Introduction to Payroll in Ukraine
Innovation, not war, defines nations.
In Ukraine, innovation is never in short supply. Capturing what is best in Ukraine's innovation stock requires, though, a deep understanding of Europe's second-largest country's local tax, compensation, and payroll requirements.
Opting for payroll services in Ukraine, Skuad — the HR management industry's reputable employer of record — is second to none to help you as an international employer stay compliant by
- Managing your payroll securely, instantly, and effectively
- Managing all in-country compensation, corporate and income tax, social security, withholdings, and more
- Customizing payroll packages per country and employee
- Streamlining and optimizing payments for your distributed teams in 160+ countries and 100 currencies
Wait no more and reach out to us at Skuad to let you in on what Ukraine has to offer.
Payroll Process in Ukraine
Under pandemic-neutral and no-war conditions, payroll in Ukraine just as in many jurisdictions, follows a similar three-phase process:
(2) Payroll calculation
This phase involves setting up mandatory business requisite, not only to manage payroll but also so you run as a recognized business in a given jurisdiction. To do so, here are several basics every company needs to set up before rolling out payroll:
From a payroll perspective, a business profile requires an in-country registered business number to be used in compensation accounting, tax auditing and reporting, and many more regulatory examination and communication activities.
Whether you have one or more business locations, in or out of the country, each location needs to define a specific set of payroll policies compliant with each jurisdiction.
Leaves are not recorded for good performance and promotion purposes only. They are crucial to calculating payroll and staying compliant with multiple leaves: sick, maternal or paternal, COVID-19-related, childcare, and many more.
Similarly, attendance is mandatory for compliance and regulatory requirements. In more recent years, biometric devices are used to register attendance. In whatever method you choose to record attendance, a clear and flexible attendance policy is crucial not only to accommodate increasing disruptions in regular working hours but also to attract and retain talent for whom flexibility is a top perk.
Abiding by in-country statutory labor laws and regulations is not just a matter of legal necessity but also about brand reputation. So staying compliant with and being on top of unexpected anomalies — like a recent proposition to suspend some labor rights in Ukraine under current war conditions — is part of doing business in Ukraine and anywhere.
In addition to leaves and attendance, salary structure can be your winning card to attract and retain talent in Ukraine by designing custom packages that speak.to each employee's professional and personal needs.
Pay has always been a major, sometimes exclusive, factor in employment arrangements.
So, make sure you set a specific date for payouts unless you're required by law to pay on a certain day or within a given time frame.
Even more, your payment schedule could be yet another winning card to attract and retain talent by making some components of the payment schedule such as bonuses and raises more flexible and talent-centric.
Payroll Calculation Phase
Payroll calculation is performed either manually or using a system. In whatever form or system you use to calculate payroll, make sure your calculations address different taxes, social security, and withholdings to stay compliant.
This phase is where your compliance must be executed accurately so you don't miss any important compliance process, requirement, or form. To do so, you need to consider:
These can be done in a conventional way using a separate corporate account to pay salaries or wages; or, using an automated process where payments are a built-in feature of your software.
As a business, recording in-house operations and processes, including payroll accounting, is not only critical for your organization to learn but also to keep a constant and handy tab on expenses.
In practice, companies vary in how payroll accounting is performed. For bigger organizations, payroll accounting may be outsourced to an auditing service company. For small-to-medium organizations, though, payroll accounting is performed in-house and, depending on the company's size and in-country laws and regulations, an external auditor may be mandatory.
Payroll Reporting and Compliance
This step is where you finalize your payroll process by completing compliance forms and reporting to relevant tax and regulatory bodies.
Typically, payroll and compliance are performed at the salary or wage payment of origin. That is, all statutory taxes, social security, withholdings, and deductions are made automatically when salaries or wages are processed and before actual payment is made to employees or independent contractors.
This payroll method, performed in a three-phase process, is carried out, as mentioned, under normal circumstances.
The war, coupled with growing concerns for an aggressive COVID-19 rebound, is leading to a shrinkage in Ukraine's economy by 45%.
This unpleasant economic prospect, though, doesn't mean that you as an international employer, cannot maximize your ROI by attracting local talent in Ukraine.
Managing payroll in Ukraine can't be easier with Skuad.
Payroll Processing in Ukraine
Companies in Ukraine have been increasingly adopting more sophisticated payroll solutions to manage the growing complexities of payroll activities.
Given current developments in Ukraine, a remote HR platform to manage payroll needs in Ukraine can't be more urgent.
Payroll Processing Company in Ukraine
Skuad is always a pioneering payroll management service provider, under normal and not-so-normal work conditions.
Opting for payroll outsourcing in Ukraine using Skuad's leading payroll offering is all that you need to navigate your way to payroll compliance and talent acquisition and retention in a country undergoing unusual and rapidly changing work conditions.
Payroll Management in Ukraine
The standard threel-phase process of payroll management in Ukraine is expected to change dramatically because of a range of proposed labor law changes.
These include more deregulation, liberalizing employment legislation, COVID-19-related work arrangements (such as remote and telework), and, as mentioned above, suspension of some labor rights.
Payroll Compliance in Ukraine
The basic statutory employment rights are guaranteed under Ukraine's flagship Labor Code of December 10th, 1971.
In a similar line to statutory compliance requirements in other jurisdictions, Ukraine's labor laws, regulations, and policies provide for minimum salary or wage compensation, social security benefits, and leaves (for public holidays, parental or maternal purposes, sickness, etc.).
Moreover, employees with a long service record are shielded from dismissal for economic reasons (such as layoffs or furloughs).
The next section delves more deeply into the statutory rights and compliance requirements to which employees are entitled and with which employers should comply.
Payroll Components in Ukraine
Employment statutory rights and compliance requirements are regulated, as noted, under Ukraine's flagship Labor Code of December 10th, 1971.
The entitlements employees enjoy as payroll components can be broken down as follows:
UAH 6,000 a month and UAH 36.11 an hour — minimum salary or wage as of January 1st, 2021
These are classified according to working hours and employee age or working conditions as follows
Seven hours — for a 40-hour working week
Six hours — for a 36-hour working week
Four hours — for a 24-hour working week
Employee Age or Working Condition
16-18 years old — 36 hours a week
15-16 years old — 24 hours a week
Employees working under harmful conditions — a maximum of 36 hours a week
Under Ukraine's labor laws, employees should be paid overtime as follows:
- Set at a maximum of four hours on any two consecutive days and 120 hours a year
- Paid at a double regular hourly pay
- Set at a maximum of 12 hours for all working hours of shift workers
- Set at a unified social contribution of 22% of salary, wage, or similar payments
- Capped at 15 minimum statutory salaries
- Not capped at a maximum paid duration
- Set at 100% of the regulatory salary or wage for an employee's first five days of sick leave
- Recovered by employers from Ukraine's Social Security Fund (SSF) on the sixth day and onward of sick leave
- Set at 50%-100% of regulatory salary or wage paid by SSF depending on each employee's employment arrangement
Paid in full for all parents or grandparents for 126 (or 140) calendar days as follows:
- 70 calendar days — for pregnant women before childbirth
- 56 calendar days — for women after childbirth
- 14 calendar days (excluding all statutory holidays) — no later than three months after childbirth for a child's natural (or not) parents or grandparents
January 01 — New Year's Day
January 07 — Orthodox Christmas
March 07 — Women's Day (Bridge Day)
March 08 — Women's Day
April 24 — Orthodox Easter Day
April 25 — Orthodox Easter Monday
May 01 — Labor Day
May 02 — Labor Day (in lieu)
May 09 — Victory Day Holiday
June 13 — Orthodox Pentecost Monday
June 27 — Constitution Day (Bridge Day)
June 28 — Constitution Day
June 28 — Day of Ukrainian Statehood
August 24 — Independence Day
October 14 — Day of the Defender
December 25 — Christmas Day
December 26 — Christmas Day (in lieu)
- Applicable to all residents and non-residents receiving income from a source in Ukraine
- Withheld from personal income as follows:
- 18% — as a minimum statutory tax
- 1.5% — as a military levy
In addition to Ukraine's Labor Code, a few more important laws are relevant:
- Law 1213-IX of February 4th, 2021 on Amending Certain Ukrainian Laws Regarding Improving Legal Regulation of Remote Working, Homeworking (Teleworking) and Working Based on Flexible Working Hours Regime
- Law 1667-IX of July 15, 2021, on Promoting Development of a Digital Economy in Ukraine
Employee Benefits in Ukraine
In addition to all statutory benefits to which employees and independent contractors are entitled in Ukraine, employees are also entitled to jointly own intellectual property rights with employers if an IP right is created during work.
This benefit, seen against a backdrop of increasingly favorable digital economy laws, is apt to attract high-skilled and knowledge workers.
The state of payroll in Ukraine, you must have learned now, is in flux.
The combination of evolving labor laws, growing digitization of services and entitlement to rights, and, of course, the impact of COVID-19 and war, is creating a mosaic of payroll complexities you as an employer have no options but to consider.
Going it alone in Ukraine is an option a few, if any, international employers might contemplate.
Instead, Skuad is at your disposal to hover you over — drone-style — Ukraine's changing payroll management landscape.
The Hryvnia (UAH), Ukraine's official currency, exchange rate against USD ($) is 0.62.