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Transferring employees to effective contracts

Transferring employees to effective contracts

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The term “effective contract” was introduced in 2012 in connection with the adoption of the Program of improvement of the work wage system in state and municipal institutions. The employers from the budget sector of the economy must apply effective contracts. They must execute effective contracts with all employees (Section VI of the Program) until 2018. Effective contracts fully comply with Article 57 of the Labor Code and are not a new legal form of employment contracts.

What is an effective contract? The essence of an effective contract. An effective contract is an employment contract with the employee of a state or municipal institution, which formulates the following in the most complete manner (Section VI of the Program): the employee’s official functions; the conditions of work remuneration. This includes the indicators and criteria of the employee’s performance for the purpose of awarding bonuses dependent on the performance and the quality of the rendered state or municipal services, as well as social assistance.

The essence of an effective contract is the forming of a new system of labor remuneration tied to the results of operations of the budget organization (subclause “e” of clause 1 of the Decree No. 597 dated May 7 of 2012 of the President of Russia). This mechanism should stimulate employees to render public services of better quality. Since employment relations arise mainly on the basis of an employment contract, this measure appears efficient from the legal point of view.

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