Employment Law In Ukraine

Ukraine is an Eastern European country that enjoys a strategic placement with neighbors like Poland, Russia, Belarus, Slovakia, and many other prime manufacturing countries. As a part of the manufacturing lobby in the world, international employers have often flocked to Ukraine due to the lower cost of various raw materials and transportation. 

The average population of Ukraine is 43 million, which is comparatively higher than most of its European siblings. However, the country has been able to set new standards in terms of education by clocking a 100% literacy rate. The residents in Ukraine are often touted as highly skilled and educated, which has acted as a significant catalyst for bringing businesses to the country. With more affordable wages than in countries like India, China, Indonesia, Thailand, and Vietnam, the country is considered a haven for businesses of every size and budget. 

Even though the business opportunities provided by Ukraine are appreciable, employers must be aware of the Ukrainian labor law to run their firms with minimal or no hiccups. This article highlights only the essential aspects of the labor code in Ukraine. It allows employers to negate the enormous learning curve in record time and leverage the 16 free trade agreements and other opportunities.  

Who Is Covered by the Ukrainian Labor Law?

The Ukrainian labor law applies to every employee working within the country under a resident or non-resident company. These conditions are listed below. 

• The labor act rules in Ukraine apply to foreign individuals except for the conditions mentioned.

1. 1. Non-residents working for specific diplomatic outcomes 
   2. A foreign company has assigned a non-resident to work in Ukraine. 

• Residents working abroad are generally covered by the labor code in Ukraine. However, there are exceptions when the mentioned rules are excluded. These conditions are as follows.

1. 1. Individuals working as foreign diplomats for Ukraine 
   2. A resident is assigned to work outside the country, where the employer has mentioned that the labor laws in the foreign country do not contradict the labor code in Ukraine. 

Employment Contract

The labor act rules in Ukraine make it mandatory to issue a written contract to verify the employment of a resident. The contract should comply with the mentioned labor laws and highlight all the clauses as agreed by both parties. Furthermore, every employment contract must include the mentioned details. 

• Contract tenure
• Deliverables and remuneration 
• Rights of both parties
• Termination clauses and subsequent notice period 

Key Provisions of the Act

The Ukrainian labor law introduces specific regulations and protocols for employment, which are as follows: 

Working hours

• The labor regulations in Ukraine implement a 40-hour work week divided into 5 or 6 working days. 
• Per martial law, employees working with critical infrastructure can work up to 60 hours per week. 
• The Ukrainian labor law also implements shorter work weeks for employees of varying ages based on predetermined conditions.

• Employees working in a potentially harmful environment can work up to 36 hours weekly. 
• Overtime work is limited to 4 hours daily for two consecutive days. The total overtime allowed per year is 120 hours. 

Rest breaks & holiday entitlements

Rest breaks

• Employers must provide 2 hours of rest to their employees during a shift. 
• Rest breaks are excluded from general working time.

Companies must ensure their employees have an uninterrupted rest of more than 42 hours after completing a work week. The mentioned rest break can be reduced to 24 hours during martial law. 

Sundays are mandatory rest days, and companies can implement a 6-day work week until the 40-hour work week is followed. 

According to the labor act regulations in Ukraine, Articles 67 and 70, employees must be paid double remuneration for rest day shifts. Furthermore, an employer might need to compensate them with an additional rest day. 

Employees are entitled to a minimum annual leave of 24 days. However, different rules apply to employees of different ages. 

• Employees under 18 must be provided with 31 days of annual leave. 
• An employee with a disability can take up annual leaves between 26 to 30 days, depending on the severity of the disability.  

The Ukrainian government issues 13 public holidays in a year, which are follows:: 

• 1st January, New Year’s Day
• 7th January, Orthodox Christmas Day
• 8th March, International Women’s Day
• 24th April, Orthodox Easter Sunday
• 25th April, Orthodox Easter Monday
• 1st May, Labor Day
• 9th May, Victory Day
• 12th June, Whit Sunday
• 13th June, Whit Monday
• 28th June, Constitution Day
• 24th August, Independence Day
• 14th October, Defender’s Day
• 25th December, Christmas

Public holidays can be canceled when martial law is active. 

Leave schemes

Maternity leave

• The Ukrainian paid maternity leave allows pregnant employees to rest for 126 days. 
• An employee is allowed to leave 70 days before the expected delivery date.  
• After birth, the employee is granted another 56 days of rest.
• During multiple birth or complications, the mentioned post-birth leave can be extended up to 70 days instead of 56.  
• Per article 17 of the holiday act, enforced by the Ukrainian labor law, the minimum working hours for mothers are also reduced. The mentioned rule applies till the child turns 14 or if the concerned child has a disability.

Adoption leave

• Article 181 of the holiday act entitles an employee to a 56-day leave during adoption. 
• Under the labor act rules in Ukraine, the mentioned tenure can be extended up to 70 days in case of multiple adoptions. 
• Rest days and holidays are excluded during this tenure.

Paternity leave

• An employee should be granted a 14-day leave when they become a father. 
• According to Art 77(3) Labour code in Ukraine (added by Law No. 1401-1X 2021), paternity leave can be taken by a single person during childbirth.

Parental leave

• The Ukrainian labor law enacts equal rights to the father and the mother for taking unpaid parental leave once the maternity leave ends. 
• The parental leave can be taken until the child turns three. 
• Parental leave is usually unpaid, but companies can remunerate their employees for the mentioned scheme.

Childcare leave

• When certain conditions are applicable, the caretaker of a child can take ten additional paid leaves every year. 
• Childcare leave can be taken when the child has a disability or is less than three years old. The mother, father, or guardian taking care of more than one child under 15 can also apply for this leave. 
• Companies can voluntarily increase the tenure of childcare leave, either on an unpaid or partial payment scheme. 

Sick leave

• Employees can take up a sick leave of up to 4 months. However, per the labor act rules in Ukraine, companies can terminate employment if the mentioned tenure is surpassed. 
• Sick leaves are paid, and the employing company must remunerate the employees for the initial five days of the leave.

Marriage leave

• Employees can take an additional unpaid 10-day leave during their wedding.

Bereavement leave

• During the death of a relative, an employee can take a 3-day leave. 
• The unpaid bereavement leave during the death of a close relative is seven days. 

Miscellaneous leave

• War veterans or individuals who have provided certain services for the country must be granted 14 days of additional leave. 
• Individuals rewarded for their special labor services in the country are entitled to an additional leave that can last up to 21 days.

Education leave

• An employee appearing for final examinations in primary or high school must receive an additional 10-day or 23-day leave, respectively. 
• The transfer exam from primary to secondary school allows an employee to take up to 6 days of additional leave. 
• Employees attending vocational schools must be provided with a 35-day paid leave during examinations. 
• Employees completing their graduation must be provided with an extra 30-day leave over four years. This leave adds an extra rest day with 50% remuneration every week.  

Other leave

• Employees can be granted an additional leave of up to 15 days every year for caring for their families. 

Minimum wage

• The national minimum wage in Ukraine is UAH 6,700 every month. 
• The hourly minimum wage is UAH 40.46.  

Pension fund

The Ukrainian labor law enforces two mandatory and one optional pension fund for citizens and other individuals covered by the law. 

Solidarity state pension

• Often touted as the tier-one pension system, participation in the solidarity state pension is mandatory for all working citizens. 
• The payment is calculated at 22% of an employee’s monthly remuneration. 
• Amounts are either paid by the employer or the employee. 

Accumulation state pension 

• The accumulation state pension is also called the tier-two pension system, where employees must voluntarily participate. 
• The monthly premium is 7% of an employee’s salary. 

Private pension fund

• The private pension fund is commonly referred to as the non-state pension fund (NPF) or third-level pension fund. 
• Participation in NPFs is voluntary and optional. 
• The monthly premium depends on the pension scheme selected by an employee. 

Payroll tax

Labor laws in Ukraine enforce a standard tax rate of 18% on corporate income (CIT). There are some additions to this rule for the gambling and insurance industries. 

• The total employer contribution is 22% of their employee’s monthly income, but the taxes are limited to 237,600 UAH annually for unified social contributions. 
• Employers must also deduct 0.6% from their employee’s salaries for social security contributions. 

With the withholding tax system in place, every employer must withhold taxes and pay the proceeds to the concerned authorities. Like the CIT, personal income is also taxed at a flat rate of 18%. A special tax slab of 1.5% is applicable only for defense and military personnel. 

Payslip

The labor act regulations in Ukraine do not explicitly mention the requirement to provide employees with a payslip. However, when the company pays withholding taxes to several authorities, employers must provide a salary slip to deal with legal ramifications. It should include the following details:

• Employee name
• Invoice number and salary date
• Salary amount
• Base salary
• Overtime pay or any other monetary benefits, when applicable
• Necessary tax deductions

Dismissal Rules

The dismissal rules might vary according to the employment type based on the mutual agreement of the participating parties. According to the labor regulations in Ukraine, employers can terminate an employment contract with or without the employee’s consent. Based on the reason for termination, the tenure of the notice period might vary, as underlined below.

• There is no requirement for a notice period when the termination is agreed upon mutually. 
• When an employing company terminates a contract, it must provide 14 days of written notice. 

Severance pay

The severance pay in Ukraine equals an employee’s monthly salary after every two years of continuous employment. 

Data protection and employee privacy

The Data Protection Law, under Ukrainian labor law No. 2297 VI on personal data protection, 1st June 2010, primarily moderates employee data privacy. According to the mentioned laws, employers must uphold utmost transparency with the subject while processing data and take all precautions to protect the stored data. Furthermore, the use of data must be relevant to the corresponding requirement.

Penalties

The labor act regulations in Ukraine impose certain fines and punishments on employing companies for non-compliance. Fines are usually counted in multiples of the national minimum wage and are often called the mNMW. Penalties for non-compliance with different labor regulations in Ukraine have been listed below. 

• Employers who hire Ukranians without a written contract or issue salaries without deducting and paying the necessary amounts to the concerned authorities are fined USD 1,925 or 10 mNMW. Companies that fall under the I-III tax-paying groups are exempted from this rule with a warning.

1. 1. Repeated violation of the mentioned rule within two years of the first warning might warrant a higher penalty of USD 5,775 or 30 mNMW.

• Obstructing investigators during an investigative process within a company is punishable with a penalty of 16 mNMW or USD 3,080.
• Failure to comply with the minimum wage rule is punishable by a fine of 4 mNMW, or USD 770, for each employee. 
• Failure to pay salary within the agreed due date is punishable with a fine of 3 mNMW or USD 580. 
• In case of other individual violations, the employing company must pay USD 190 or 1 mNMW. 

Repeated violations of the Ukrainian labor law within a year are punishable with a fine of 2 mNMW or USD 385. A company must pay 50% of the fine during a penalty within the next ten business days. Punishments can be reconsidered, but the same is done once the full fine is paid.

Compliance Strategies for Employers

Companies looking to hire employees can use multiple ways to comply with the local labor act rules in Ukraine. The choice of a compliance strategy depends on factors such as the available budget, the scope of employment, etc. Some options include:

In-house HR

• An in-house HR team ensures that the employing company complies by streamlining employment clauses with labor regulations in Ukraine. 
• The in-house team moderates minimum wage, rest breaks, holiday entitlements, and benefits per Ukrainian labor law. 
• Companies often need to hire an HR specialist who is well-versed in the mentioned labor law while fulfilling the requirement of other employees. 
• As additional hiring is involved, such a compliance strategy is only advised for companies that can spare a higher budget every month. 

HR agencies

• HR agencies help a company abide by the labor code in Ukraine for a fraction of the cost required to hire and maintain an in-house team. 
• These agencies moderate employment contracts by aligning essential aspects, such as wages, holidays, breaks, etc., with the labor regulations in Ukraine. 
• Companies looking for an affordable solution to comply with local laws can find good results through an HR agency. 

Employer of Records (EOR)

• EOR is a new market solution allowing companies to comply with local labor laws across multiple economies. 
• Predetermined conditions are set per the local labor laws, allowing businesses to negate the requirement of an in-house or outsourced HR team. 
• The cost of employing an EOR solution is minimal compared to an HR agency, thus allowing businesses of every size to hire employees in different markets. 

How Can Multiplier Help?

Multiplier is a SaaS-based EOR platform allowing companies to comply with local labor laws in more than 150 countries. Using a centralized platform with predetermined conditions allows employers to wield more control while negating all the time-consuming tasks. 

Customers of Multiplier can generate bespoke employment contracts, which are always compliant with the latest changes made by the relevant labor laws. Furthermore, features such as one-click multi-currency payments, payrolls, mandatory benefit management, and many others make it easier for companies of any size to test markets in record time.