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13th salary goes down to the wire for Russian workers

While banking bonuses have become a hot topic in many countries, the economic downturn is putting pressure on a time honoured Russian corporate custom.

The so-called "13th salary" is something of a tradition in the Russian workplace. But with profits down, the bonus, paid just before Christmas, may prove elusive this year.

A prominent exception – Gazprom – will pay over $4 million dollars in bonuses in spite of falling revenue and a lower dividend payout to shareholders. That's because directors committed to the bonus 3 years ago.

Anton Derlyatka, Managing Partner at Ward Howell, Moscow says paying the bonus is about tailoring employee expectations and building morale.

“People know that we are in crisis. They don't have any rosy expectations generally. Obviously, the bonus is really to lift morale. It's not just about the money. We are positive. We see a great potential growth for 2010."

Other employers have put their focus on protecting their business – boosting marketing or saving jobs – possibly at the expense of bonuses, according to Tom Mundy, Equity Strategist at Renaissance Capital.  He says focus is turning to boosting salaries, and consumption, throughout the year.

"It's very typical for Russian companies to pay bonuses – to pay a 13th month or a bit extra over the new year. It would be very politically difficult to withdraw that. But what is much more important for Russia and what we are seeing already is the government increasing base-level salaries for the public sector, and that is a function of the crisis. The government needs to increase disposable income and consumer spending."

Boosting real incomes has been a challenge this year. Inflation is expected to be as much as 9%. But individual Russian producers have raised prices by 13% or more. So the crucial shopping season might just not be possible without extra cash in the pocket.

As the final payday of the year approaches, people across the country are hoping that Santa Claus or Father Frost will deliver a 13th salary to the nearest ATM.