Payment of the bonus to CEO – 5 reasons why it is IMPOSSIBLE

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Any bonus payment news? Sometimes the accrual and bonus payment rules to CEO contradicts the norms of legislation. In particular, it is prohibited to charge and pay a bonus to the manager of an organization of ANY form of ownership, if there is:

  1. arrears of payments to the republican or local budgets

Such payments include: taxes, fees, duties, fines, penalties, other mandatory payments payable to the budget in accordance with the legislation, including budget loans, etc. Moreover, it is prohibited to accrue a bonus for calendar days in which there was a debt, as well as for those months on the 1st day of which there was a debt.

  1. arrears of contributions to the Social Protection Fund

The essence of restrictions is the same as for taxes.

  1. arrears in the payment of wages and state benefits to families with children

If there is a delay of even 1 day, the CEO should not receive a bonus for such a month.

  1. arrears of payment for water supply, electricity and natural gas services.

Such services must be paid by the due date established by law, contract or on the last day of the reporting period (depending on the specific type). No bonus is accrued for the month in which the arrears were incurred.

  1. growth of loss from sale of goods (works, services) or net loss

If, based on the results of the period for which the bonus is accrued, the entire organization has experienced an increase in the loss from the sale of products, goods (work, services) or net loss compared to the previous reporting period, the bonus cannot be accrued and paid to CEO.

Bonus payment applicability: to assess whether there is a limitation on the payment of the bonus to CEO on this basis, it is necessary:

– firstly to determine the specific loss ratio to be assessed. Options: loss from sale of goods (works, services) or net loss;

– secondly to determine the period for comparison (for monthly, quarterly bonuses). Options:  1. compare the current reporting period with the previous reporting period

For example, compare the loss for March to the loss for February, or compare the loss for the 2nd quarter to the loss for the 1st quarter of the current year.

  1. compare the reporting period with the same reporting period of the previous year

For example, compare the loss for March of the current year with the loss for March of the previous year.

The specific procedure for determining the growth of loss from the sale of products, goods (works, services) is established by the property owner or the body authorized to conclude a contract.

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