Labour law in Ukraine

Agreement

In Ukraine, companies generally hire employees based on an employment agreement or employment contract. An employment agreement may be executed as a written agreement signed by the parties or as an employer order.

“Employment contract”

For certain groups of employees (e.g. company directors), Ukrainian law provides for the conclusion of an “employment contract” which can be distinguished from the regular employment agreement. The law allows for employment contracts to contain additional provisions and deviate from default provisions of the law with respect to certain conditions (term, termination grounds, material liability).

All Ukrainian nationals are required to have a labour book, which lists their employment history. Labour books are generally provided by the first employer of an employee. It is then the obligation of any further employer to keep the employee’s labour book up-to-date and to make entries therein. They are required to include such entries on commencement and termination of employment, professional development, changes of workplace, etc. 

Since June 2021, electronic labour books have been introduced in Ukraine. The five-year transfer period was introduced to convert all paper labour books into electronic ones.

Choice of law

If work is performed in Ukraine, the employment relationship is governed by the law of Ukraine, unless an international agreement provides otherwise. 

Any disputes arising from employment relationships governed by Ukrainian law fall within the competence of the Ukrainian courts.

1.2 Contracts for services

Apart from an employment agreement (or “employment contract”, where appropriate), companies engage personnel (commonly registered as private entrepreneurs on a simplified tax scheme) based on civil law agreements. Under such an agreement, a contractor undertakes to provide certain services/perform certain works according to a customer’s order (but without being subordinated to the customer), using either his/her own materials or those of the customer. The services/works are also undertaken at the contractor’s own risk. 

A Gig-contract is a special form of civil law agreement, which can be executed with a gig-specialist (mainly IT personnel) and a company that has the status of Diia City resident. Diia City is a special tax and employment regime applicable to IT businesses upon registration as Diia City residents. 

1.3. Employment of foreigners 

1.4. Special rules for executives 

Generally, executives are subject to employment law. However, as pointed out above (see Section 1.1.), directors can be party to an “employment contract”. This gives the parties the option to apply certain special rules for executives in relation to a variety of issues, such as duration and termination of employment. 

Currently, executives can be engaged based on a civil-law agreement. 

2.1. Minimum wage

Employees cannot receive remuneration for monthly or hourly work in an amount less than the statutory minimum salary. The minimum salary is established by law. Currently, the minimum monthly salary is UAH 4,123 (ca. EUR 150) (this amount applies till the end fo 2019 year, and, according to the 2020 draft budget, the minimum monthly salary for 2020 year is planned to be UAH 4,723 (ca. EUR 170). The minimum salary to be paid to foreigners employed in Ukraine, except for certain specific categories, is: UAH 18,615 (ca. EUR 775) for those employed by public associations, charity funds or some other types of NGOs; and UAH 41,730 (ca. EUR 1,500) for all others. Starting from 2020 the aforementioned amounts for foreigneirs will also be increased pro rata to the increase of statutory minimum salary.

2.2. Reduction of wages

An employee’s remuneration is a material term of an employment agreement and therefore cannot be changed without the employee’s consent. 

However, in the event of the introduction of a new organisational scheme, the employer may need to adapt the remuneration in order to take into account the new working conditions.  

In such a case, the employer must notify the employees two months prior to the proposed organisational changes of the intention to reduce their salary. If the employees do not agree to the reduction of their remuneration, the employer can terminate their employment. During the martial law regime, introduced in Ukraine since 24 February 2022, the two-month prior notice of the organisational salary is not required, and the changes may be introduced on short notice, but no later than such introduction.  

3.1. Standard working hours and breaks

The general statutory maximum is 40 hours per week, which amounts to eight hours per day in a five-day working week. 

The normal working hours during the period of martial law may be increased to 60 hours per week for employees employed at critical infrastructure facilities (in the defence sector, in the sphere of ensuring the vital activity of the population, etc.).

As a rule, employees are entitled to unpaid breaks after for hours of work, which must not last for more than two hours. Rest breaks are normally regulated by internal labour rules (company’s by-laws) or policies. 

3.2. Minimum rest periods

There is no general rule that relates to minimum daily rest periods. However, employees engaged in shift-work must be granted a rest period that lasts for double the length of their previous shift (including the break time for lunch).

Weekly rest periods must be continuous and must be for at least 42 hours.

3.3. Overtime work

Generally, overtime work is not permitted. Although there are numerous exceptions provided for by law, which are specific and relate to emergency situations or special types of businesses

Overtime work can only be carried out subject to the permission of the trade union committee if a trade union has been established at the company.

Moreover, the employer has a duty to keep records of any overtime work that an individual employee performs.

Overtime work must not exceed four hours in two consecutive days and 120 hours per year. This limitations does not apply during the martial law regime. 

Certain categories of employees may not be engaged for overtime work (e.g. pregnant women, women with children of up to three years of age and persons under 18 years of age). Other special categories of employees can perform overtime work, only subject to their consent (e.g. women with children aged three to 14 years or with a disabled child).

Some categories of employees (e.g. executives, employees whose working hours are not possible to fix) may be engaged under a special regime of working hours (variable irregular working hours), which will not be considered overtime work. Employees with variable working hours are entitled to up to seven days of additional paid annual leave. 

Overtime must be compensated for generally at a double hourly rate for each hour of overtime.

3.4. Working during the weekend and on public holidays

As a rule, working during weekends and public holidays is prohibited.

Work of an employee at the weekend may be subject to the approval of a trade union (if a trade union is established at the company). 

Employees working at weekends must be compensated at double their hourly rate. An employee may agree with the employer to be compensated for work at weekends by additional days off.

3.5. Premiums for night-work and work on public holidays

Night-work (between 10 p.m. and 6 a.m.) must be compensated with a premium, determined by a collective bargaining agreement in the amount of at least 20% of the basic hourly rate. 

Employees working on public holidays must be compensated at a double hourly rate. The employee may decide to get additional days off as compensation for work on public holidays.

Minimum holiday entitlement

Employees are entitled to at least 24 calendar days of paid annual leave after working for an employer for six continuous months. Before the expiration of this six-month period, employees can take paid annual leave on a pro rata basis for the time they have been employed.

Enhanced entitlement of paid holidays

Ukrainian law establishes longer minimum paid annual holidays (from 28 to 56 calendar days) for certain professions or industries, persons with disabilities, and young employees below 18 years of age.

Holiday consumption

If an employee does not take the holiday during one year, the holiday can be carried over to the next year.

Annual leave can be partially replaced, at the request of the employee, by a payment in lieu, although only for the part exceeding 24 calendar days.

Employees who are unable to work due to sickness or other temporary disabilities are entitled to compensation for the entire period of their absence from work. Sickness or other temporary disability and its expected duration must be certified by a registered medical practitioner.  

Compensation

Compensation is paid by the employer for the first five days of sick leave and by the State Temporary Disability Fund for the remainder of the time. The sick leave allowance ranges from between 50% to 100% of an employee's average salary depending on the length of their employment insurance record.

Certain employees’ exemptions

Certain employees (e.g. war veterans and persons affected by the Chernobyl nuclear accident) are entitled to receive 100% of their average salary as compensation for sick leave regardless of their length of employment insurance record. 

6.1. Formal requirements to be observed by the employer

Notice periods

This depends on the grounds for dismissal. The statutory minimum notice period is two months if the case involves redundancy. In certain cases (e.g. where there has been a gross violation of employment duties), notification is not required.  

Employees can voluntarily terminate an employment agreement by giving two weeks’ notice. 

Written form and work employment record

In all cases, a decision regarding dismissal must be made in the form of a written order, signed by a duly authorised representative of the employer. The employee is to be provided with a copy of the dismissal order and his/her labour book on the last day of his employment. 

Payment of all monies due

In all cases of dismissal, an employer must pay an employee whose employment is being terminated with all payments due under the employment agreement (e.g. salary and compensation for any of the employee’s annual vacation accumulated but not used during his term of employment with the employing company). Voluntary severance payments are also subject to negotiations between an employer and an employee. On the last day of his/her employment, an employee is to be provided with a written statement on accrued and paid amounts due to him/her under the employment agreement.

6.2. Limited reasons to terminate the employment

Most common “valid reasons”

Valid grounds for termination may be divided into those related to the employee’s breaches of employment duties (i.e. ‘termination with cause on the part of the employee’) and those not related to the employee’s actions (‘termination without cause’). Termination is not generally allowed while an employee is on annual or sick leave (except for several exceptions, including during martial law). 

An employer may unilaterally terminate an employee’s employment with cause in the following cases:  

1. systematic unjustified failure to fulfil employment obligations; 
2. unjustified absence from work for more than three hours during one day; 
3. appearance at work while under the influence of alcohol or drugs; 
4. misappropriation of property; 
5. a single gross violation of employment obligations; 
6. actions of a company head causing delayed or reduced payment of wages; 
7. real or potential conflict of interest;  
8. immediate subordination to a related party contrary to the Law of Ukraine ‘On Preventing Corruption’; 
9. repeated violation of the requirements of the legislation in the field of licensing, on the issuance of permits or in the field of administrative services; 
10. actions of an employee entrusted with company assets (i.e. cash or property) that result in the loss of the employer’s trust; or 
11. immoral conduct. 

Additional reasons for termination

An employer may terminate an employee’s employment without cause in the following cases: 

1. changes in the organisation of work and production (e.g. redundancy); 
2. the employee’s unsuitability for the job or position due to lack of qualifications or poor health conditions; 
3. reinstatement of an employee who previously occupied the position;  
4. absence from work due to sickness for more than four continuous months; 
5. recruitment to the army or mobilisation of an employee-natural person within a special period; 
6. the employee’s unsuitability for the job or position found within his/her probation period; or 
7. work cannot be provided to the employee due to the destruction of the employer’s property, production tools, technical or organisational conditions as a result of combat actions during martial law. 

Termination without cause in cases 1-3 and 7 above is only allowed if the employee cannot be transferred to another position or job. 

6.3. Collective Redundancies

Currently, there are no specific rules for collective redundancies in Ukraine (i.e. the redundancy procedure is the same irrespective of the number of people being made redundant). 

The applicable law defines ‘collective redundancy’ as a one-time dismissal or series of dismissals following a decision by the employer made within one month if:

• ten or more employees have been dismissed from a company employing 20 to 100 individuals; or
• 10% or more of the company’s workforce have been dismissed from a company employing 101 to 300 individuals; or(II) three months, if
• 20% or more of the company’s workforce have been dismissed, irrespective of the total number of staff.

In cases of redundancy, the employer must comply with the following notification and consultation requirements by :

• informing the trade union at the company level (if a union operates in the company) about the redundancies being considered. The notice must be given within three months of the decision on the redundancies being taken, but no later than three months before the redundancies are expected to take place. Given these time requirements, it is advisable to notify the trade union promptly after the decision on redundancies has been taken; 
• notifying the employees of the redundancy two months in advance; 
• in case of collective redundancy, notifying the State Employment Service of any redundancies being considered, two months in advance. 

In case of a mass redundancy of employees, if the work cannot be provided to them due to the destruction of the employer’s property, tools of production, technical or organisational conditions as a result of combat actions, ten-day prior notice must be provided to employees, the trade union (if established) and the State Employment Service. 

6.4. Involvement of the trade union

Notification and consultation

In cases involving redundancies, the employer must notify and consult with the trade union at the company level (if such a union operates at the employing company). In some cases, the employer is required to obtain prior consent from the trade union at company level (if a union operates) to terminate the employment of trade union members. Such cases can include redundancy (with the exception of cases in which the redundancy is caused by the liquidation of the employing company). During the martial law period in Ukraine, obtaining prior consent from the trade union to terminate the employment of trade union members is not required, except in cases of dismissal of employees of enterprises, institutions or organisations who have been elected to trade union bodies

6.5. Employees with special protection against termination of employment

Protected groups

The employment of certain categories of employees cannot be terminated by an employer without their prior consent. This ‘protected’ category of employees includes:  

• pregnant women; 
• women with children of up to three years of age (or up to six years of age depending on the circumstances); 
• single parents or the legal guardians of a child under the age of 14 or a handicapped child; 
• young workers (up to 18 years of age); 
• employees on maternity leave; 
• trade union officials (prior consent of the trade union is required). 

The law only allows the employment of ‘protected’ employees to be terminated if the employer is liquidated without legal succession. Under these circumstances, the law requires that they be paid their average wages for three months following the termination. 

8.1. Trade unions and staff representatives

Trade unions and the management of the business

Trade unions may be established at the company at a local, regional, or national level. At companies where a trade union has not been formed, general meetings of employees have representative powers.

Participation

Participation in a trade union is voluntary and may not serve as the basis for discrimination or preferential treatment by employers. Trade unions must act according to their charters and are legalised through notification of the government. Any employed or self-employed person or a student may join a trade union by submitting an application.

8.2. Collective Agreements

Parties of a collective agreement

Collective agreements are entered into between an employer and employee representatives (either a trade union or a representative elected at the general meeting of the employees).

Issues that may be dealt with

Collective agreements may cover a great range of issues that are more or less closely related to employment. Any provisions of a сollective agreement that worsen the employee’s rights and guarantees in comparison to those granted by law are invalid. 

Application

A collective agreement, if concluded, automatically applies to all employees in the company. 

9.1. Individual employment disputes

No special labour courts

Individual employment disputes are generally considered by the general courts under general civil procedural rules. There are no special labour/employment courts. 

General background

The social security system covers a variety of social risks, including maternity, sickness, disability and unemployment.

10.1. Contributions for social insurance

Calculation of contributions

Social security contributions are paid on top of the salary amount solely at the cost of the employer. They amount to 22% of the employee’s salary with a cap currently at UAH 100,500 or approximately EUR 2,650 per employee. 

10.2. State pension

Retirement age

In Ukraine, the pension age is 60 years for both women and men (a special pension age scale from 55 to 60 years of age applies to women born in 1961 or earlier). 

Private pension systems

A private pension is not mandatory and provides an additional benefit to the mandatory state pension provision. Private pension provision is provided by pension funds (public, corporate and professional/industry-oriented pension funds), insurance companies and banks.

10.3. Unemployment benefits

Unemployment benefits

Unemployed people are supported by the state. This mainly consists of unemployment benefits and training programmes, which aim to help individuals gain new qualifications and find new employment.