HEAD OF PRACTICE
ArsLegem’s labour and employment team provides comprehensive advice and creative solutions in all matters pertaining to Ukrainian employment law and is experienced in all facets of the complex landscape of employment relations.
WE ADVISE CLIENTS ON THE FOLLOWING MATTERS:
- commencement and termination of employment of top management;
- legal support in hiring and dismissal of personnel;
- restructurings, transfer of employees, reductions-in-force, and redundancies;
- personal data protection, trade secrets and confidential information;
- cross-border employment issues;
- work of foreigners in Ukraine and Ukrainian nationals abroad;
- drafting and negotiations of different employment-related bye-laws;
- representing employers during various employment-related disputes and litigation;
- matters related to activities of trade unions, including negotiations of collective agreements, restructurings, layoffs, etc;
- legal due diligence of employment matters;
- employment tax-related matters and other regulatory issues.
FREQUENTLY ASKED QUESTIONS (updated as of 01 September 2017):
What prior approvals do foreign nationals require to work in Ukraine? What information/paperwork needs to be kept or filed with the authorities when they start work?
Procedure for obtaining approval. Citizens of EU countries, the US, Canada, Japan and some other countries do not require a visa to enter Ukraine for a stay up to 90 days within a 180-day period, which is normally sufficient to handle all formalities related to employment. The list of countries and respective visa requirements are available in English on the website of the Ministry of Foreign Affairs of Ukraine (http://mfa.gov.ua/en).
Citizens of other countries wishing to formalise their employment relations in Ukraine must obtain a long-term type D visa (the procedures for visa applications can usually be found on the website of the Ukrainian consulate or embassy in the corresponding country of application).
Cost. The administrative fee for obtaining a visa is equal to USD 65 (approximately EUR 55).
Time frame. The ordinary visa processing time is up to 10 working days. This can be extended by up to 30 working days in cases where additional verifications are required. In some cases, it is possible to obtain a visa under the urgent procedure (up to 5 working days) for a double fee.
Once an employee has a work permit, he/she can apply for a temporary residence permit that replaces a visa and allows a stay in Ukraine for a period exceeding 90 days.
Sanctions. A foreign citizen whose stay in Ukraine is not duly formalised can be subject to administrative sanctions that range from a warning and fine, in amount equivalent of approximately from EUR 17 to EUR 27 up to deportation from Ukraine with a three-year ban from entering Ukraine.
Procedure for obtaining approval. An employer wishing to use the work of a foreign national must obtain a work permit for this person. Authorities issue work permits on a case-by-case basis, for a particular applicant and a particular job position in a company. Work permits are granted in the following cases:
- There is a lack of qualified local labour force in the region.
- It is reasonable and sufficiently justified to use the work of a foreign national. The following cases are recognised by the authorities as “sufficiently justified”:
– application to a managerial position in a company where the foreign national is a shareholder;
– application to a position that provides for the creation of intellectual property as a main activity;
– application to certain positions in the IT industry; and
– applicant holds a degree from one of the top 100 world universities.
- Employees of a foreign company performing works/services in Ukraine aiming to fulfil contractual obligations of the foreign company vis-à-vis a Ukrainian contractor (provided that not more that 50% of employees engaged in fulfilling this contract are foreign nationals).
- Foreign nationals who can be defined as intra-company assignees.
- Foreign nationals officially recognised as refugees or persons that require additional protection.
A work permit is normally issued for the period of employment indicated in the employment contract, but for not more than one year. A work permit can be renewed for the same term, for an unlimited number of times and free of charge.
Cost. The employer bears the costs of about UAH 12,800 (equivalent of approximately EUR 410) per work permit.
Time frame. It takes up to 7 working days for authorities to make a decision in relation to issuing or rejecting a work permit. In the case of a positive decision, the applicant receives a corresponding resolution and an invoice for stamp duty (both an e-mail and hardcopy). The applicant has ten days to pay the invoice, otherwise the decision is cancelled. The permit itself is issued within three working days after the payment is made.
Sanctions. A foreign citizen who is unlawfully employed in Ukraine can be subject to an administrative fine in amount equivalent of approximately from EUR 17 to EUR 27. The employer can be also subject to an administrative fine in amount equivalent of approximately from EUR 55 to EUR 110).
Procedure for obtaining approval. A duly employed foreign citizen (that is, with a valid work permit) must normally spend more than 90 days within a 180-day period in Ukraine. If this is the case, this person can obtain a temporary residence certificate. The temporary residence certificate is issued for a term of one year and can be renewed for other consecutive terms of one year.
Cost. Approximately EUR 8 (stamp duty, administrative service and form).
Time frame. It takes about two to three weeks from making an application to obtain a temporary residence certificate.
Sanctions. The sanctions are the same as for visa-related violations (see above, Visa: sanctions).
Please, note that certain changes to Ukrainian laws in relation to visas and work permits are coming into effect as of the end of September 2017. Those changes are not yet fully developed. We will revise this section as soon as corresponding procedures will be fully implemented.
What is the basis of taxation of employment income for: Foreign nationals working in Ukraine? Nationals of Ukraine working abroad?
Taxation of individuals in Ukraine is determined by their tax residence, although there may be some exceptions under international treaties. As a general rule, employment-related income received from a Ukrainian employer is taxed in Ukraine.
Nationals working abroad
Nationals (provided that they are tax residents of Ukraine) working abroad must annually declare and pay in Ukraine personal income tax at the rate of 18% and a temporary military charge of 1.5% on their income produced or earned abroad during the year. Certain exemptions can be established by a bilateral double taxation agreement between Ukraine and the country where an individual received his income.
What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?
Rate of taxation on employment income
For 2017, all employment-related income is taxed at the flat rate of 18%. Additionally, a temporary military charge of 1.5% applies.
Social security contributions
An employer must make a sole social contribution of 22% of the employee’s gross income. However, the base of accrual of this contribution is capped at 25 living wages (UAH 42,100 as at 1 May 2017, UAH 44,050 as at 1 December 2017).
What rights do employees have when their employment contract is terminated?
An employee can resign by giving a two weeks’ notice to the employer. In certain cases (mostly family-related or health-related), an employee can request a shorter notice period and the employer must satisfy this request.
In the case of redundancy or a similar basis for termination of employment, the employer must give at least two months’ notice to the employee. Additionally, in most cases, dismissing a member of a trade union requires preliminary consent of the respective trade union. Applicable collective agreements or individual employment contracts can provide for longer notice periods.
An employee is entitled to a severance payment of at least:
- One average monthly salary when employment is terminated due to:
– the employee’s refusal to move with the employer to a different area (in the case the business is transferred to a different town, city, and so on);
– the employee’s refusal to continue employment in the case of material changes in working conditions;
– reorganisation, restructuring, liquidation or bankruptcy of the employer, or redundancy;
– failure of the employee to conform to the requirements for his position (due to lack of qualification or health condition); and
– return of the employee who occupied the position previously.
- Two average monthly salaries when employment is terminated due to the employee’s conscription for military or alternative service.
- Three average monthly salaries when employment is terminated by the employee as a result of the employer’s violation of the labour law, collective agreement or employment contract.
- Six average monthly salaries when employment of a company’s executive is terminated on revocation of his authority (for example, a CEO can be revoked by the general meeting of a company).
The applicable collective agreement or employment contracts can establish higher amounts of severance payments than the above statutory minimum amounts.
Procedural requirements for dismissal
Termination of employment is formalised in a written resolution (order) issued by the company’s director or chairman, which contains certain information, such as the reasons and date of termination.
On the day of termination, the employer must ensure that:
- the employee receives a certified copy of the resolution (on request of the employee in the case of resignation or termination based on the agreement of the parties);
- the employee receives his employment book (a special document that keeps a record of all previous employments);
- all payments due to the employee are made (such as salary, compensation for unused vacation, and so on).