October 2020 – Ukraine Payroll Outsourcing

What does ‘truly integrated’ HR and payroll really mean?

For both HR and payroll professionals, recent years have brought about a significant shift in role. More and more, HR is expected to deliver…

For both HR and payroll professionals, recent years have brought about a significant shift in role.

More and more, HR is expected to deliver added value to the business through analytical and transformational work, rather than solely focusing on people administration.

Payroll departments, meanwhile, have seen their responsibilities grow significantly too, largely thanks to legislation like RTI (Real-Time Information) and auto-enrolment.

While some businesses have sought to meet these new-found challenges separately (often outsourcing payroll altogether), more and more organisations now recognise the value in tackling these challenges in parallel, integrating HR and payroll into one single system.

Done correctly, the integration of HR and payroll brings a vast array of benefits – with one single set of data which means fewer duplications, less work, and far less room for error.

It also makes reporting more accessible and insightful, bringing together employee and payroll data to help you accurately relate pay to performance.

The problem is when HR software providers say “Integrated HR and Payroll” they don’t all mean the same thing. And while providers will almost always promise some kind of payroll integration – it will often fail to live up to your expectations.

In this blog post, we’ll identify what truly integrated HR and payroll looks like, and how the right system can help you deliver big benefits to the business as a whole.

Why true HR and payroll integration means a single source of data

Speak to HR software suppliers about their platform and it won’t be long before you hear the word ‘integration’. Vendors know that bringing HR and payroll data together is a key driver for many businesses, and it’s, therefore, becoming a primary selling point for the software.

Make no mistake though, one supplier’s idea of integration can be very different from the next.

While true integration can be defined as the use of one single database, many suppliers simply offer the link-up of two existing systems so that they “talk” to each other – but with data still existing separately in each system.

While this does offer some advantages, it isn’t integration in the truest sense – and it can present some problems.

Firstly, when systems are bolted together in this way, the data typically only flows in one direction. From HR into payroll or vice versa.

This means the data can easily become inconsistent if something were to be manually edited in the ‘receiving end’ of the system.

What’s more, with two separate datasets in existence, even the simplest of formatting issues (for instance £10.00 v £10) can cause significant headaches, putting up a roadblock to accurate reporting.

Perhaps most significantly, bolting systems together leaves the integration open to potential failure. Ultimately, you’re still transferring or syncing data from one system to another – and that’s less reliable than having both systems use the same dataset automatically. This situation is far from ideal, as inaccurate people data can cause all sorts of problems, particularly when it relates to your employees’ pay and benefits.

When you’re in the market for integrated HR and payroll software, it’s important to ask suppliers if their solution is built on a single (‘unitary’) database.

Only the single database approach can guarantee a reduction in administration, and eliminate the pitfalls of duplicate data entry.

The benefits of properly integrated payroll

As well as putting duplicate data entry to an end, single-database HR and payroll systems can bring a raft of benefits for the wider business.

Here are just some of the ways true payroll integration can support your overarching business aims:

1 Improved, insightful reporting

Pooling and analysing your HR and payroll data can be a significant undertaking when you’re operating separate systems – and even when your systems are bolted together, the existence of separate data sets can still make accurate reporting a challenge.

Given the enhanced capabilities of today’s analytics and reporting tools, that’s a real missed opportunity for any business.

With true HR and payroll integration, you’ll always be working with one single version of the truth. A data set you can trust for actionable insights, deliverable in one click.

2 Better employee engagement

When you integrate payroll with an HR system that offers self-service functionality, you take another positive step in delivering an engaging employee experience.

As well as being able to book time off and manage their personal data online, employees will also be able to view their payslip and benefits data at their own convenience.

This gives your employees greater visibility over their pay records and more understanding of their benefits entitlement. It also becomes easier to spot and solve inaccuracies.

This shouldn’t be underestimated, given the clear correlation between efficient, accurate payroll and continued employee satisfaction.

3 Reduced exposure to compliance issues

Maintaining compliance with fast-evolving employment legislation is arguably one of HR’s greatest modern-day challenges. From tax issues to working time regulations, there’s no shortage of red tape to wrap you up – but having all your data in one place can help you keep you compliant with the latest employee legislation.

Single database systems can also help you keep your house in order from a GDPR (General Data Protection Regulation) perspective too. Responding to a request for data removal, for instance, becomes easier when you know you only have to delete it from one single system.

Summary

As HR and payroll gradually intertwine to play a larger, more strategic role in the business, pooling the departments’ data resources makes a logical and sensible step.

Unless you’re operating a heavily embedded HR system that you simply can’t move away from, firms should now be seeking as much integration between HR and payroll as possible.

Remember though, every software supplier has its own definition of unified data. Only single-database solutions can deliver the ‘holy grail’ of true integration.

This article was curated from naturalhr.com
Featured Image Credit: Photo by Jonathan Borba from Pexels

How Integration Is Shaping the Future of Payroll

For years major organizations around the world have been adopting and upgrading enterprise technology solutions to improve essential business functions…

For years major organizations around the world have been adopting and upgrading enterprise technology solutions to improve essential business functions, most notably in HR, Finance, and Sales. Recently the digital transformation has extended to the payroll function, a development that appears perfectly timed with the next key step for companies looking to improve their performance and control: system integration.

Although data, big data, and better data have been hot topics for years, their significance and application have been an ongoing discovery for both innovators and end-users. Now the widespread ability to link the software systems used across functions serves to supercharge our data quality, accuracy, and access, and thereby elevate both process results and potential. In global payroll, this confluence of advancing technology and systems integration is serving to transform payroll from a poorly understood back-office function to a key source of business information and performance insights.

The Process

Behind every successful payroll, runs tedious hours of manual data collection and verification, adjustments, calculations, and information transfer. Advanced payroll solutions and automation technology are already transforming those processes to improve accuracy, security, speed, and results—integration takes it a step further.

By connecting systems across related functions through seamless interfaces, the benefits of these better solutions can be shared throughout the workflow. More complete employee data in a company’s HRIS can be accessed directly by their global payroll platform, which can automatically validate the information in minutes to highlight any critical errors in need of attention. Suddenly a process that took days and required an employee in HR to engage with an employee in payroll is completed in a fraction of the time with almost zero labour.

Integrating systems requires a level of standardisation of both processes and data formats across functions, which can create opportunities for greater alignment and understanding between related departments. It presents a fundamental change to the way we process payroll and shares the benefits throughout the organisation by enabling better access to better data for all integrated solutions.

The People

For the payroll professional, integration brings greater opportunities to contribute to and engage with their organization. Our research shows that up to 40% of current payroll activities can be automated, a figure exclusive of the potential savings available through system integrations. That’s a significant amount of time that payroll professionals could be spending on higher-value tasks.

Integration can afford payroll teams the opportunities and time to work upstream of their function to improve the overall process. A payroll professional could focus their saved time on minimising or expediting error resolutions, thereby directly improving payroll performance and the employee experience. Another could work towards shortening cycle times to include more complete and accurate data in each payroll run, enabling more comprehensive reporting on the company’s workforce.

As the quality and totality of data improves, its value increases. And as payroll data becomes more important to organizations, so will the people who understand it. The role of the payroll professional will expand beyond processing data changes and pay calculations to interpret trends and applying their unique insight to help support and improve overall business performance.

The Perks

As I’ve mentioned, the importance of improving payroll solutions and integrating related systems lies in the data. Acknowledging data integrity as both the end and means of payroll innovation is the key to unlocking its potential.

Systems integration creates opportunities to standardise both processes and formats, which can speed data collection and movement between functions. Integration minimises or eliminates manual intervention, diminishing the risk of introducing errors into datasets and improving accuracy—not only for payroll but for each function accessing integrated data.

Integration is key to creating what’s called a single source of truth (SSoT) for an organization. There are no versions of data, no files stored on desktops, no manual entry of Excel content. There is only one source of accurate, up-to-date, complete data that is maintained and accessible through the linked systems. Everyone who needs it has access to it, and today’s leading systems automatically track and control access and changes to ensure transparency and traceability.

For global payroll, this means more complete, true data in every cycle, minimised errors, and better performance. For organisations, it means greater control and visibility of their largest cost centres, as well as related functions. Rather than payroll data being a security risk, an advanced, integrated payroll solution can become a vehicle for compliance, as well as positive process change. Audits are easier and quicker to manage, reporting is more flexible and accurate, and analytics can happen in real-time for instant insights and problem-solving.

The Full Picture

For any company processing payrolls for multiple populations or multiple regions, moving to an advanced, unified solution will improve results. For enterprise organizations with complex needs, integrating that solution with other core functions like HR and Finance will transform payroll data into a tool for elevating performance and maintaining compliance. While integrating systems can be a major undertaking, its benefits are no less tremendous, with advantages shared across integrated functions, related departments, business leadership, and in fact every employee—including the ones responsible for processing the future of payroll.

This article was curated from CloudPay
Featured Image Credit: pxfuel.com

Benefits of an Integrated Payroll System

Everyone in business today knows the value of efficient processes and systems. Duplication of efforts hits the bottom line hard…

Everyone in business today knows the value of efficient processes and systems. Duplication of efforts hits the bottom line hard, making good processes an important part of business success. Payroll is a perfect example of a good system to target for efficiency with integration.

What Is an Integrated Payroll System?

Employees responsible for human resources and payroll often deal with the same information, such as employee identification information, employee salary information, and employee status. Two separate departments gathering, storing and using the same information independently make for a duplication of efforts, the possibility for human error, and more liability because of the sensitive nature of employee information. An integrated payroll system is one that allows both human resources and payroll staff to access the same information without duplicate paperwork or files, creating efficiencies that save time and money and reduce liability.

Reduction in Costs

One of the obvious benefits of integrating payroll with related systems is a reduction in administrative costs. When duplication of paperwork, data, and efforts is eliminated, your company is saving money on salaries, supplies, and system resources such as storage space.

Accessibility and Efficiency

But a bigger benefit of integrated payroll is the jump in accessibility and efficiency. When the payroll files are locked up in a payroll department across the building or on a different floor, human resources staff who may need to get something out of the file have to plan to either make a call or make a trip to get to the files they need. Even if those files are electronic, that information may still need to be requested from the other department. An integrated system opens up access to authorized staff from different departments that need to work with the same data.

Management Information

Along with better access and efficiency, an integrated payroll system also comes with better management information. Quicker, easier access to accurate payroll information means better management reports for improved decision-making on costs and planning. Management reports from integrated payroll systems provide multiple formats of reporting. Comparisons of personnel costs with competitors and industry peers, or an eyeball on staffing expenses compared to revenues are easier to compile with reports formatted in an excel format.

Automatic Updating

When a company’s payroll system is integrated with its human resources information system (HRIS), data entered or changed in payroll is automatically updated in HR, and vice versa. It’s the same information. Employee new hires, raises and bonuses, terminations, and benefits are all related and integrated without the necessity of duplicate files. Electronic records are kept in an easy-to-access audit history and do not require the purging of data. The amount of work and room for error is greatly reduced while the quality and security of the information are improved.

What to Look for in a System

When you want to integrate your payroll and human resource systems, consider doing it with online payroll services. Entrepreneur senior writer Kim LaChance Shandrow recommends asking what services are offered, what the pricing structure is, how the setup is handled, what the security infrastructure is, where the data center is, what accounting/HRIS systems they can integrate with, and what kind of customer and technical service is available. Also ask about employee self-service, which is a part of many online payroll services, allowing self-onboarding and lifetime employee accounts for access to payment details and tax forms.

This article was curated from PAYDAY
Featured Image Credit: Image by rawpixel.com

Regulation of Compliance Matters in Ukraine

The term “compliance” in its current sense emerged in the US business environment over the last 30-40 years and refers to…

The term “compliance” in its current sense emerged in the US business environment over the last 30-40 years and refers to the system of internal regulations and measures implemented by entities to ensure adherence to laws, as well as to specific industry standards, trade customs, and regulations. In international business, this term also currently covers the system of control an entity uses to ensure that its directors, managers, and other employees, as well as contractors and authorized representatives, adhere to all regulations applicable to a business, whether local, foreign, or specific to a company.

In Ukraine, this term has not been widely used, as legislative and practical efforts are focused very narrowly. In particular, the principal statute in the area — the Law on Prevention of Corruption (adopted in 2014 and regularly amended) — is aimed primarily at counteracting corruption and eliminating the impact of conflicts of interest on business and government decisions. However, like in many other aspects of the Ukrainian economy and business over the last quarter of a century, Ukrainian companies will inevitably follow the path chartered by multinational companies in the area of compliance and adopt the best practices that have been developed, which cover a much broader range of issues.

The main driver for this will be the demands of international and certain foreign legislation (US Foreign Corrupt Practices Act, UK Bribery Act, etc.) because global companies are introducing their worldwide standards into their Ukrainian operations, causing their Ukrainian business partners to adopt the relevant standards. In particular, the best clients of Ukrainian companies — multinational and big foreign companies — demand that their suppliers either adhere to the customer’s compliance policies or that they have their own compliance policies that are satisfactory to the customer.

Ukrainian legislation, although not perfect, has been drafted along the lines of the most significant international anti-bribery conventions. For example, now, any bidder in a government or municipal tender must have an anti-corruption program and a designated company employee responsible for its implementation. Certain specific legislation has been adopted to regulate interaction with healthcare practitioners and that has had a major impact on the pharma industry in Ukraine. Also, as of 1 September 2014, all companies in Ukraine may face criminal liability for corruption offenses committed by their employees (not only by management!). Therefore, to survive and develop, any large or mid-size Ukrainian business must build an effective compliance system that takes into account both best international practices (which have emerged in response to certain foreign laws) and Ukrainian legislation.

Key Compliance Issues and Protections

Each company operating in Ukraine must build its own system of compliance depending on its specific features and the issues it encounters in its business. Generally, however, any effective compliance program includes the following elements:
a compliance policy and compliance officer
internal audits
evaluation of compliance risks
measures preventing violations by third parties authorized to act on behalf of the company
communication channels for reporting offenses or possible violations (including whistleblower hotlines)
measures are taken by the management in response to violations or whistleblower reports
protection for whistleblowers
internal investigation procedures
rules for interaction with law-enforcement authorities authorized to investigate corruption and other violations of the law
rules for resolution of conflicts of interest

Additional elements of the compliance system depend on the area of business and the level of corruption risks in the environment (industry, geographic area, and interaction with the authorities). For example, the risks for a transportation company will significantly differ depending on whether it performs cross-border carriage and, in any case, its risks will be different from those faced by a pharmaceutical manufacturing company (and, again, there will be different risks for domestic and foreign manufacturers).

Identification and Evaluation of Compliance Risks

Copying a compliance policy or program from another company is not effective. Instead, each company must identify which of its particular business processes carry high risks of non-compliance and corruption. Note that in some cases employees act corruptly for their own benefit but, in many cases, they will do so trying to obtain or retain business for the company, thereby exposing it to liability under many foreign laws in addition to Ukrainian laws. In Ukraine, traditionally, the riskiest processes are those related to obtaining or renewing a license or permit (e.g., for construction or renovation), import and export (customs clearance), an audit by a government authority, and reimbursement of export VAT.

A risk assessment must be conducted before the compliance program for the Ukrainian office is put in place. However, it should also be repeated periodically to ensure that the compliance system is up to date and to identify any changes that may be needed to ensure the continued effectiveness of the program.

The assessment should identify the job positions that are most exposed to corruption risks, the methods by which violations may be committed, and the circumstances that facilitate such violations. Employees in high-risk positions may be required to undergo the relevant training and review more often than other company employees. To minimize the risks such employees may be required to follow relevant standard operating procedures. Also, the relevant job duties may be allocated among several employees or to the most suitable employee based on their personality traits and/or skills and experience. Other measures that help to lower the risks should also be used (e.g., electronic declaration forms that do not require personal interaction between the employee and the government official responsible, and establishing thresholds and reporting requirements for gifts and payments received or paid by the employee).

The company should always keep the identities of whistleblowers secret and otherwise protect their rights. In particular, retaliation or discrimination against such employees should be prevented or stopped.

Conflicts of Interest

A conflict of interest is a relatively new concept in Ukrainian law and is defined in the Law On Prevention of Corruption. Thus, all company employees should be trained on how to identify and resolve such issues, and what harm can be caused to the company if this is not done.

It is better if the conflict of interest policy is communicated to all employees (and to contractors), even if they are not in a conflict of interest situation at the time. Particular attention should be devoted to the procedures for the disclosure and the resolution of the conflict of interest situations because the privacy and labor laws need to be taken into account when such actions are implemented.

Anti-Corruption Programs under Ukrainian Law

An anti-corruption program regulates a much narrower set of issues than the compliance policy or the code of ethics. Nevertheless, those companies that must have such a program as a separate policy (e.g., those that bid in government tenders) should observe some key requirements. First, the anti-corruption program needs to be preliminarily discussed with employees before it can be formally implemented. In addition, it must be accessible to the employees at all times. For Ukraine, this means that a policy in English (or another foreign language) uploaded somewhere on the company’s intranet will not satisfy this requirement.

Ukrainian law does not contain a full list of the issues that must be addressed in its anti-corruption program. However, the following specific items must be included:

the range of persons to whom the program applies
a list and description of the anti-corruption measures, standards, and procedures, and the manner of their application, including the corruption risk assessment
the ethics standards for employees
the rights and obligations of the employees and company owners in the anti-corruption field
the rights and obligations of the compliance officer and subordinates (if any)
the procedure for regular reports by the compliance officer to the owners of the company
the procedure for monitoring compliance with the anti-corruption program and evaluation of the measures envisaged in it
the terms of confidentiality for employees providing information to the compliance officer about attempted bribery or the solicitation of bribes
the procedures for the protection of employees who have provided information about corruption or related offenses

The obligation to comply with the anti-corruption program must be included in the employment agreements of employees. This requirement may also be present in agreements with the contractors of a company, which provides solid legal grounds for protecting multinational businesses from questionable Ukrainian contractors.

Compliance Challenges in Ukraine

The relative novelty of the concept of compliance in the Ukrainian business environment means that there are little awareness and an acute shortage of qualified candidates for the position of a compliance officer. As a result, non-compliance risks have been largely ignored, even by foreign managers of Ukrainian divisions of multinational companies. This has created significant potential (and actual) exposure to enforcement actions against companies and their management in their home countries (especially in the US), which in some cases led to the loss of market share and dismissal of the relevant top managers.

In our experience, the lack of compliance policies (or of their proper enforcement) in Ukrainian offices has led to the flourishing of costly corporate fraud, low morale and a lack of loyalty from staff, and significant effort and legal expenses required to clean up the consequences of non-compliant acts. This includes the cost of dismissing the relevant top managers and other employees, expenses related to the recovery of stolen assets, full investigations of violations in Ukraine, and millions of dollars to defend the company in the US. Accordingly, managers of international businesses in Ukraine must pay prompt and constant attention to ensure that the business activities of their companies comply strictly with Ukrainian legislation and global best compliance practices.

This article was curated from Ukrainian Law Firms
Featured Image Credit: Image by xdfolio from Pixabay

Payroll Outsourcing: Frees Up Your Resources to be More Strategic

The outsourcing of personnel services and payroll administration can be defined as the performance of payroll tasks and management…

Why is payroll outsourcing a good idea?

The outsourcing of personnel services and payroll administration can be defined as the performance of payroll tasks and management of personnel by a third party. This is in order to relieve the workload of human resources and use internal resources more efficiently.

It is true that over time, this type of service has changed greatly. It has been evolving and modernizing to such an extent, that now it’s possible to carry out tasks and procedures that were unthinkable a few years ago.

In the past, these types of services were far more rigid. There was not the automation technology we have today.

Nowadays outsourcing is extremely flexible. Using next-generation cloud technology and artificial intelligence means tasks can be automated and be more efficient.

On the one hand, flexibility allows you to select exactly what jobs to outsource. These can range from inputting workers’ data (registrations, cancellations, changes, etc.) through to payroll calculations.

On the other hand, it means you can improve management processes. That is because we have experts who specialize in this type of service and technology and can significantly improve a company’s management processes. Or, at the very least fine-tune them.

Company Expansion

Today, it is essential to have a management model that can easily adapt to the needs of the business. Companies grow, shrink, merge, demerge, or expand into other countries. So you need a flexible payroll service to support your business.

Being adaptable to business needs is paramount for companies to prosper. If we take a large company for example. If they decided to expand into new markets, they not only had to adjust many of their processes but also hire new employees in these new countries.

This implies a change in the way of outsourcing payroll services. Up until the expansion they were pretty standard and managed locally. So it is a big change to move to a multi-country payroll service with global management.

Through outsourcing, multinationals are able to focus on more strategic tasks that add much more value to their business.

They rely on experts to ensure compliance with current local labor laws in the countries they operate in. And to reduce operational costs, they have access to quality information that means they can be far more analytical in their decision making.

What do I need to consider when choosing an outsourcing service?

Before outsourcing payroll services, a company must analyze its current situation and what it needs in order to find the most appropriate solution. Each company is different and has specific needs according to their industry, geography, and the specific characteristics of their business.

After the analysis and the decision to outsource is made, a review of the company’s management processes must be done also as part of the organization change management.

It is better to not just implement a new payroll management service and continue doing things the same way as previously. We must take advantage of the transition to adapt, improve, or fine-tune Human Resources management processes.

This is why it is important to have change management experts like working with the company and of course that there is mutual trust between the parties. For the project to prosper, trust is vital to prevent the fear of losing control by outsourcing a service.

Our current technology has quality controls and audits done regularly. This ensures our clients have trust in us and are still in control.

This article was curated from Alight
Featured Image Credit: Image by William Iven from Pixabay

Payroll Services in Ukraine

Payroll Outsourcing and HR services are a very sensitive area of accounting because you should be confident that employees get what they have…

Payroll Outsourcing

Payroll Outsourcing and HR services are a very sensitive area of accounting because you should be confident that employees get what they have earned, taxes are calculated and paid correctly, the confidential data are protected.

Following the legislation in Ukraine is more challenging than in western countries, rules and regulations may vary a few times a year and are not available on the internet in English. Sometimes they are not clear and leave room for interpretation. That is why it is better to outsource payroll services from reliable service providers.

Work with well educated, experienced staff and a strong internal control system ensure that a major error is less likely to occur. It should be a trusted payroll company in Ukraine and source for payroll outsourcing, human resource administration, and related services. With a provider of a flexible payroll solution for HR outsourcing and outstaffing services that will meet your business needs, your employees will be accurately paid in time, while you can focus on achieving the main goals of your business.

Standard payroll outsourcing and HR administration services should include (but not limited):

advising on employment and labor legislation;
payroll accounting and payroll taxes calculation;
preparation and submission of obligatory monthly and quarterly reports (management statements, if needed) to statistical offices, tax offices, labor funds;
Arranging timely payment of wages, salaries, and deductions (Income Tax, Military Duty and Social Insurance Contribution);
Administering leave, expense claims, keeping track of personnel’s’ vacations, sick-leaves, etc.;
HR administration, filling in Employment Record Books, dealing with internal orders regarding the company`s employees.

Basics of payroll calculation in Ukraine

There are a few ways employers can determine gross wages and employee’s net pay. It can be done by hand, using an excel table, online payroll calculator, or special accounting software. Alternatively, as mentioned above, they may choose to outsource the entire process by hiring one of the payroll services companies which are present in Ukraine.

The payroll accounting process consists of the following 5 stages:

Determination of an income for time worked (as a rule, it is a wage rate per month);
Income calculation for a nonworking time (a vacation, sick, maternity leave, etc.);
Ukraine payroll taxes / contributions determination;
Salary and related taxes payments processing;
Preparation and submission of payroll-related reports.

Typically, salaried workers are paid fixed monthly wages, which is their gross regular pay. Once gross regular pay is calculated we subtracted salary deductions from it.

Statutory Ukraine payroll taxes are personal income tax (PIT) at 18% and military duty with 1.5% (MD). These are items that employer-determined and paid on behalf of the staff.

Employer, then, has to calculate the amount of Social Security Tax (contribution) to pay. It is a fixed percentage of an employee’s gross pay. The current tax rate for Social Security is 22%%. The maximum amount of wages subject to Social Security tax is 15 minimal wages (or 55,845.00 UAH). An income exceeding 15 minimal wages is excluded from taxation under UST. No Social Security Tax (contribution) is deducted from the workers’ salaries.

The formula for salary calculation is Wage rate – PTI – MD= Net pay.

Wage rate + wage rate* SST = companies expenses

To Illustrate:

If an employee’s gross monthly salary is 10,000 ₴. PIT would be 1,800 ₴ and MD would be 150 ₴. Net pay in this case would be 8,050 ₴. Total company`s expenses related to salary would be 12,200 (wage rate 10,000 ₴ + SST 2,200 ₴).

HR documentation and human resource services in Ukraine

Human resource documentation’s primary recording is obligatory here. Every company regardless of its size, ownership, the legal form shall keep a primary recording of HR documentation. The correct drawing together with keeping human resource documentation is an indicator of transparency in the labor payment sphere. The laws in this sphere differ from the Western one, penalties for labor laws violation can reach several thousand. As a result, HR services are becoming more and more popular in Kyiv.

Human resources services are one of our main activities. HR outsourcing includes:

New employees formalization, submission of notification into the fiscal state bodies;

Staff schedule preparation, vacation, termination, work trips orders;
Management of vacation requests travel expenses reimbursement, inspection for personnel vacations and certificates of work incapacity, etc.;
Administration and keeping of Employment Record Books;
Submission of income certificate to the pension fund, other state bodies, and visa centers.

If you are looking reliable payroll company in Ukraine, or human resource services in Kyiv, please let our certified specialists help you!

This article was curated from Petterson & Bennett
Featured Image Credit: Image by rawpixel.com

Ukraine Tax System

Learn more about the tax system of Ukraine, including VAT, single social contribution, and property tax.

Value-added tax in Ukraine

The value-added tax (VAT) rate is 20%. For pharmaceutical products, the VAT rate is 7%. It should be noted that 0% VAT rate is applied to the export of goods in the customs regime from the territory of Ukraine.

The taxpayer is obliged to register as a VAT payer if the aggregate value of supplied goods or services exceeds UAH 1 million for the last 12 months. However, if the value of taxable transactions does not exceed UAH 1 million, the voluntary registration as a VAT payer is available.

VAT is applied to transactions on the supply of goods and services on the customs territory of Ukraine, as well as to transactions related to import and export of goods in Ukraine. In addition, services on the international transportation of passengers and luggage by sea, river, and air transport are also subject to VAT.

The chart below shows the VAT across a range of countries.

Single social contribution and military duty

The single social contribution is paid by employers, private entrepreneurs, and self-employed citizens. The single social contribution rate is established at 22%. However, the maximum taxable amount of the single social contribution shall not exceed 15 minimal wages.

The military duty has been made effective in Ukraine for several years now and amounts to 1.5%.

Property tax

The property tax is paid for real estate and movable property. The real estate tax on buildings and land plots is paid by individuals and legal entities, including non-residents.

The amount of real estate tax on buildings is determined by the municipal authorities. However, the tax rate shall not exceed 1.5% of the minimum wage per 1 sq. m. of residential and non-residential property.

The additional tax rate in the amount of UAH 25,000 is applied to apartments of more than 300 square meters and houses of more than 500 square meters.

The real estate tax is paid per each sq. m. of residential and non-residential property. Owners of apartments of less than 60 sq. m. and houses less than 120 sq. m. (or houses and apartments with a total area of 180 sq. m.) are exempt from tax.

The amount of real estate tax on land plots is determined by the municipal authorities. The rate shall not exceed 3% of the normative evaluation of a land plot and 1% for agricultural land plots of general use. For farmland, the rate shall be not less than 0.3% and not more than 1% of its normative evaluation. For forest lands, the rate shall not exceed 0.1% of their normative evaluation. For land plots, which are under permanent use by business entities, the rate shall not exceed 12% of the normative evaluation.

The tax base is land plots in ownership or use.

This article is curated from DLF Attorneys at Law.

Outstaffing in 2020: Payroll Accounting and Labor Issues

Due to the fact that failure to comply with any legal requirements, for example, late payment of wages or violation of working hours per week, in relation to employees, is an infringement of their rights. However, the observance of norms in human resources and wage matters is particularly closely monitored not only by the tax services but also by the social security services, the pension fund, and labor protection authorities.

The situation may seem particularly complicated to companies that offer outstaffing services. In fact, even the very activities of this kind are not fully regulated by Ukrainian legislation today. On the other hand, it is a very promising form of doing business.

Outstaffing is a word long known abroad. It is no wonder that many foreign companies want to do business in Ukraine in this way.

Today, an accountant of Pravova Dopomoga Law Firm will tell about the peculiarities of payroll and personnel accounting of outstaffing company.

What responsibility does the enterprise bear when conducting personnel and payroll accounting?

We sincerely believe that it is difficult for an outstaffing company to cope without human resources professional and a salary accountant. It is too easy to miss the important moments of personnel records management, and remember them only during inspections conducted by the labor protection authorities. Now, after the quarantine, this service is the first to conduct inspections of business entities. At the same time, in case of the lack of a timesheet, a fine is imposed in the amount of 1 minimum wage (UAH 4,723 as of 2020) per employee.

Also, it should be taken into account that from February 2020, a fine in the amount of 1 minimum wage will be imposed for each violation of labor legislation, and this may be:

violation of the probationary period and its conditions;
non-conformity of the actually performed work with the established profession (e.g. when an employee is specified as a welder in the work order and works as a mason);
violation of working time standards (more than 40 hours per week or other standards set by the Labour Code of Ukraine);
failure to meet the conditions for working employees with guarantees under the Labour Code (disabled persons, minors, single mothers, etc.).

The following fines may be imposed:

- Penalties in the amount of 10 minimum wages (as of 2020, 1 minimum wage amounts to UAH 4,743, respectively, the entire amount of fine is UAH 47,430) are imposed for admission to work without an employment agreement or employment for part-time work, when working on a full-time basis. And also for non-payment of taxes when transferring a salary.

Repeated violation leads to a fine in the amount of 30 minimum wages (UAH 142,290). When choosing the Group 1-3 of the simplified taxation system, the first violation leads to a warning, and the second violation – to the fine of 30 minimum wages (UAH 142,290).

Penalties in the amount of 2 times the amount of salary for each employee – in case of non-compliance with the minimum wage guarantees (late payment of 2 times per month, failure to comply with wage indexing, failure to comply with the rules of accrual and payment of vacation pay, etc.).

Penalties in the amount of 3 times the amount of the minimum wage – that is UAH 14,229 – will be accrued in case of non-admission of the inspector to the enterprise in order to determine the working conditions. Penalties in the amount of 6 times (UAH 28,458) – in case of hindrance of inspection for identification of employees off the books.

We would like to note separately the penalties for the violation of salary indexation. According to the law, monthly wages shall be indexed depending on the inflation index. The lack of indexation during the inspection of the Labor Service leads to financial penalties in the amount of 10 minimum wages. At the same time, over-indexation may serve as an excuse to deduct the amount from the expenses of the enterprise, which increases taxable profit and tax.

There are many fines and you can hardly avoid them all, but an experienced accountant will help to warn against them or at least minimise them.

Payroll accounting at the outstaffing company

It would seem that any accountant can do the calculation of wages, but this is not always true. The complexity of the organization of the accounting process of outstaffing company relates, for example, to the calculation of wages in case of a shift schedule, or part-time working week. In addition, our specialists offer not only payroll and accounting services, but also performance of management functions of your company’s employees, i.e. internal staff management, solving current payroll and staff issues, etc.

Salary shall be paid 2 times a month. Today, salary is usually transferred to the employees’ card accounts. Almost any bank opens salary projects, which somewhat save on banking services for the transfer of salaries. In addition, now there is an opportunity to bind an employee’s card to any bank.
In the presence of a cash register and cash management, wages can also be paid from the cash desk of the enterprise. In this case, taxes shall be transferred on the day of payment.

What other payments do you have to keep track of?

In addition to wages, there are a number of other payments that are recorded in the payroll: sick leave, vacation, certain types of material assistance and bonuses, and others. Let’s also mention here some peculiarities of their accounting.

Particular attention should be paid to the calculation and payment of sick leaves – all employees may be sick, but not every accountant can calculate a sick leave properly. You should take into account the correctness of the completion of the sick leave, calculate the length of service, consider all the payments that must be calculated in the sick leave, etc.

In addition, a sick leave of more than 6 days is paid by the Social Insurance Fund. The same fund also finances other types of sick leaves – for pregnancy and childbirth, for health resort treatment, etc. In order to be reimbursed for the costs of sick lists, you must submit an application with a calculation to the Fund. If an error is detected in the calculation of sick leaves, the Fund imposes a fine in the amount of 50% of the wrongly paid amount.

As for the calculation of vacation payments, it is important to correctly calculate their amount, take into account all the payments due, and do not forget to pay them 3 business days before the vacation.

The legislation changes regularly, as well as rates and indices do. From July 1, 2020, it is not planned to increase the minimum subsistence level, which is set in the budget annually. Its increase leads to changes in some taxes and benefits, such as an increase in the minimum wage for which the income tax benefit applies. An increase in the minimum wage is also planned for September.

If you plan to set up an outstaffing company, think in advance about outstaffing accountant services – this will save you money not only on staff accounting, but also on possible penalties.

This article was curated from Pravova Dopomoga Law Firm.