18:30 22.02.2021

EBA urges Cabinet not to complicate calculation of average wages

2 min read
EBA urges Cabinet not to complicate calculation of average wages

The European Business Association (EBA) has called on the Cabinet of Ministers not to complicate calculating the average wages of employees, as suggested by the clarification of the updated procedure for calculating wages published by the Economy Ministry.

"The adopted document changed the formula for calculating the average wage. According to the EBA member companies, this formula has become much more complicated for accounting, and the business community is not ready for this," the EBA said in a press release on Monday.

The association said that this indicator is used to calculate the vacation, sick leave, business trip payments.

"For a better understanding, we would draw an example. According to the current legislation, if an employee goes on leave from June 1, an employer will have to pay him/her vacation entitlements three working days before the leave starts. At the same time, if the company pays bonuses to its employees, let’s say, every six months, then the amount of vacation payment must be recalculated, and the company shall pay the difference in the amount," the EBA said.

However, according to the old formula, the amount of vacation payment should not be recalculated, because their size was determined at the time of the employee going on leave, not six months later. Thus, accrued bonuses were taken into account when calculating subsequent leave, and the employee in any case did not incur any losses, the association said.

"This situation creates difficulties for business in matters of administration because 3,000-4,000 payments will have to be adjusted monthly in companies with tens of thousands of employees. In addition, in such a situation, an employer cannot calculate the salary fund for the year because the amount of recalculation [for example, the amount of bonuses that depends on the employee's performance] is unknown," the experts said.

Therefore, the business appeals to Prime Minister of Ukraine Denys Shmyhal to return the old formula for calculating the average wage.

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