Hire in Ukraine through our Employer of Record (EOR)

Ukraine's employment landscape is characterized by a well-educated workforce undergoing significant changes due to economic reforms, technological advancements, and ongoing regional conflicts. The country faces demographic challenges, including an aging population and skilled worker migration. While traditional industries remain important, there's a growing emphasis on diversifying the economy and developing sectors like IT, agriculture, and services.

Overview of Labor Laws

Ukraine's labor laws are primarily governed by the Labor Code, which outlines the rights and obligations of both employers and employees. Key aspects include:

• Standard workweek of 40 hours
• Minimum of 24 calendar days of paid annual leave
• Maternity leave of 126 calendar days (70 days before and 56 days after childbirth)
• Prohibition of discrimination based on gender, age, race, or other factors
• Strict regulations on termination of employment contracts

Employers must also adhere to workplace safety regulations and provide social insurance contributions for their employees.

Cultural Considerations

Understanding Ukrainian workplace culture is crucial for successful business operations:

1. Hierarchy: Many organizations maintain a hierarchical structure, with respect for authority figures being important.

2. Communication: Ukrainians tend to be direct in their communication, but politeness is still valued. Non-verbal cues play a significant role.

3. Work ethic: Ukrainians are known for their strong work ethic and dedication to their jobs.

4. Work-life balance: While work is important, family life is highly valued. Flexibility for family needs is often expected.

5. Language: Ukrainian is the official language, but Russian is also widely spoken, especially in eastern regions.

Challenges of Direct Hiring

Direct hiring in Ukraine can present several challenges:

1. Legal complexities: Navigating Ukrainian labor laws and regulations can be complex for foreign companies unfamiliar with the local legal system.

2. Language barrier: Unless fluent in Ukrainian or Russian, communication during the hiring process and day-to-day operations can be challenging.

3. Cultural differences: Understanding and adapting to local work culture and expectations can be difficult for foreign employers.

4. Administrative burden: Managing payroll, taxes, and social contributions in compliance with local regulations can be time-consuming and complex.

5. Talent retention: With increasing outmigration of skilled workers, retaining top talent can be challenging.

6. Regional variations: Significant differences in labor markets and business practices between western and eastern Ukraine can complicate nationwide hiring strategies.

7. Economic instability: Ongoing conflicts and economic fluctuations can create uncertainty in long-term workforce planning.

To overcome these challenges, many foreign companies choose to partner with local experts or use services like Employer of Record (EOR) to facilitate their hiring and employment processes in Ukraine.

Ukraine's payroll and tax system is structured to ensure both employers and employees contribute to the country's social security and public services. The system involves various contributions and deductions, with employers bearing significant responsibilities in managing these financial obligations. Let's delve into the intricacies of payroll and taxes in Ukraine, exploring the roles and responsibilities of both employers and employees.

In Ukraine, the primary components of the payroll and tax system include the Unified Social Contribution (USC), Personal Income Tax (PIT), and Military Tax. These elements form the backbone of the country's social security and tax framework, with specific obligations for both employers and employees.

Employer Contributions

Employers in Ukraine have several tax responsibilities that they must fulfill to comply with the country's regulations:

Unified Social Contribution (USC)

The USC is a mandatory social security contribution that employers are required to pay on behalf of their employees. The standard rate for USC is 22% of the employee's gross salary. This contribution goes towards various social insurance programs, including pension funds, unemployment insurance, and healthcare.

Personal Income Tax (PIT) Withholding

While employees are ultimately responsible for paying Personal Income Tax, employers play a crucial role in the process. They are required to withhold PIT from their employees' salaries at a standard rate of 18%. This withholding ensures that employees' tax obligations are met consistently throughout the year.

Military Tax Withholding

In addition to PIT, employers must also withhold a 1.5% military tax from their employees' salaries. This tax was introduced as a temporary measure to support Ukraine's defense efforts but has remained in place.

Payment Deadlines and Reporting

Employers must adhere to specific deadlines for remitting the taxes they withhold. PIT and military tax must be paid to the tax authorities on the same day that salaries are disbursed. The USC, however, is typically due by the 20th of the month following the salary payment.

Registration and Compliance

To operate legally, employers must register as taxpayers with the Ukrainian tax authorities. This registration process can usually be completed online, streamlining the administrative burden. Employers are also responsible for maintaining accurate records and submitting regular reports to the tax authorities.

Employee Contributions

While employers handle much of the tax administration, employees in Ukraine also have financial obligations within the payroll and tax system:

Personal Income Tax (PIT)

Employees are subject to a flat PIT rate of 18% on their earnings. This tax is automatically withheld from their salaries by their employers, simplifying the process for individual workers.

Military Tax

The 1.5% military tax is also deducted directly from employees' salaries. Like PIT, this deduction is managed by the employer, requiring no additional action from the employee.

Unified Social Contribution (USC)

It's important to note that while the USC significantly impacts the overall cost of employment, it is not directly deducted from employees' salaries. Instead, this 22% contribution is paid entirely by the employer.

Understanding these payroll and tax obligations is crucial for both employers and employees in Ukraine. Employers must ensure they're complying with all regulations and deadlines, while employees should be aware of the deductions from their salaries and the benefits these contributions provide. By working together within this system, both parties contribute to Ukraine's social welfare and economic stability.

Employee benefits in Ukraine are a crucial aspect of the country's labor landscape, providing essential support and security for workers. While the government mandates a robust set of benefits, many employers go above and beyond to attract and retain top talent. As an Employer of Record (EOR), Rivermate expertly navigates this complex system, ensuring compliance with mandatory benefits while also helping companies implement attractive optional benefits packages. This comprehensive approach not only safeguards employees but also enhances the employer's appeal in a competitive job market.

Mandatory Benefits

Ukrainian law requires employers to provide several essential benefits to their employees:

• Pension contributions: Employers contribute 22% of an employee's gross salary to the Unified Social Tax (UST), partially funding the state pension system.

• Unemployment benefits: The UST also finances unemployment assistance for eligible employees who lose their jobs involuntarily.

• Temporary disability benefits: Employees are entitled to paid sick leave for up to four months, with the first five days funded by the employer and the remainder covered by the Social Insurance Fund.

• Maternity leave: New mothers receive 126 days of paid maternity leave, financed by the Social Insurance Fund.

• Work injury and occupational disease benefits: Compensation for medical expenses and lost income due to work-related injuries or illnesses is provided.

• Death benefits: Financial assistance may be available to dependents in case of an employee's death.

Optional Benefits

To create more attractive employment packages, many Ukrainian employers offer additional benefits:

• Group life insurance: Provides financial security for an employee's family in case of death.

• Meal vouchers or allowances: Helps offset food expenses during work hours.

• Performance-based bonuses: Incentivizes employees and rewards achievements.

• Additional vacation days: Promotes work-life balance beyond the mandated 24 days of paid leave.

• Flexible work arrangements: Includes remote work options or flexible hours to enhance work-life balance.

• Professional development support: Offers training programs, conference attendance, or tuition reimbursement for further education.

• Company cars or car allowances: Facilitates work-related travel for specific roles or senior positions.

• Gym memberships or on-site fitness facilities: Promotes employee health and well-being.

• Free or subsidized meals: Provides an additional perk for employees at the workplace.

By offering a mix of mandatory and optional benefits, employers in Ukraine can create comprehensive packages that not only comply with legal requirements but also attract and retain valuable talent. As an EOR, Rivermate assists companies in navigating these benefits, ensuring both compliance and competitiveness in the Ukrainian labor market.

The process of termination and offboarding in Ukraine is governed by specific regulations outlined in the Ukrainian Labour Code. Understanding these procedures is crucial for both employers and employees to ensure a smooth and legally compliant transition.

Termination Process

In Ukraine, employment can be terminated under various circumstances, either initiated by the employer or the employee. Lawful grounds for dismissal include:

• Employee misconduct (e.g., serious violations of labour discipline)
• Employee incompetence
• Redundancy due to company restructuring
• Company closure or liquidation

Employees can also initiate termination through resignation or in response to a breach of contract by the employer.

Notice Periods

The required notice periods vary depending on the reason for termination:

• Employer-initiated dismissal (except redundancy or liquidation): One month's written notice
• Employer-initiated redundancy or liquidation: Two months' written notice
• Employee-initiated resignation: Two weeks' written notice

It's important to note that there are some exceptions to these notice periods as outlined in the Ukrainian Labour Code.

Severance Pay

Ukrainian law mandates severance pay in certain situations:

• Redundancy: Equivalent to one month's average salary
• Company closure or liquidation: Based on the employee's average salary and length of service
• Employee dismissal due to employer breach of contract: May be entitled to severance pay depending on the nature of the breach

Offboarding Process

The offboarding process in Ukraine typically involves the following steps:

1. Formal notification: Provide written notice of termination as per the required notice period.

2. Exit interview: Conduct an exit interview to gather feedback and ensure a smooth transition.

3. Return of company property: Ensure all company assets are returned, including equipment, access cards, and confidential information.

4. Final paycheck: Process the final paycheck, including any outstanding wages, unused vacation days, and applicable severance pay.

5. Documentation: Complete necessary paperwork, including a termination agreement and any required government forms.

6. Benefits closure: Finalize any employee benefits, such as health insurance or pension contributions.

7. References: Provide a reference letter if requested and agreed upon.

By following these procedures, both employers and employees can ensure a legally compliant and professional termination and offboarding process in Ukraine.

Ukraine, with its growing economy and diverse opportunities, attracts foreign workers from various countries. However, navigating the visa and work permit requirements can be complex. Here's a concise overview of what foreign workers need to know:

Visa Requirements

Foreign nationals typically need a visa to enter Ukraine for work purposes. The most common type is the D-visa, which is a long-term visa for those intending to work in the country.

Work Permit

Before applying for a visa, foreign workers must obtain a work permit. This document is usually secured by the Ukrainian employer on behalf of the foreign employee. The work permit is valid for up to one year and can be extended.

Key Steps in the Process

1. The Ukrainian employer applies for a work permit from the State Employment Service.
2. Once approved, the foreign worker applies for a D-visa at a Ukrainian embassy or consulate in their home country.
3. After entering Ukraine, the worker must register their place of residence within 30 days.

Important Considerations

• The process can take several weeks to a few months, so it's advisable to start well in advance.
• Some professions may have additional requirements or restrictions.
• Certain nationalities may be exempt from visa requirements for short stays, but a work permit is still necessary for employment.

Employer of Record Solution

For companies looking to hire in Ukraine without establishing a local entity, an Employer of Record (EOR) service like Rivermate can simplify the process. EORs handle visa and work permit applications, ensuring compliance with local labor laws and regulations.

Understanding these requirements is crucial for foreign workers planning to work in Ukraine. While the process may seem daunting, proper preparation and assistance from experienced professionals can make the transition smoother.