CMS Expert Guide to ESG Compensation in Ukraine

In Ukraine, there are currently no regulations that specifically govern ESG criteria/obligations in executive remuneration. Certain general rules relevant to ESG criteria/obligations to some extent are set forth mainly in:

• the Constitution of Ukraine;
• the Labour Code of Ukraine (Labour Code); and
• the Law of Ukraine " On Ensuring Equal Rights and Opportunities for Women and Men" (Equal Rights Law).

The listed general regulations are not industry/sector-specific and apply to all business areas. 

There is no specific distinction between ESG-relevant pillars (E, S, or G) in the regulations. In essence, the available general rules are mostly relevant to S and G pillars.

The available general rules include only the basic relevant obligations for the employers, such as: (i) equal rights of men and women in the workplace (including equal pay) and in professional development (Article 24 of the Constitution of Ukraine), (ii) payment of equal wages to women and men with the same qualifications and the same working conditions (Article 17 of the Equal Rights Law), (iii) prohibition of any discrimination in employment (Article 2-1 of the Labour Code), and (iv) prohibition of unequal pay for work of equal value performed by employees with equal qualifications and unjustified deprivation of an employee of part of the payments (bonuses and other incentives) (Article 2-2 of the Labour Code).

There is no express distinction between directors and top management employees in terms of ESG requirements set out in Ukrainian laws. The companies, however, may establish appropriate mechanisms internally for the implementation of ESG requirements and the distinction between directors and top management employees.

In Ukraine, there are no regulations governing ESG obligations that apply specifically to non-executive employees' remuneration.  Such rules may be determined at the internal local company level.

There are currently no legal requirements specifically aimed at addressing the pay gap between executive and workforce remuneration. Gender pay gap issues are generally addressed in the Equal Rights Law, with a general obligation on employers to pay equal wages to women and men with the same qualifications and the same working conditions. There is no specific obligation to assess and/or report on gender pay differences. However, depending on headcount, there is an obligation to assess and report on women's pay (in the form of quarterly statistical reports relating to the salaries of female employees).

N/A – In Ukraine, there are no prescribed remuneration schemes in relation to ESG.

In Ukraine, there are no specific legally established rules regarding ESG KPIs for the remuneration of directors/top management.

To date, there is no widely established market practice regarding the consideration of ESG criteria in executive remuneration. Only a very small number of companies apply relevant criteria based on their internally developed rules. The practice in this case is not representative and may differ significantly from company to company.

The practice regarding ESG criteria in executive remuneration is still very underdeveloped in Ukraine. In the rare cases where some companies implement such a practice, it derives from voluntary adoption standards created internally by each company itself or from the respective foreign/global policy at a company’s group level.

In general, practices for applying ESG criteria in Ukraine are not developed in any sector or industry. Currently, they are limited to sporadic cases of voluntary ESG implementation through internal policies, which may vary significantly from company to company. The trend of increasing interest in the implementation of ESG practices and overall ESG awareness can be primarily observed in the IT industry.

There is no established market practice regarding ESG KPIs in Ukraine to date. In the rare case of their application, they may vary significantly from company to company.

N/A – there is generally no established practice.

N/A – there is generally no established practice.

There are no specific ESG-related reporting obligations. Depending on headcount, there is an obligation to report general statistics, which among other information includes information on salaries of female employees. The report is provided to the State Statistics Service of Ukraine. There is no obligation to publish the report. There is no active enforcement of such obligations, and many employers fail to comply.

The regulations set out in the legislation overrule employment/civil law agreements.

There is no regulatory body overseeing ESG matters. However, the State Labour Service of Ukraine is responsible for general state supervision of employment matters (which should also include equal pay for women and men with the same qualifications and the same working conditions). The authority may conduct regular or unscheduled inspections and impose fines.

We are not aware of any relevant legal initiatives.