Ukraine Draft Labour Code 2026

APEX AV LLC

Ukrainian Labor Law Compliance Services

Stefan Lilienkamp | Managing Partner

vul. Universytetska 33, office 52, 18031 Cherkasy, Ukraine

📧 stefan@ukrpayroll.com

🌐 ukrpayroll.com

When This Takes Effect

📅 NO FIXED DATE: Bill No. 14386 was registered in the Verkhovna Rada on 15 January 2026 and recommended by the Social Policy Committee for adoption in first reading on 4 February 2026. It has not yet been adopted. Under its own transitional provisions the Code enters into force six months after martial law ends or is cancelled, other than the provisions on medical insurance. Martial law remains in force, so no commencement date is fixed. Your preparation window is the six months that begin when martial law ends, which is a reason to audit now rather than later: the trigger is outside your control and the window does not extend.

Executive Summary

Ukraine's new Draft Labor Code (bill No. 14386, registered in the Verkhovna Rada on 15 January 2026) represents the most significant employment law change in over a decade. The most critical impact: a new presumption of employment for contractors meeting 5 or more of the 8 statutory criteria.

                ⚠️ THE CORE ISSUE: If your "contractor" meets 5 or more of the 8 criteria in the defined list, they are presumed to be an employee. This applies regardless of your written agreement. The burden of proof shifts to you to prove they are NOT an employee.
            

For companies using contractors, this creates urgent compliance obligations:

Audit exposure: concentrated on arrangements scoring 5 or more of the 8 criteria
Exposure per misclassified contractor: UAH 800,000 - 4,700,000
Timeline: the Code takes effect six months after martial law ends, and that six months is your preparation window
Action required: Convert, restructure, or terminate FOP arrangements

The 8 Criteria Test

The Draft Labor Code establishes 8 key criteria. If a contractor meets 5 or more, employment is presumed:

#	Criterion	What It Means	Your Exposure?
1	Integrated into company structure	Assigned workspace, integrated into teams, regular schedule	HIGH
2	Subordination to management	Receives instructions, supervision, performance reviews	HIGH
3	Non-discretionary work	Cannot refuse work, cannot delegate to others	CRITICAL
4	Company provides tools/equipment	Computer, software, office setup furnished by company	HIGH
5	Works on company premises	Office-based work (vs. remote independent work)	MEDIUM
6	Company controls schedule	Fixed hours or core hours required	HIGH
7	Exclusive engagement	Cannot work for competitors during contract period	MEDIUM
8	Regular income stream	Fixed monthly payment vs. project-based irregular pay	CRITICAL

The Four Biggest Risks

Risk #1: IT & Tech Companies (Highest Criteria Scores)

WHY YOU'RE AT HIGHEST RISK: IT contractor arrangements typically score 8/8 on the criteria test. Developers in your office with assigned workstations, fixed schedules, and monthly pay = presumed employment.

Typical IT company exposure:

5 developers @ UAH 80,000/month = UAH 4,800,000 total exposure
Penalties: Back taxes, social contributions, fines = 50-70% of salary exposure
Impact: UAH 2,400,000 - 3,400,000 in penalties per year audited

Risk #2: Manufacturing & Production (OHS System Redesign Required)

DUAL CRISIS: Manufacturing faces TWO compliance crises simultaneously: contractor reclassification PLUS complete occupational health and safety (OHS) system overhaul.

OHS Implementation Costs:

One-time setup: UAH 150,000 - 265,000
Annual maintenance: UAH 50,000 - 70,000/year
Timeline: 90-180 days for full implementation

Risk #3: Outsourcing & Staffing (Mixed Exposure)

Companies using outsourced teams, staffing agencies, or project-based contractors face moderate-to-high exposure depending on arrangement terms. If outsourced team members are integrated into your operations with fixed schedules, exposure increases significantly.

Risk #4: Misclassified "Consultants" (Criminal Liability)

PERSONAL LIABILITY WARNING: For senior management, misclassification can trigger criminal charges, not just corporate penalties. This is taken seriously by Ukrainian tax authorities.

Financial Impact & Penalty Structure

Calculation Example: Single Misclassified Developer

Scenario: One developer incorrectly classified as FOP, earning UAH 80,000/month for 24 months

Component	Amount	Calculation
Base salary (24 months)	UAH 1,920,000	80,000 × 24
Employer tax (22%)	UAH 422,400	1,920,000 × 22%
Employee tax (18%)	UAH 345,600	1,920,000 × 18%
Admin penalty (20%)	UAH 128,000	Back taxes × 20%
TOTAL EXPOSURE	UAH 896,000

For 5 developers: UAH 4,480,000

For 10 developers: UAH 8,960,000

Risk Categorization Framework

Risk Level	Criteria Met	Likely Outcome	Recommended Action
LOW	0-2 criteria	Low audit probability, defensible position	Document independence, maintain low contact
MEDIUM	3-4 criteria	Moderate risk, case-by-case audit	Begin transition planning
HIGH	5-7 criteria	High audit probability, presumption against you	Immediate action required: convert or terminate
VERY HIGH	8+ criteria	Certain audit, certain reclassification	URGENT - Convert to employment before the Code takes effect

3-Step Action Plan

STEP 1: Audit Your Contractor Base (Week 1-2)

Action: For each contractor, score them against the 8 criteria. Use this framework:

✓ = Criterion met
? = Unclear/borderline
✗ = Criterion not met

Deliverable: Spreadsheet with score for each contractor. Any scoring 5+ = HIGH RISK.

STEP 2: Risk Assessment Meeting (Week 2-3)

Action: Meet with finance, HR, and legal. Categorize contractors:

GROUP A: Core team (score 7-9) → CONVERT to employment
GROUP B: Mixed (score 4-6) → RESTRUCTURE arrangements
GROUP C: Genuinely independent (score 0-3) → DOCUMENT independence

Deliverable: Decision matrix with action for each person/team.

STEP 3: Implementation Timeline (Week 3+ ongoing)

Action: Execute conversions/terminations based on timeline:

Month 1: Begin Group A conversions (employment contracts signed)
Month 2: Complete Group A; begin Group B restructuring
Month 3: Finalize Group B arrangements; document Group C independence
Ongoing: Update payroll, tax registrations, insurance

Deliverable: Conversion complete before code enforcement (Month 6+).

FOP Reclassification Calculator

Calculate Your Exposure

Instructions: Fill in your contractor details below to estimate financial exposure.

Variable	Your Number	Example
Number of misclassified contractors	___	5
Average monthly payment per contractor (UAH)	___	80,000
Months of misclassification	___	24

Total monthly liability (UAH)	___	400,000
Total exposure period (UAH)	___	9,600,000
Estimated penalties (40% of base)	___	3,840,000

Use these estimates to justify immediate action to leadership.

Sector-Specific Guidance

IT & Software Companies

Risk level: VERY HIGH (8-9 criteria typical)
Action: Convert all office-based developers to employment immediately
Exception: Genuinely remote contractors with exclusive client work may qualify as independent
Timeline: 60-90 days for conversion

Manufacturing & Production

Risk level: HIGH (6-8 criteria) + OHS system overhaul required
Action: Reclassify factory workers + implement OHS system
Cost: UAH 150K-265K setup + UAH 50K-70K annual
Timeline: 120-180 days for full implementation

Consulting & Professional Services

Risk level: MEDIUM-HIGH (5-7 criteria typical)
Action: Restructure contracts to emphasize independence (remote, project-based, client discretion)
Timeline: 90-120 days for restructuring

Healthcare & Medical Services

Risk level: HIGH (6-8 criteria for staff doctors, nurses)
Action: Consider employment vs. permanent contractor status
Complexity: Licensing requirements affect classification options
Timeline: 60-90 days

Retail & Hospitality

Risk level: MEDIUM (4-6 criteria for shift workers)
Action: Restructure scheduling, emphasize on-call flexibility
Challenge: Shift-based work inherently scores high on criteria
Timeline: 60-90 days

Critical Next Steps & Disclaimer

⚠️ LEGAL DISCLAIMER: This guide provides general information about Ukraine's Draft Labor Code based on available legislative materials. It is not legal advice. The final code may contain changes. Your specific situation may have unique considerations. Consult with Ukrainian labor law counsel before taking action.

Immediate Actions (This Week)

Request meeting with your finance/HR/legal team
Audit each contractor against the 8 criteria
Calculate your exposure using the calculator above
Schedule consultation with APEX AV LLC for personalized assessment

Why Choose APEX AV LLC?

Ukrainian Expertise: Deep knowledge of Labor Code, tax compliance, enforcement practices
Multilingual Support: German, Ukrainian, English communication
Practical Implementation: We handle conversions, restructuring, compliance setup
Risk Mitigation: Reduce audit exposure and penalties through proper classification
Sector-Specific Experience: We work with IT, manufacturing, healthcare, consulting firms

NEXT STEP: Schedule a FREE 30-minute consultation with Stefan Lilienkamp. We'll analyze your specific contractor arrangements, calculate your exposure, and provide a clear action plan.