Payroll, benefits, taxes, and compliance can be difficult to manage in Ukraine, particularly if you don't have established local relationships. You can hire employees in Ukraine effectively, conveniently, and in full compliance with all relevant labor laws.
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Residents of Ukraine are liable to pay taxes on their worldwide income. However, the taxes are subject to the restrictions set forth by any applicable Double Tax Treaty. Non-resident employees are subject to income tax in Ukraine only on their Ukrainian-source income.
Ukrainian-source income, for example, includes income received by an employee from their employer, either resident or non-resident, concerning employment exercised in Ukraine or, under conditions, investment profit from operation with non-Ukrainian investment assets if the issuers own Ukrainian subsidiaries.
The same tax rates apply to tax residents and non-residents (with certain exceptions).
Resident individuals are taxed on their worldwide income at a standard tax rate of 18%.
Taxable income applies to any income received as a salary, benefits, and income from abroad.
As per the provisions of the Ukrainian legislation, an employer must enroll an employee in the Ukrainian state social security system upon signing an employment agreement. An employer is also responsible for payment and accrual of social security contributions (SSC) at its own expense to the state budget.
The social security contribution in Ukraine is 22% of the gross earnings (salaries and benefits paid to employees). This percent is applied to salaries less than 25 subsistence minimums for able-bodied persons.
The 22% of gross salary is divided among different funds that include the unemployment fund, accident fund, pension contribution, and temporary disability fund.
The maximum base for the Unified Social Tax (UST) is 15 x (the average cost of living), with a maximum capping of UAH 90,000.00.
Statutory benefits are a certain kind of mandated benefits that employers must comply with while hiring and employing full-time and part-time employees. Statutory benefits that are mandated include contributions towards social security, unemployment insurance, and workers’ compensation.
Statutory benefits in Ukraine include pension benefits, unemployment, death, and short term and long-term disability resulting from occupational illnesses or personal accidents.
The employment laws in Ukraine also mandate paid time off.
The pension system in Ukraine is based only on level 1 of the pension provision that follows a PAYG ‘pay as you go’ level. A retired employee can claim his pension at the age of 60 years. The contributions to pension amount to 22% of an individual's salary, which is paid either by the individual or their employer.
Employers must pay salaries for vacation days (also known as Vacation pay). This provides employees with annual leaves to preserve
An employee during the vacation period is only paid an average salary.
State social security payments are responsible for the payment at the time of short-term disability, long-term disability, or during unemployment. Contribution to the employment insurance is made by the employer on behalf of their employees in the form of unified social tax. The employer’s contribution to the employment fund is 22% of the employee's gross salary.
Short-term disability – Employees are paid benefits in 100% x (employee's average salary per day of disability). The employer pays the first 5 days, the rest – by the state fund.
However, the payment amount depends on the employee’s length of service if the disability is not work-related.
Long-term disability – Long-term disability benefits depend on the average salary (or minimum income) and the level of disability. The spherical disability state commission establishes the level of disability.
Unemployment insurance – Compensation from the unemployment fund depends upon the reason for unemployment, the length of service, and the person's average salary before unemployment. This compensation could also be provided as one single payment.
Fringe benefits are an additional part of an employee's compensation, considered part of the employee’s salary for payroll purposes, and a basis for calculating employees' labor rights.
Under their benefits policies, Ukrainian companies usually offer alternatives, including inkind compensation and flexible work agreements.
Companies know that incentivizing their employees is not always paying more but better.
In this regard, companies use different in-kind elements to individualize the compensation for every employee’s needs; this also has favorable tax treatment, increasing the net amounts employees receive.
Commonly provided fringe benefits include
Voluntary medical insurance offers different additional options, some of the most popular ones in Ukraine being:
The exempt benefits include
The mandatory long-term incentives listed above include market practice benefits. Long term benefits are a great strategic way to retain and attract the right talent to a business.
A few commonly provided supplementary employee benefits in Ukraine include retirement, life insurance, medical, and personal accident insurance. A few perks also range from health days’ to critical illness coverage.
Long-term life insurance – Employers in Ukraine provide additional retirement insurance that can be arranged in the form of long-term life insurance. For tax benefit purposes, an employer chooses insurance coverage that must be arranged in the form of additional pension insurance. Such insurance covers have several requirements according to the law:
In cases other than above, the employer has to pay the following taxes:
However, corporate clients use this as an instrument of the social package.
Territory of coverage: Ukraine or worldwide.
Limits: Fixed amounts or salary-based (up to 3x annual salaries)
Scope of coverage:
The employer pays costs and premiums that depend on factors such as each employee's group size, occupation, gender, and age.
Typical medical insurance plans in Ukraine include:
Premiums for health insurance in Ukraine are usually paid for by the employer. The costs depend on group size, the scope of the medical plan, level of clinics covered (state/ departmental, private clinics of different levels).
Territory of coverage: Ukraine or worldwide.
Period of coverage: working hours only, 24 hours a day (preferable)
Insurance limits: fixed amounts or salary based (usually up to 3x annual salaries)
Scope of coverage:
Premiums are must be paid for by the employer, and the premium amounts would depend upon group size and employee occupation.
This insurance has a few forms, including single policies, group medical coverage, or separate corporate business travel insurance policies.
Scope of coverage:
The amount of severance pay employees in Ukraine are entitled to depends on the reason for termination and the employee’s seniority. If an employee terminates their contract for violation of agreement or law, they are entitled to a severance pay of three average salaries.
In most other cases, severance pay is one month's salary in addition to the notice period pay (if provided in lieu of actual notice period), compensation for unused vacation pay, and other benefits.
Corporate officers are entitled to a severance pay of six months of average salary.
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