regular and extra-budgetary programmes including social services; this, in turn, complicated the prompt mobilization of financial resources to pay the wages of the social sector workers, pensions, allowances, scholarships and other social payments. Budget shortfalls for a number of sectors of manufacturing as well as systematic delays in allocating resources to enterprises to fill state orders led to an accumulation of arrears not only at those enterprises but also provoked greater debt in enterprises with which they conduct business. The chronic failure by consumers to pay for delivered goods and services, a progressive growth in mutual debt between enterprises, and acute lack of working capital to buy raw materials, supplies, spare parts and also a number of other factors independent of labour relations considerably exacerbated the problems related to the prompt payment of wages.
18. The Government adds, however, that the causes of increased wage arrears also include the diversion of funds earmarked for the pay bill to interest-free loans to replenish working capital, to the acquisition of state bonds, the yield and tax advantages of which largely exceed production profitability, and the placing of funds in accounts in commercial banks with a view to earning interest. The conclusions drawn by the labour inspectorate of the Russian Federation, the Public Prosecutor's Office, and the Tax Inspectorate-related bodies reveal massive disrespect for the principles of civil law and outright abuse, even criminal, on the part of those involved in financial transactions.
Measures to ensure the prompt payment of wages
19. As to the measures to ensure the prompt payment of wages, the Government indicates the following: the President of the Russian Federation issued Decrees Nos. 66 and 209 (dated 19 January and 1 February 1996 respectively) designed to guarantee the prompt payment of wages out of regular budgets at all levels, as well as pensions and social benefits. In March 1996, the Government of the Russian Federation decided (Ordinance No. 329-P of March 1996) to introduce a number of measures to ensure the payment of wage arrears to public sector workers and others. Ad hoc working groups headed by deputy chairmen of the Government of the Russian Federation and the Ministers of Economic Affairs, Finance and Labour examined the proposals made by the constituent parts of the Russian Federation and decided to send most of them additional financial assistance to clear arrears in wages, scholarships and benefits.
20. The Government states that, as a result of the measures taken to remedy the situation, wage arrears in the social sector (financed by public sector budget) decreased by 2 per cent and were 10,009 thousand million roubles by 21 April 1996 as compared with those of 24 March, including the arrears due to the lack of direct financing from the budgets of all levels -- 8,792 thousand million roubles -- and those due to the lack of own funds by enterprises -- 1,282 thousand million roubles. The Government indicates that the volume of arrears in respect of educational establishments fell insignificantly (less than by 1 per cent) and was 5,329 thousand million roubles, while the arrears in respect of science establishments fell by 3.4 per cent and were 1,164 thousand million roubles.
21. The Government further states that, in order to support the budgets of territories and improve the situation enabling payment of wages to the employees of the budget organizations at the territorial level, the Government of the Russian Federation transferred to the constituent parts of the Russian Federation, where the situation was particularly serious, financial aid equal to 1.3 billion roubles in addition to the scheduled funds transferred in March. The financial aid was offered as an advance transfer to 19 constituent parts of the Russian Federation that lacked own resources to clear the wage arrears of the employees of educational establishments. This aid was earmarked in addition to the transfers due to the territories for March this year from the Fund of Financial Aid of the Russian Federation.
22. According to the Government, the issues of clearing the wage arrears were repeatedly dealt with at the sessions of the Russian Tripartite Commission on Regulation of Socio-Labour Relations. In October-November 1996 the Government of the Russian Federation jointly with the Russian Tripartite Commission on Regulation of Socio-Labour Relations took fresh steps to alleviate the situation concerning the wage arrears. The schedule to clear the arrears of the federal budget was approved. An appeal was sent to the executive bodies of the constituent parts of the Russian Federation to take the same actions in respect to the establishments and organization financed from regional budgets as well as an appeal to employers and trade unions to draw up urgent joint plans of action to clear the wage arrears at enterprises of the industrial sector, to control strictly the transfer of funds to the accounts and their distribution.
23. As to the labour inspection and implementation of sanctions, the Government indicates the following: during the period from January to December 1996 the Russian Labour Inspectorate had carried out more than 55,000 inspections to check if the wages were paid on time. As a result of these, 68,500 violations had been established and more than 40,000 prescriptions had been issued to remedy them. The overall wages actually paid to employees following the requirements of the Labour Inspection Services and as a result of other measures amounted to more than 5.3 billion roubles. Almost 7,600 managers of enterprises and establishments were sanctioned by fines constituting an overall amount of 5.5 thousand million roubles for gross violations of the wages legislation, 740 persons got disciplinary sanctions, 35 of whom were dismissed. In respect of the most gross violations according to section 138 of the Criminal Code of the Russian Federation, the matters were laid before the Public Prosecutor's Office to initiate criminal proceedings. The Public Prosecutor's Office initiated more than 200 criminal proceedings.
24. The Government adds that in March 1997 a number of meetings and conferences between representatives of the Government of the Russian Federation, all Russian associations of trade unions and employers took place, as a result of which a number of measures were adopted to clear the wage arrears. At the expense of the federal budget resources, the employees of the budget branches are being paid their wage arrears. The Government of the Russian Federation worked out and adopted a schedule to pay the wage arrears to the employees of educational establishments, one to finance science institutions in 1997 and another to pay the budget wage arrears in 1996. These schedules were agreed upon at a working group meeting of 21 March 1997 held by the Government of the Russian Federation, with the participation of representatives of Russian associations of trade unions and national associations of employers. The clearing of wage arrears with the establishments financed by the federal budget takes place according to the adopted schedules. At the same time the schedule of financing the public sector establishments of federal level as it had been fixed for this March was fulfilled in advance. For this purpose, 337.6 thousand million roubles instead of 120 thousand million roubles were earmarked. The schedule of financing for science institutions envisaged the allocation of funds equal to the overall sum of 3.2 billion roubles in the first half of this year. In March these allocations were supposed to reach 950 thousand million roubles with, in fact, the science institutions at the federal level receiving an additional 18 thousand million roubles.
25. The Government indicates, in addition, that moves to clear the wage arrears were also undertaken in the region's Tripartite Commissions on Regulation of Socio-Labour Relations, and are set up and function in all constituent parts of the Russian Federation to improve procedures of payments and meeting accounts. The activities of these commissions have become more substantial lately. A number of territories have worked out plans and programmes of action to address the problem of the wage arrears. Regular inspections of enterprises and establishments are carried out to check if they comply with the labour legislation. The measures taken to remedy the situation led to the decrease in the wage arrears.
26. The Government concludes by saying that the problem of wage arrears can only be solved once the financial crisis is resolved, first of all the crisis of unpaid accounts, as well as by the stabilization of the economy, the economic recovery and by profound structural adjustments of the national economy. Measures to improve considerably the economic situation are envisaged in the draft Mid-Term Programme for 1997-2000, "Structural Adjustment and Economic Recovery". The draft suggests that since 1997 vigorous efforts have been deployed to reform enterprises radically in order to ensure their restructuring, improvement of management, increase of their efficiency and effectiveness, competitiveness of their production, labour productivity to bring down operating costs, and enhancing the outcome of financial and economic activities.
C. The Committee's conclusions
27. The Committee notes that the situation of non-payment or delay in the payment of wages referred to by EI and the ESEUR in the representation mainly concerns the application of Article 12, paragraph 1, of Convention No. 95, which provides for the regular payment of wages. The Committee notes that the question of the level of remuneration for employees in education in comparison with average wages in the industry does not fall within the scope of the Convention and it therefore cannot examine the point.
28. Article 12 of Convention No. 95 reads as follows:
1. Wages shall be paid regularly. Except where other appropriate arrangements exist which ensure the payment of wages at regular intervals, the intervals for the payment of wages shall be prescribed by national laws or regulations or fixed by collective agreement or arbitration award.
Previous examination of the application of Convention No. 95 by the ILO's supervisory bodies
29. The Committee notes that the application of Convention No. 95, and in particular its Article 12, paragraph 1, by the Russian Federation has been the subject of comments of the Committee of Experts on the Application of Conventions and Recommendations since 1993 and at every session of that Committee since March 1995, following a number of observations from workers' organizations alleging non-payment or delayed payment of wages, in various regions and various sectors. The Committee of Experts has noted that the problem concerned the implementation in practice of the national legislation which gives effect to the provision of the Convention. It has thus been asking the Government to indicate measures taken or envisaged to ensure, among other things, the regular payment of wages, and to include for instance extracts from official reports that show the number of investigations made, infringements observed and penalties imposed. The Committee on the Application of Standards of the 82nd International Labour Conference (June 1995) also discussed the application of this Convention in the Russian Federation. This Conference Committee noted that the non-payment and delayed payment of wages in the Russian Federation were matters of serious concern, while recognizing that legislative framework to deal with the problem existed. It called for enhanced supervision so as to secure prompt payment of wages and urged the Government to furnish information on law enforcement and on the practical steps taken against infringement of the law.
Payment of wages at regular intervals
30. The Committee recalls that, under Article 12, paragraph 1, of the Convention, wages must be paid at regular intervals. A State that ratifies the Convention is required not only to apply it scrupulously to workers whose wages are financed directly from the State's budget, but also to ensure that it be applied by local authorities and private enterprises. The Committee notes that the Russian Federation did not take steps to exclude any categories of persons from its application by virtue of Article 2, paragraph 2, of the Convention.
31. The Committee notes that the Government does not contest the allegation that there exist wage arrears in the country, including the education sector specifically mentioned by EI and the ESEUR. Whether it is called wage arrears, delayed payment of wages or non-payment of wages, the situation falls within the scope of the Convention as a failure to ensure the regular payment of wages provided under Article 12, paragraph 1.
32. As to the dimension of the wage arrears, the Committee notes that the Government does not dispute the statistics quoted by EI and the ESEUR. The Committee also notes that the Government mentions, in its reply, 5,329 thousand million roubles of arrears as at 21 April 1996 in educational establishments. This figure is in fact much larger than the 1,578 thousand million quoted by the complainant organizations from official statistics as the amount of non-payment in the same month. In the absence of any detailed information on the methodology and criteria used in the compilation of these figures, the Committee notes that these statistics give only an indication of magnitude of the wage arrears. It further notes that, according to the Government, the wage arrears in the social sector, which includes education, increased in the course of 1996 by 6,200 thousand million roubles or by 360 per cent. In addition, the Committee notes that wage arrears in the social sector, financed by public sector budget, were 10,009 thousand million roubles by 21 April 1996.
33. Neither the complainant organizations nor the Government refers to the provisions of national legislation giving effect to the Convention. However, from the available information, the Committee notes that the Labour Code of the Russian Federation contains, in its Article 96,(5) provisions on the periodical payment of wages, which appear to meet the requirement of Article 12, paragraph 1, of the Convention. The present allegation therefore concerns the effective enforcement of the relevant national legislation, since the legislative conformity alone is insufficient to constitute satisfactory compliance with the Convention unless the law is effectively enforced in practice.
34. The Committee notes that the Government refers to various measures to ensure the prompt payment of wages, including Presidential Decrees in 1996, the financial aid to the constituent parts of the Russian Federation, labour inspection, tripartite meetings and setting up of schedules to pay the wage arrears. The Committee notes, however, that there is no evidence of substantial improvement in the situation in spite of the above measures taken by the Government. The Committee therefore is bound to conclude that the Government has not secured the effective observance of the relevant provision of the Convention.
35. The Committee notes that the Government considers that the problem of wage arrears can only be solved by the resolution of the financial crisis. While it is difficult to deny the relation between the problem of wage arrears and the general situation of finance and the national economy, it is also obvious that the wage arrears of such a magnitude all over the country and throughout the sectors are adversely affecting the national economy. It seems indispensable to the Committee that the Government make a firm commitment and take all possible measures to put an end to the problem of wage arrears so as to cut the chain of vicious circle -- financial crisis causing wage arrears, resulting in prejudice to the national economy, leading to the reduction of tax revenue, which aggravates the financial crisis.
36. What the Committee notes with special concern is the reference by the Government, among the principal causes of the wage arrears, to the diversion of funds earmarked for the pay bill to other directions such as financial transactions, involving a massive disrespect of the civil law principles and even criminal abuse. If such practices were to be left untouched, all other financial measures to mobilize resources for the prompt payment of wages would have only limited results and just further benefit those who take advantage of the situation.
37. In the opinion of the Committee, the effective application of the Convention comprises three principal aspects: supervision, appropriate penalties to prevent and punish infringements, and steps to make good the prejudice suffered. As to the aspect of supervision, the Committee has noted(6) the Government's indication of the functioning of the Russian labour inspectorate in supervising the regular payment of wages. The Committee urges the Government to reinforce further the activities of the labour inspectorate in this regard in order not to leave the disrespect of law taken for granted.
38. With regard to penalties, the Committee notes (6) that the Government only indicates the total sum of 5.5 thousand million roubles that has been imposed upon almost 7,600 managers as fines for gross violations of the wage legislation, and that more than 200 criminal proceedings had been initiated. The Committee also notes that the Government has not supplied information concerning the sanctions for violation of law concerning wage payment in reply to the observation(7) made by the Committee of Experts regarding the application of Article 15(c) of this Convention. Although for the lack of detailed information the Committee is unable to express an opinion on the fines for the failure to pay wages regularly, it notes that the penalties referred to above do not appear so far to have had the effect of decreasing the cases of wage arrears significantly. The Committee therefore recommends that adequate penalties be prescribed and strictly enforced by the Government as required by Article 15(c) of the Convention.
39. As to the measures to make good the prejudice suffered, the Committee has no precise information, not even the exact number of workers concerned, not to mention the amounts and the duration of the delay in wage payment. Given the magnitude of the delays in the payment of wages, apparent from the figures quoted not only by the complainant organizations but also by the Government, the Committee stresses the importance of applying an accelerated procedure and trusts that the Government will take all possible measures to ensure the rapid recovery of their wages by the workers concerned. The Committee notes(8) in this regard the indication of the Government that it adopted, with the participation of the social partners, a schedule to pay the wage arrears to the employees of educational establishments, and that the clearing of wage arrears in the establishments financed by the federal budget takes place according to the schedule, or even at an accelerated pace. The Committee urges the Government to continue and reinforce furthermore the efforts to discharge its direct responsibility as an employer in the public sector. At the same time, the Committee recalls that it is also the responsibility of the Government to ensure that the reimbursement of the wage arrears be made rapidly and effectively by local authorities and private enterprises.
Payment of wages in forms other than in legal tender
40. In its reply the Government provides no information on the payment of wages in forms other than cash, such as promissory notes or allowances in kind. According to the complainant organizations, in some rural areas local authorities have made arrangements with shops to supply teachers and other staff with food up to a certain value, which will be paid for once salaries come through. They consider that this practice may be getting close to the payment of wages in the form of allowances in kind or in vouchers in lieu of money. The Committee recalls that the Convention prohibits, in its Article 3, the payment of wages in the form of promissory notes, vouchers or coupons, or in any other form alleged to represent legal tender, and also that Article 4 of the Convention lays down criteria for limitation and regulation of the wage payment in the form of allowances in kind. It wishes to draw the attention of the Government to these provisions so that the measures taken with a view to reimbursing wage arrears should not result in the violation of other provisions of the Convention.
41. The Committee observes with deep concern the failure of the Government to secure effective application of the Convention, and the grave social consequences of that failure. It notes that the most recent statistical information available to it indicates that the measures taken by the Government have brought no substantial improvement in the situation.
42. The Committee considers it essential that the Committee of Experts continue to ensure the follow-up of the issues raised in the present representation. It therefore requests the Government to communicate, in the report that is due under article 22 of the Constitution of the ILO, all the relevant information on the measures taken or envisaged with reference to the above conclusions and on the consequent development of the situation, including details of the numbers of workers affected, the nature and amount of wages owed, and the number and nature of the establishments and enterprises concerned by the non-payment of wages, the amount of payments already made, as well as the number and nature of penalties imposed.
Recommendations of the Committee
43. The Committee recommends that the Governing Body approve this report and, in particular, in the light of the conclusions in paragraphs 30 to 42 of the report --
a. that it urge the Government to ensure the full application of the Convention and in this regard:
i) to take all necessary measures, in full consultation with workers' and employers' representatives, to ensure the prompt payment of wage arrears owed by different state budgets, enterprises and organizations;
ii) to strengthen the supervision of payment of wages, notably through the reinforcement of the activities of the labour inspectorate;
iii) to ensure effective enforcement of dissuasive sanctions for the non-payment of wages;
iv) to take specific measures to prevent the diversion to other illicit purposes of funds that should be used to pay wages;
v) to ensure that measures taken with a view to reimbursing wage arrears do not result in the violation of other provisions of the Convention;
b. that it invite the Government, in the report that is due under article 22 of the Constitution on the application of Convention No. 95, to supply detailed information on all the measures taken or envisaged in accordance with the above recommendations and the consequent development of the situation, including:
i) details of the numbers of workers affected, the nature and amount of wages owed, and the number and nature of the establishments and enterprises concerned by the non-payment of wages, as well as the amount of payments already made;
ii) the number of labour inspection visits made regarding the regular payment of wages, the number and nature of infringements observed, and the number and nature of penalties imposed, as well as similar information on criminal cases involving non-payment or delayed payment of wages;
iii) the extent to which and the manner in which the schedules to pay the wage arrears in educational establishments and the federal public budget sector are put into effect;
c. that it declare closed the procedure initiated before the Governing Body as a result of the representation made by Education International (EI) and the Education and Science Employees' Union of Russia (ESEUR) concerning the application by the Russian Federation of the Protection of Wages Convention, 1949 (No. 95).
44. The Committee suggests that, in respect of the above recommendations, the Governing Body request the Director-General to propose technical assistance by the Office to the Government of the Russian Federation.
Geneva, 11 November 1997.
(Signed) Ms. Musulin,
Points for decision:
1. Convention No. 95, ratified on 4 May 1961.
2. See Official Bulletin, Vol. LXIV, 1981, Series A, No. 1, pp. 93-95.
4. In this report, "billion" means million million, or 12 zeros.
5. Section 96, paragraph 1, reads: "Wages shall be paid not less frequently than every half-month." Its paragraph 2 reads: "Other periods of payment may be fixed for separate categories of workers and other employees."
6. See para. 23 above.
7. International Labour Conference, 83rd Session, 1996, Report III (Part 4A), pp.182-183.
8. See para. 24 above.