Global PEO Services (GPS) helps companies hire employees in Ukraine without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by the Global PEO, while the new hires and headquarter teams focus on your business goals.
When hiring employees in Ukraine, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Ukraine labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Ukraine. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Ukraine - Country Overview
Ukraine is a post-Soviet state that has emerged as a free market and invites foreign investment, which is an important part of its growth policy. Trade is extremely important to the country’s economy as the combined value of imports and exports equals 108% of GDP. The major industries of the country include iron and steel, chemical, forestry, fishing, shipbuilding, aircraft/aerospace, shopping tourism, and defense complex.
Unitary Semi-presidential Republic
Odessa, Kharkiv, Zaporizhia
Employment Contracts in Ukraine
It is not mandatory to have employment contracts in writing in Ukraine, though it is required in some cases. Formalized hiring by an internal order of the employer is needed, but even in the absence of such an order, an employment agreement is concluded when the worker is allowed to commence work.
While Ukrainian law does not make it mandatory to include certain terms in an employment agreement, certain conditions of employment are binding under the Labor Code:
- Limits on extension of working hours and terms of overtime
- Minimum pay and compensation,
- Entitlements of annual leave and sick leave
- Termination and guarantees of redundancy, and
- Special treatment of specific types of employees.
The employment agreements are mostly for an indefinite term and are allowed to be terminated only in cases that the law prescribes. Fixed-term employment is allowed only in specific circumstances. A fixed-term employment agreement becomes one for an indefinite term if, after the end of the term for which the agreement was made, an employee continues working and neither of the parties initiates the termination of the agreement.
Usually, a probationary period does not last longer than 3 months. In case a major trade union agrees, the probationary period may extend to 6 months in some special cases (such as for some public officers).
Working Hours in Ukraine
The Labor Code stipulates a 40-hour workweek, mostly for 5 days. The law does not mention the period of a workday, as this is usually left to the employer’s discretion or negotiation between the employer and its major trade union organizations. The Labor Code permits 6-day workweeks which entails an average workday of 7 hours considering a 40-hour workweek.
The Labor Code provides shorter regular workweeks spanning 24 to 36 hours for some employees, which include:
- Employees aged 18 or less
- Students engaged in work during their vacations
- Employees working under risky conditions
- Some medical practitioners
- Employees with certain disabilities, and
- Employees working with agrichemicals and pesticides.
In addition to 40 hours per week of full-time work, the Labor Code allows shifts, and irregular or part-time work. The work schedule during certain weeks can be more than 40 hours as long as the average hours per week does not change in a period of 2 months or any other duration agreed to by the employer and employee.
The Labor Code mentions two main methods for paying overtime:
- Piece-rate, where the employees’ remuneration is based on performance as measured against a set standard, and
- Time-based, where employees’ remuneration depends on the amount of additional time an employee engages in work.
In a piece-rate system, each hour of overtime must be paid at 100% above the standard hourly rate for the relevant work. In a time-based system, overtime must be compensated at double the hourly rate.
Certain employees are allowed to work overtime only if they give consent to it, such as part-time employees, single fathers, mothers, legal guardians of children in the 3-15 age group, elderly persons, disabled persons including disabled children.
The maximum overtime allowed by the Labor Code is 4 hours within 2 consecutive days of work and up to 120 hours in a year. The law prohibits compensatory time off in place of payment.
Employee Leave in Ukraine
Employees get the following 12 paid public holidays in Ukraine:
- January 1: New Year’s Day
- January 7: Orthodox Christmas Day
- March 8: International Women’s Day
- Orthodox Easter Sunday
- Trinity Sunday
- May 1-2: Labor Day
- May 9: World War II Victory Day
- Orthodox Trinity Sunday
- June 28: Ukrainian Constitution Day
- August 24: Independence Day
- October 14: Ukraine Defender’s Day
Holidays that fall on weekends (or another day off) shift to the next business day. Working days before a public holiday are reduced by an hour.
Work on national holidays is permitted only in case of production or technical necessities (such as for employers with constant production cycles). Employers who work on a holiday are entitled to receive double pay for the number of additional hours worked.
The Ukraine Labor Standards Act provides a minimum 2 weeks’ of paid vacation to employees working in provincially regulated industries on completion of their first 4 years of employment. The paid vacation can go up to 3 weeks’ after 5 consecutive years of employment. Employees need not take a vacation in the first year of employment. Contract of employment may stipulate a longer vacation period for an employee.
An employer needs to ensure that their employees take an annual vacation within 12 months of completing their first year of employment. Employees going on their earned vacation of 2 weeks must receive 4% of their earnings as vacation pay for the year for which they took the vacation. This goes up to 6% for employees who go on 3 weeks’ vacation.
Female employees get 70 calendar days’ of prenatal leave before 56 calendar days’ of paid post-childbirth and child care leave (which goes up to 70 days when there are multiple births or complications post-delivery). Payment for maternity leave is provided by the State Social Insurance Fund at 100% of the mother’s average monthly salary for 6 months.
There is no legal mandate that employers must grant paternity leave to male employees. However, fathers may be eligible for childcare as well as parental leave.
An employee is entitled to 10 calendar days’ of paid parental leave every year (or 17 calendar days in some circumstances) if the employee is:
- The mother of 2 or more children aged 15 or below
- The mother of a disabled child
- A single parent
- An adoptive parent, or
- A child’s legal guardian
Employees who are unable to work because of sickness or some temporary disability are entitled to remuneration for the whole duration of their absence from work. Compensation of this leave is paid by the employer for the initial 5 days of sick leave and the remainder by the State Temporary Disability Fund. The amount of compensation varies based on the duration of workers’ employment:
- 60% of average salary for employees who have completed up to 5 years of unbroken employment
- 80% for employees who have completed 5 to 8 years of unbroken employment, and
- 100% for the employees who have completed more than 8 years.
Employee Benefits in Ukraine
Employees who get injured at work or develop an occupational sickness while performing their duties get compensation from the government through the social insurance fund.
Employers need to make one comprehensive monthly contribution that equals 22% of payroll to a unified social insurance fund that covers pension, accident, temporary disability, and unemployment benefits. Employees do not make any contribution.
Employees may retire and be entitled to a full pension at age 60 (men) or 55 ½ (women) with a minimum 30 years’ coverage. The minimum age for women will gradually increase to 60 by 2021. Partial pensions are also available for certain employees who meet the age criteria and have a coverage of 15 to 34 years for men and 15 to 29 years for women.
Ukraine’s state social security fund grants unemployment benefits to eligible individuals. In order to get the benefit, recipients need to be registered at an employment office, be capable and willing to work but have an income that is below the minimum wage.
Benefits range from 50% of average earnings to 70% for work experience ranging from less than 2 years to more than 70 years. Beneficiaries get 100% of the benefit during the first 90 calendar days of unemployment, 80% in the subsequent 90 calendar days and 70% after that.