Taxes and payrolls: the peculiarities of the labour market in Ukraine
Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the labour market in Ukraine.
Even if the national currency is the Ukrainian Hryvnia (UAH), the whole article is in EUR to compare easily across countries and exchange rates
General data about the Ukrainian labour market
|Minimum wage||164.28€ monthly|
|Payment||Must be paid between the 15th and 20th of each month and the 31st and 7th of the following month.|
|Maximum working hours||40h|
|Maximum overtime hours||4h during 2 consecutive days|
|Maximum overtime hours a year||120h|
|Working hours compensation||200% rate of an employee’s regular hourly rate.|
Employees who are pregnant or have children under three years of age, those under 18, and those who are studying at school or college are prohibited from working overtime. Employers are required to obtain consent from women who have children aged between 3 and 14 and individuals with disabilities to work overtime. However, in cases of production disruptions due to accidents or to avoid production downtime, overtime may become mandatory.
Payroll taxes in …
Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.
|Contingencies||Employer %||Employee %|
|Unified Social Contributions (maximum annual contribution 5,825.94€)||22%|
|Total Employment Cost||0.6%|
Once contributions are paid, employees need to pay a flat income tax of 18%. Moreover, there is a rate of 1.5% for the military/defence levy. In total, the income tax is 19.5%.
Contingencies from self-employees
Self-employment workers should register with the Ukrainian government. Once registered, you’ll pay a 5% tax on your profit in addition to the regular income tax rate.
Example of net salary in Ukraine
As a reference, we use the average salary of a software engineer. In Ukraine, on average, software engineers earn annually 29,400€.
|Gross salary (annually)||29,400|
|Unified Social Contributions||22%||6,468 → maximum annual contribution 5,825.94€|
|Total Employment Cost||0.6%||176.4|
|Net salary (annually)||23,525€|
The employer contributes 5,825.94 euros to social security, and the employee contributes 176.4 euros.
After paying the income tax, the employee has a net salary of 23,525 euros from a gross salary of 29,400 euros.
Unemployment regulation in Ukraine
Pregnant women, women with children under three years of age, and pre-pension employees are all protected against dismissal.
The notice period depends on the individual initiating the process
|Notice period||Individual initiating|
|2 months||The employer|
|14 days||The employee|
|No notice period||Mutual agreement|
In Ukraine, the severance payment is one month’s salary for every two years of employment.
The probation period for a non-qualified employee is one month and three months for specialists and managers.
Different kinds of leaves in Ukraine
After completing at least six months of continuous employment, employees have the right to a minimum of 24 days of paid annual leave. However, for minors and employees with challenging and hazardous jobs, the entitlement to paid leave may be higher.
There are 12 public holidays.
Paid sick leave lasts for 4 months. It is paid by the Social Insurance Fund, except for the first 5 days that the employee pays. The Social Insurance Fund’s compensation depends on the seniority of the employee.
|Time worked||Sick leave payment|
|Less than 6 months||Payment based on minimum wage|
|0-3 years of employment||50.00% of the employees’ average salary|
|3-5 years of employment||60.00% of the employees’ average salary|
|5-8 years of employment||70.00% of the employees’ average salary|
|More than 8 years of employment||100.00% of the employees’ average salary|
Other leaves are:
- Up to 7 days for bereavement leave.
- 10 days after marriage.
- Leave for students during the exam period.
Paid parental leave
Maternity leave lasts for 126 paid calendar days of leave: 70 before the due date, 56 after the birth. It is paid by the Social Insurance Fund at 100% of the employee’s average salary.
There is no paid paternity leave in Ukraine. Fathers can take two weeks of unpaid leave or part of the mother’s leave if they have returned to work earlier.
After maternity leave ends, mothers, fathers, and grandparents can take unpaid parental leave until the child turns 3.
Other common Ukrainian benefits
|Benefit||% of companies with this benefit|
|Casual dree code||48%|
How to employ a Ukrainian worker
If you are hiring workers in Ukraine, it is compulsory to provide a written employment contract that can be concluded either for a fixed or an indefinite period. Regardless of the duration of the contract, it must be in Ukrainian language.
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.
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