2026 – Ukraine Payroll Outsourcing

Transport & Logistics Sector Compliance Guide – Ukraine Draft Labor Code 2026

Transport & Logistics Sector Compliance Guide - Ukraine Draft Labor Code 2026

APEX AV LLC

Ukrainian Labor Law Compliance Services

Стефан Лілієнкамп | Managing Partner

Universitetskaya str. 33, office 52, Cherkasy, Ukraine

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

🌐 claruskiev.com | ukrpayroll.com

The Transport & Logistics Crisis

🚨 CRITICAL ALERT: Ukrainian transport and logistics companies face an unprecedented compliance challenge with the new Draft Labor Code:

Driver Reclassification Risk: FOP drivers will be presumed employees (8/8 criteria match typical)
Owner-Operator Complexity: Vehicle-owning drivers in grey zone (may be employees despite ownership)
Fleet Contractor Exposure: Companies renting drivers/vehicles face employer liability
Route Optimization Paradox: Advanced dispatch systems trigger "subordination" criteria
International Transit Risk: Border crossing drivers face unique classification issues

Transportation is uniquely vulnerable to the Draft Code because the nature of modern fleet management (GPS tracking, route optimization, schedule control) creates textbook employment criteria relationships, regardless of whether drivers own their vehicles.

Why Transport Is at Extreme High Risk

The Employment Criteria Mismatch

Modern transport operations inherently trigger employment classification criteria:

Transport Reality	Employment Criteria It Triggers	Why It's Problematic
Dispatch system assigns routes/deliveries	Company controls schedule (Criterion 6)	Driver must follow assigned route/delivery order
GPS tracking during work	Subordination to management (Criterion 2)	Real-time location monitoring = supervision
Company-branded vehicles	Company provides tools/equipment (Criterion 4)	Company owns/controls vehicle (even if driver pays fuel)
Fixed daily/weekly routes	Non-discretionary work (Criterion 3)	Driver cannot refuse assigned deliveries
Driver works for company exclusively	Exclusive engagement (Criterion 7)	No ability to take other clients during working hours
Monthly payment/salary structure	Regular income stream (Criterion 8)	Payment looks like employment, not project-based
Driver integrated into operations	Integrated into company structure (Criterion 1)	Driver is core to logistics chain
Management oversight of performance	Subordination to management (Criterion 2)	Quality checks, delivery verification, performance reviews

Result: Typical transport FOP driver arrangements score 8/8 criteria - essentially a guaranteed reclassification if audited.

Three Risk Categories in Transport

Risk Category 1: FOP Drivers (Company Vehicles) - CRITICAL RISK

Typical Arrangement: FOP drivers in company-owned/branded vehicles, assigned routes, monthly stipends.

Criterion	Typical Transport Setup	Score
Integrated into company structure	✓ Core logistics operations	YES
Subordination to management	✓ Dispatch assigns routes/deliveries	YES
Non-discretionary work	✓ Must complete assigned deliveries	YES
Company provides tools/equipment	✓ Company vehicle, fuel, insurance provided	YES
Works on company premises (logistics hub)	✓ Reports to/from warehouse	YES
Company controls schedule	✓ Fixed daily routes, shift times	YES
Exclusive engagement	✓ Usually no side deliveries	YES
Regular income stream	✓ Monthly salary/stipend	YES
TOTAL	8/8 criteria met	CRITICAL

Financial Exposure Example:

20 FOP drivers @ UAH 50K/month = UAH 1M monthly
Annual salary exposure: UAH 12M
Missing employer tax (22%): UAH 2.64M
Missing employee tax (18%): UAH 2.16M
Penalties (20%): UAH 924K
Total annual exposure: UAH 5.724M
For 2-year audit period: UAH 11.448M

Risk Category 2: Owner-Operator Drivers (Vehicle-Owning) - HIGH RISK

Typical Arrangement: FOP drivers own their own vehicles but work exclusively for company via dispatch system, receiving monthly payments.

⚠️ CRITICAL ISSUE: Vehicle ownership does NOT protect against reclassification. If an owner-operator driver meets 5+ criteria, they're still presumed employees. The Draft Code doesn't exempt vehicle-owning drivers.

Criterion	Owner-Operator Setup	Score
Integrated into company structure	✓ Part of dispatch/logistics network	YES
Subordination to management	✓ Dispatch system controls routes	YES
Non-discretionary work	✓ Must accept assigned routes	YES
Company provides tools/equipment	? Driver owns vehicle but company controls usage	PARTIAL
Works on company premises	? May report to hub, or work remotely	SOMETIMES
Company controls schedule	✓ Work hours determined by dispatch	YES
Exclusive engagement	✓ Often exclusive to one logistics company	YES
Regular income stream	✓ Monthly guarantee or per-mile payments	YES
TOTAL	6-7 criteria met	HIGH

Why Vehicle Ownership Doesn't Help: Courts and tax authorities look at substance, not form. If a driver must accept all assigned routes, report to your hub, work exclusive hours for you, and receive monthly payment, they're an employee—regardless of who owns the vehicle.

Risk Category 3: International/Border Crossing Drivers - MEDIUM-HIGH RISK

Typical Arrangement: FOP drivers cross EU borders for international deliveries, often working 24+ hour shifts, paid per trip.

Criterion	International Driver Setup	Score
Integrated into company structure	✓ International logistics division	YES
Subordination to management	✓ Route planning, delivery coordination	YES
Non-discretionary work	✓ Cannot refuse assigned international routes	YES
Company provides tools/equipment	✓ Vehicle, fuel, border docs, insurance	YES
Works on company premises	? Operates internationally, reports to hub	YES
Company controls schedule	✓ Delivery windows, rest periods managed	YES
Exclusive engagement	? May have flexibility, but usually exclusive	USUALLY
Regular income stream	✓ Per-trip or monthly retainer	YES
TOTAL	7-8 criteria met	HIGH/CRITICAL

Additional Complexity: International drivers may trigger EU employment protections (especially if substantial EU operations). Ukrainian authorities may coordinate audits with EU partners, increasing scrutiny.

GPS Tracking & Digital Dispatch: A Hidden Trigger

⚠️ TECHNOLOGY PARADOX: Transport companies implement GPS tracking and digital dispatch to reduce costs and improve efficiency. However, these systems are exactly what auditors point to as evidence of "subordination" and "management control." The more sophisticated your dispatch system, the more it looks like employment management.

Real-time location monitoring = real-time supervision = employment relationship

Audit Probability for Transport Sector

Why Transport Will Be Heavily Audited:

Large financial exposure per driver (UAH 500K - 1M+ per audit year)
Clear paper trail (dispatch records, payment records, GPS logs)
Textbook criteria violations (easier for auditors to prove)
Many operators, high concentration of misclassifications
International visibility (foreign logistics companies also targeted)

Timeline Phase	Event	Transport Impact	Audit Probability
Q2-Q3 2026	Draft Labor Code passed/enacted	Enforcement begins; immediate audit risk	LOW initially (setup period)
Q3-Q4 2026	Tax authority audits begin in earnest	Large logistics companies targeted first (visible, large exposure)	HIGH (50-60% for major operators)
2027 Onwards	Audit enforcement normalizes	All transport companies at permanent elevated audit risk	ONGOING (standard +50-80% for transport)

Compliance Options for Transport Sector

OPTION 1: Convert FOP Drivers to Employment

What: Convert all FOP drivers to full-time or part-time employees on payroll.

Implementation:

Execute employment contracts with all drivers
Add to payroll system and tax registration
Process monthly payroll with withholding
Provide standard employee benefits (health insurance, vacation, social insurance)

Pros:

✓ Eliminates audit risk 100%
✓ Simplest legal position
✓ May improve driver stability and retention
✓ Workers prefer employment status

Cons:

✗ Significant cost increase: +22% employer tax on all drivers
✗ For 20 drivers @ 50K/month: +UAH 220K/month (+UAH 2.64M/year)
✗ Higher operational friction (cannot quickly adjust headcount)
✗ Employment termination procedures more formal

Cost Example:

20 drivers × UAH 50K/month = UAH 1M current cost
Add employer tax (22%): +UAH 220K/month
New monthly cost: UAH 1.22M (+22%)
Annual cost increase: UAH 2.64M

OPTION 2: Restructure for True Contractor Independence

What: Fundamentally restructure driver relationships to emphasize independence (project/route-based, flexible, multiple clients).

Implementation Requirements (Difficult):

✓ Route-based or delivery-based billing (not monthly salary)
✓ Remove dispatch control: drivers choose which routes/deliveries to accept
✓ Enable multi-client work: drivers work for competing logistics companies simultaneously
✓ Remove GPS tracking during work (or inform driver it's optional)
✓ No performance reviews or supervision
✓ Flexible hours: drivers work when they want
✓ Drivers own/maintain own vehicles

Pros:

✓ Maintains current cost structure (or reduces cost)
✓ Preserves operational flexibility

Cons:

✗ Requires fundamental operational restructuring
✗ Still audit risk if implementation is incomplete
✗ Severely impacts service quality (drivers can refuse routes)
✗ Likely driver dissatisfaction and turnover
✗ Difficult to enforce (drivers still depend on your volume)
✗ Auditors will scrutinize actual practice vs. contract language

⚠️ WARNING: This approach works only if implemented genuinely. If auditors examine your dispatch logs and see drivers accepting every assigned route, this "restructuring" will fail scrutiny.

OPTION 3: Hybrid Model (Recommended for Large Operators)

What: Create multi-tier driver model: core drivers as employees, flexible contractors for peak demand.

Implementation:

Tier 1 (Core Employees): 10-12 permanent drivers → employment contracts
Tier 2 (Flexible Contractors): 8-10 route-specific contractors → per-route payments, genuine flexibility
Tier 3 (Agency Drivers): Peak demand fulfilled through staffing agencies

Cost Impact:

Core employees (12 × 50K × 1.22): UAH 732K/month
Flexible contractors (8 × 35K reduced): UAH 280K/month
Agency drivers (peak): UAH 100K/month average
Total: UAH 1.112M vs. current UAH 1M = +11% cost increase

When to Choose: Best for mid-to-large transport operators with mixed driver needs (permanent routes + seasonal/peak demand).

OPTION 4: Joint Venture / Franchising Model

What: Convert independent drivers to sub-contractors who operate their own dispatch, accept their own clients, use your brand/logistics network.

Structure:

Driver becomes independent operator, not your employee
Driver pays you franchise/network fee or profit split
Driver uses your logistics platform (optional, but encouraged)
Driver owns vehicle, controls operations, accepts which loads to take

Pros:

✓ Eliminates employment relationship entirely
✓ Aligns incentives (driver makes more by working more)
✓ Maintains brand presence (drivers still associated with your company)

Cons:

✗ Most complex legally and operationally
✗ Requires significant restructuring
✗ Risk: drivers may compete with you directly
✗ Still audit risk if implementation incomplete

When to Choose: Only for large, sophisticated operators willing to fundamentally restructure business model.

Scenario: Mid-Sized Transport Company (20 Drivers)

Current FOP Setup (CRITICAL RISK)

20 FOP drivers @ UAH 50K/month = UAH 1M monthly cost
Dispatch system: GPS tracking, route assignment, performance monitoring
12 company-owned vehicles, 8 driver-owned vehicles
Operating for 2 years with current FOP arrangement

Exposure Calculation

Monthly salary exposure: UAH 1M per month
Annual exposure: UAH 12M
Missing employer tax (22%): UAH 2.64M
Missing employee tax (18%): UAH 2.16M
Penalties (20%): UAH 924K
Annual exposure: UAH 5.724M
2-year audit period exposure: UAH 11.448M

Option 1: Full Employment Conversion

Convert all 20 drivers to employment
Cost increase: +22% = +UAH 220K/month = +UAH 2.64M/year
Payback period: ~4.3 years
Audit risk: Eliminated
Operational impact: Moderate (less flexibility on headcount)

Option 3: Hybrid (RECOMMENDED)

Convert 12 core drivers to employment (permanent routes)
Restructure 8 flexible drivers as per-route contractors
New cost structure:

12 employees @ 50K + 22% = UAH 732K/month
8 contractors @ 35K per-route (reduced): UAH 280K/month
Total: UAH 1.012M (+1.2% cost)

Payback period: Immediate (cost roughly neutral)
Audit risk: Very low (core protected, flexible tier genuinely independent)
Operational impact: Low (core permanent, flexible remains flexible)

Decision Logic

IF you need workforce flexibility and can afford modest cost increase → CHOOSE HYBRID (Option 3)

IF you have stable workforce and want maximum compliance certainty → CHOOSE EMPLOYMENT (Option 1)

IF you want to restructure operations entirely → CHOOSE FRANCHISING (Option 4)

Timeline for Transport Compliance

Immediately (Now - February 2026): Assessment & Planning

Audit all FOP drivers against 8-criteria test
Calculate financial exposure
Analyze dispatch system: identify "subordination" triggers
Decide compliance approach: employment, restructure, or hybrid
Engage Ukrainian labor counsel

February - March 2026: Implementation Planning

Prepare employment contracts (if choosing employment/hybrid)
Update dispatch system policies (if restructuring for independence)
Brief management on classification requirements
Coordinate with finance/payroll teams
Prepare driver communications

April - May 2026: Implementation Begins

Roll out new driver classification model
Execute employment contracts or restructured contractor agreements
Update payroll system and tax registration
Begin processing new payroll structure
Monitor compliance and document decisions

June 2026+: Ongoing Compliance & Preparation for Audits

Maintain detailed records of driver classification decisions
Document dispatch system changes (if applicable)
Track GPS/tracking policy changes
Be prepared for tax authority audits (high probability Q3-Q4 2026)

Transport Sector Profiles

Profile 1: Small Local Logistics (5-10 drivers)

Typical Setup: Single warehouse, local city delivery routes, mostly company-owned vehicles

Contractor Risk: CRITICAL (8/8 criteria typical)

Recommended Approach: Full employment conversion (simpler for small teams)

Cost Impact: +22% of driver costs

Timeline: 4-6 weeks

Profile 2: Mid-Sized Regional Operator (15-30 drivers)

Typical Setup: Multiple regional hubs, mix of local and regional routes, mixed vehicle ownership

Contractor Risk: CRITICAL (8/8 criteria for most drivers)

Recommended Approach: Hybrid model (core employment + flexible contractors)

Cost Impact: +5-15% of driver costs

Timeline: 6-8 weeks

Profile 3: Large National Operator (50+ drivers)

Typical Setup: National network, multiple distribution centers, international routes, sophisticated dispatch

Contractor Risk: CRITICAL (8/8 criteria for all drivers)

Recommended Approach: Hybrid or franchising model (allows scale, flexibility)

Cost Impact: +10-20% depending on model

Timeline: 8-12 weeks

Profile 4: Specialized/Courier Services

Typical Setup: Express delivery, time-critical shipments, flexible routing, intensive GPS tracking

Contractor Risk: CRITICAL (GPS tracking triggers subordination, route assignment triggers control)

Recommended Approach: Full employment or hybrid (restructuring too operationally complex)

Cost Impact: +22% of driver costs

Timeline: 4-6 weeks

Digital Dispatch Systems & Compliance

CRITICAL QUESTION: If you restructure drivers for independence, you must modify your dispatch system:

Remove mandatory route assignment features
Allow drivers to decline routes without penalty
Eliminate performance monitoring/driver ratings
Remove GPS real-time tracking (or make it optional)
Enable multi-client visibility (show drivers can work for competitors)

If your dispatch system looks like an employment management tool, auditors will find evidence of subordination.

Documentation & Audit Defense

For transport compliance, maintain detailed records of:

Driver Classification

Document 8-criteria assessment for each driver

Dispatch Policies

How routes are assigned (mandatory vs. optional)

GPS/Tracking

When tracking is used and for what purposes

Payment Records

Clear distinction: employment vs. FOP contractor payments

Performance Management

Whether reviews are conducted (employment signal)

Ownership Documentation

Vehicle registration (company vs. driver-owned)

Personal Liability for Transport Operators

⚠️ PERSONAL EXPOSURE: Transport company owners face potential criminal liability for:

Systematic driver misclassification (tax evasion)
Driving hour violations (misclassified drivers may exceed legal hours)
Vehicle safety violations (reduced oversight of FOP drivers)
Intentional non-compliance after code enforcement begins

This is not just business penalties—personal criminal charges are possible, especially for large operators with systemic misclassification.

Key Success Factors for Transport Compliance

Early Action: Decide approach immediately (before Q2 2026 code passage)
Dispatch System Alignment: Ensure dispatch policies match chosen classification (employee vs. contractor)
Consistent Application: Apply same criteria to all drivers (auditors expect uniformity)
Record Documentation: Maintain detailed records of classification decisions and implementation
Legal Review: Engage Ukrainian labor counsel for employment contracts or restructuring agreements
Driver Communication: Be transparent about changes (reduces disputes, improves retention)
System Testing: For restructuring models, test actual operations before full rollout
Flexibility: Be prepared to adjust as Draft Code final language emerges

NEXT STEP: Schedule a FREE 30-minute consultation with Stefan Lilienkamp at Apex AV LLC. We'll analyze your specific driver arrangements, calculate your exposure, review your dispatch system, and develop a customized compliance strategy.

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

Agricultural Sector Compliance Guide – Ukraine Draft Labor Code 2026

Agricultural Sector Compliance Guide - Ukraine Draft Labor Code 2026

APEX AV LLC

Ukrainian Labor Law Compliance Services

Стефан Лілієнкамп | Managing Partner

Universitetskaya str. 33, office 52, Cherkasy, Ukraine

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

🌐 claruskiev.com | ukrpayroll.com

The Unique Agricultural Challenge

🚨 CRITICAL ALERT: Ukrainian agriculture faces a unique compliance crisis under the new Draft Labor Code:

Seasonal Worker Reclassification: Harvest workers, seasonal contractors at critical risk (5-9 criteria typically met)
Family Farm Complexity: Family members classified as FOP may be reclassified as employees
Machinery Contractor Risk: Combine operators, equipment contractors at high risk (7-8 criteria)
Timing Mismatch: Code enforcement timeline may conflict with harvest season (summer 2026)

Agriculture's reliance on seasonal, flexible workforce arrangements creates a perfect storm for Draft Labor Code enforcement. Unlike manufacturing (predictable year-round operations), agriculture must navigate compliance while managing seasonal hiring and complex contractor relationships.

Why Agriculture Is at High Risk

The Nature of Agricultural Work

Agricultural operations have inherent characteristics that trigger employment criteria:

Agricultural Reality	Employment Criteria It Triggers	Why It's Problematic
Work dependent on harvest timing	Company controls schedule (Criterion 6)	Harvest windows are fixed; workers must be available then
Intensive seasonal labor needs	Integrated into company structure (Criterion 1)	Seasonal workers become part of operational core
Farm provides tools (machinery, equipment)	Company provides tools/equipment (Criterion 4)	Workers cannot bring own harvesting machinery
Work on farm premises only	Works on company premises (Criterion 5)	Harvesting can only occur on your fields
Farm manager directs daily work	Subordination to management (Criterion 2)	Work pace, methods determined by farm management
Monthly payment during season	Regular income stream (Criterion 8)	Seasonal invoices often look like monthly salary
Workers cannot refuse harvest work	Non-discretionary work (Criterion 3)	Critical operations cannot be delegated
Exclusive work during season	Exclusive engagement (Criterion 7)	Seasonal workers focused on your harvest

Result: Typical agricultural FOP arrangements score 6-8 criteria, making reclassification highly likely.

Three Risk Categories in Agriculture

Risk Category 1: Seasonal Harvest Workers (CRITICAL RISK)

Typical Arrangement: FOP harvest workers hired June-September, paid monthly stipends during season.

Criterion	Typical Agricultural Setup	Score
Integrated into company structure	✓ Part of harvest team/operations	YES
Subordination to management	✓ Farm manager directs harvest	YES
Non-discretionary work	✓ Must complete harvest tasks	YES
Company provides tools/equipment	✓ Machinery, equipment provided	YES
Works on company premises	✓ Only on your fields	YES
Company controls schedule	✓ Must work harvest window dates	YES
Exclusive engagement	? Usually yes during season	USUALLY
Regular income stream	✓ Monthly seasonal payments	YES
TOTAL	7-8 criteria met	CRITICAL

Financial Exposure Example:

10 seasonal harvest workers @ UAH 40K/month × 4 months = UAH 1.6M total
Missing employer tax (22%): UAH 352K
Missing employee tax (18%): UAH 288K
Penalties (20%): UAH 128K
Total exposure: UAH 768K per year of misclassification

Risk Category 2: Machinery & Equipment Contractors (HIGH RISK)

Typical Arrangement: FOP combine operators, tractor contractors working fixed schedules during harvest.

Criterion	Equipment Contractor Setup	Score
Integrated into company structure	✓ Part of mechanization team	YES
Subordination to management	✓ Farm manager schedules/directs	YES
Non-discretionary work	✓ Must harvest assigned fields	YES
Company provides tools/equipment	? Often owns own equipment (complicating factor)	SOMETIMES
Works on company premises	✓ Only on your fields	YES
Company controls schedule	✓ Harvest window dates mandatory	YES
Exclusive engagement	? May work other farms, but primary commitment yours	USUALLY
Regular income stream	✓ Monthly payments or per-hectare rates	YES
TOTAL	6-7 criteria met	HIGH

Risk Category 3: Family Farm Members (MEDIUM-HIGH RISK)

Typical Arrangement: Family members (non-owner relatives) working full-time or seasonally, classified as FOP to avoid employment complications.

⚠️ SPECIAL CONCERN: Many family farms classify relatives as FOPs to maintain flexibility and avoid formal employment relationships. The new code treats family members the same as unrelated workers—if they meet 5+ criteria, they're presumed employees, regardless of family relationship.

Criterion	Family Farm Member Setup	Score
Integrated into company structure	✓ Core operational role	YES
Subordination to management	✓ Takes direction from owner	YES
Non-discretionary work	✓ Must perform assigned tasks	YES
Company provides tools/equipment	✓ Uses farm machinery/tools	YES
Works on company premises	✓ Works on family farm	YES
Company controls schedule	✓ Farm schedule determines work	YES
Exclusive engagement	✓ Usually exclusive to family farm	YES
Regular income stream	✓ Monthly stipend or annual salary	YES
TOTAL	7-8 criteria met	HIGH/CRITICAL

Audit Probability & Timeline for Agriculture

Special Timing Concern: Agricultural audits will likely occur after harvest season (September-December) when records are available and operations are calmer.

Timeline Phase	Event	Agricultural Impact	Audit Probability
Q2-Q3 2026	Draft Labor Code passed/enacted	Harvest season already underway; transition emergency	LOW (enforcement setup period)
Sept-Oct 2026	Harvest complete; audit season begins	Tax authorities examine seasonal payroll records	MEDIUM-HIGH (40-50% for seasonal users)
Oct-Dec 2026	Audit penalties assessed	Back-pay assessments may cover entire summer season	HIGH for non-compliant farms
2027 Harvest	Enforcement normalizes	All subsequent seasons must be fully compliant	ONGOING (standard audit rates +40%)

Compliance Options for Agricultural Sector

OPTION 1: Convert Seasonal Workers to Seasonal Employment

What: Hire seasonal workers as employees (May-October), with employment ending post-harvest.

How It Works:

Sign seasonal employment contracts (term: June 1 - September 30)
Employee status during active season only
Automatic termination at season end (no severance required for seasonal)
Re-hire same workers next season as employees again

Pros:

✓ Eliminates audit risk entirely
✓ Simplest legal position
✓ Workers may prefer employment benefits
✓ Clear termination (automatic at season end)

Cons:

✗ Higher cost: +22% employer tax during season
✗ Administrative burden: payroll setup, termination paperwork
✗ Worker expectations: seasonal employees expect benefits

Cost Example (per season):

10 workers × UAH 40K/month × 4 months = UAH 1.6M
Add employer tax (22%): +UAH 352K per season
Total seasonal employment cost: UAH 1.952M

OPTION 2: Restructure for Genuine Contractor Independence

What: Modify contractor terms to emphasize true independence (project-based, remote equipment provision, flexibility).

Implementation Requirements:

✓ Project-based invoicing (per-hectare, per-task, not monthly)
✓ Contractors bring own equipment where possible
✓ Flexible scheduling (workers can refuse tasks, negotiate rates)
✓ Ability to work multiple farms simultaneously
✓ No exclusivity clause
✓ No supervision or performance management

Pros:

✓ Maintains cost efficiency
✓ Preserves scheduling flexibility
✓ Continues FOP arrangement

Cons:

✗ Requires operational changes (not just paperwork)
✗ Still audit risk if implementation incomplete
✗ May harm worker relationships
✗ Difficult to enforce (workers still depend on your harvest)

⚠️ WARNING: Auditors will examine actual practice, not contracts. If records show fixed monthly payments, on-farm work, management direction, this "restructuring" will fail audit scrutiny.

OPTION 3: Hybrid Approach (Recommended for Agriculture)

What: Convert core permanent workers to employees; keep true seasonal specialists as FOP contractors with genuine independence.

Implementation:

Tier 1 (Employment): 2-3 core year-round managers/coordinators → seasonal employment contracts
Tier 2 (FOP Restructured): Specialized machinery operators, equipment contractors → project-based payment
Tier 3 (Agency): General harvest labor → staffing agency workers (farm not direct employer)

Cost Impact:

Seasonal employment (2-3 core): +18% cost
FOP restructured (equipment): same cost with different structure
Agency labor (6-8 general workers): +15-20% markup but shared with agency
Overall cost increase: ~12-15% vs. full FOP model

When to Choose: Most effective for medium-large farms with mixed worker types (permanent + seasonal + specialists).

Scenario: 50-Hectare Grain Farm

Current FOP Setup (High Risk)

1 farm manager (FOP) - year-round
2 equipment operators (FOP) - seasonally
8 harvest workers (FOP) - seasonal June-September
Total monthly during harvest: UAH 380K (1×80K + 2×60K + 8×30K)

Exposure Calculation

4 months harvest × UAH 380K = UAH 1.52M
Missing employer tax (22%): UAH 334K
Missing employee tax (18%): UAH 274K
Penalties (20%): UAH 122K
Annual exposure: UAH 730K per year of audit

Option 1: Full Seasonal Employment

Convert all 11 to seasonal employment contracts
Cost increase: +UAH 84K/month × 4 = +UAH 336K annual
Payback vs. exposure: Less than 6 months
Audit risk: Eliminated

Option 2: Hybrid (RECOMMENDED)

Farm manager + 2 equipment ops → Seasonal employment
8 harvest workers → Staffing agency
Cost increase: +UAH 112K/month × 4 = +UAH 448K annual
Payback vs. exposure: ~7 months
Audit risk: Very low (core protected, general labor via agency)

Decision Logic

IF you have consistent worker base year-to-year → CHOOSE SEASONAL EMPLOYMENT (Option 1)

IF you want flexibility and different workers each year → CHOOSE HYBRID (Option 3)

Timeline for Agricultural Compliance

Spring 2026 (Now - April): Preparation Phase

Audit all FOP workers against 8-criteria test
Calculate financial exposure
Decide approach: employment vs. restructured vs. hybrid
Prepare contracts/agreements before hiring season
Train management on new requirements

Summer 2026 (May-August): Transition Phase

Implement chosen approach during first harvest season
Monitor compliance (payroll, contracts, records)
Track all seasonal payments/arrangements
Document decisions and worker classifications

Fall 2026 (Sept-Oct): Audit Risk Period

Expect potential tax authority audits (harvest season complete)
Maintain complete records of summer arrangement
Be prepared to demonstrate compliance

Winter 2026-2027: Planning Phase

Assess 2026 experience
Refine processes for 2027 season
Expand to additional worker categories if needed
Plan next harvest season compliance

Agricultural Sector Profiles

Profile 1: Small Family Farm (10-50 hectares)

Typical Setup: Owner + family members + seasonal harvest help

Contractor Risk: Family members (MEDIUM-HIGH), casual seasonal help (MEDIUM)

Recommended Approach: Seasonal employment for family + consistent workers; casual labor through agency

Cost Impact: +8-12% of seasonal labor costs

Timeline: 2-3 months implementation

Profile 2: Medium Agricultural Enterprise (50-200 hectares)

Typical Setup: Permanent manager + seasonal labor mix + equipment contractors

Contractor Risk: Multiple tiers (permanent FOP manager HIGH risk, seasonal workers CRITICAL, equipment contractors HIGH)

Recommended Approach: Hybrid (seasonal employment for core, agency for volume, FOP restructured for specialists)

Cost Impact: +12-15% of total labor costs

Timeline: 3-4 months implementation

Profile 3: Large Agricultural Complex (200+ hectares)

Typical Setup: Multiple permanent staff + large seasonal workforce + outsourced services

Contractor Risk: Diversified (permanent staff HIGH, seasonal workers CRITICAL, contractors MEDIUM-HIGH)

Recommended Approach: Formal employment for all permanent staff; staffing agencies for all seasonal; specialized contractors as true FOP (restructured)

Cost Impact: +15-18% of total labor costs

Timeline: 4-5 months implementation

Profile 4: Organic/Specialty Farm

Typical Setup: Smaller scale, often owner-operated with seasonal help

Contractor Risk: Lower volume but CRITICAL risk if workers are supervised/directed

Recommended Approach: Seasonal employment or restructured FOP with genuine independence

Cost Impact: +10-15% of seasonal labor costs

Timeline: 2-3 months implementation

Critical Harvest Season Timing Conflict

                ⏰ TIMING CRISIS: The Draft Labor Code is expected to pass Q2-Q3 2026, potentially mid-harvest season. This creates an urgent compliance crisis:
                Risk: Code passes June/July → enforcement begins → harvest in full swing
Problem: Cannot quickly convert entire harvest team mid-season
Solution: Begin preparation NOW for spring 2026 implementation

            

Documentation & Audit Defense

For agricultural compliance, maintain detailed records of:

Worker Classification

Document criteria assessment for each worker (8-criteria scoring)

Contracts

Employment or FOP agreements with clear terms

Payroll Records

Clear distinction: employment payments vs. FOP invoices

Work Scheduling

Document how schedules are determined (fixed vs. flexible)

Independence Evidence

If FOP: proof of multiple income sources, other clients, flexibility

Tax Filings

Payroll taxes for employees; no tax withholding for true FOP

Personal Liability for Farm Owners

⚠️ PERSONAL EXPOSURE: Farm owners face potential criminal liability for:

Misclassifying workers (tax evasion)
Worker injuries due to lack of safety measures
Continued use of misclassified workers after code enforcement begins

This is not just business penalties—personal criminal charges are possible.

Key Success Factors for Agriculture

Early Decision: Decide approach NOW (before spring 2026 hiring)
Contracts Prepared: Have seasonal employment or restructured FOP contracts ready before hiring begins
Management Training: Ensure farm managers understand new classification rules
Record Keeping: Maintain detailed records of worker classification + decisions
Consistency: Apply same criteria to all workers (auditors expect uniformity)
Legal Review: Have Ukrainian labor counsel review your specific arrangements
Flexibility: Be prepared to adjust as Draft Code final language emerges

NEXT STEP: Schedule a FREE 30-minute consultation with Stefan Lilienkamp at Apex AV LLC. We'll analyze your farm's specific worker arrangements, calculate your exposure, and develop a customized compliance plan before spring hiring season.

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

Manufacturing Sector Compliance Guide – Ukraine Draft Labor Code 2026

Manufacturing Sector Compliance Guide - Ukraine Draft Labor Code 2026

APEX AV LLC

Ukrainian Labor Law Compliance Services

Стефан Лілієнкамп | Managing Partner

Universitetskaya str. 33, office 52, Cherkasy, Ukraine

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

🌐 claruskiev.com | ukrpayroll.com

The Dual Crisis Facing Manufacturing

🚨 CRITICAL ALERT: Manufacturing facilities face TWO simultaneous compliance crises with the new Draft Labor Code. Not one, not "either-or," but TWO:

Crisis #1: OHS System Overhaul — Complete redesign of Occupational Health & Safety systems (from reactive to proactive)
Crisis #2: Contractor Reclassification — Factory workers, maintenance contractors, and outsourced staff at risk of reclassification

This creates a perfect storm: Your facility must simultaneously invest in OHS infrastructure AND reclassify workers, all while maintaining production.

Crisis #1: OHS System Overhaul

What's Changing

The Draft Labor Code shifts occupational health and safety from REACTIVE (respond to incidents) to PROACTIVE (prevent incidents).

Old System (Reactive)	New System (Proactive)	Your Cost Impact
Incident occurs → Report to authorities	Hazard identified → Preventive action taken	Budget increases
Basic safety training (annual)	Comprehensive training + simulations	+50% training budget
PPE purchased after incidents	Proactive PPE program	+30-50% PPE budget
No hazard audits	Quarterly hazard risk assessments	+UAH 150K annual for assessments
No safety committee	Active safety committee (meets monthly)	Staff time + consultant support
Basic incident documentation	Detailed root cause analysis + corrective action	Administrative staff time

OHS Implementation Cost Breakdown

Component	One-Time Cost	Annual Ongoing	Timeline
Hazard Assessment & Risk Audit	UAH 50,000 - 75,000	UAH 15,000 (quarterly)	Week 1-4
Safety Committee Setup	UAH 15,000 (initial training)	UAH 8,000 (monthly meetings)	Week 2-3
Training Program Development	UAH 25,000 - 40,000	UAH 12,000 (annual refresher)	Week 4-8
PPE & Equipment Upgrade	UAH 30,000 - 50,000	UAH 15,000 (replacement/upgrade)	Week 2-6
Incident Management System	UAH 20,000 (software + training)	UAH 5,000 (annual license)	Week 6-8
Consultant Support (ongoing)	—	UAH 10,000 - 20,000	Months 1-6
TOTAL	UAH 150,000 - 265,000	UAH 50,000 - 70,000/year	16 weeks

Implementation Timeline: 16-Week Roadmap

Weeks 1-2: Assessment & Planning

Conduct comprehensive hazard assessment
Identify all high-risk areas and tasks
Document current safety procedures
Interview department heads and workers
Deliverable: Hazard Risk Map

Weeks 3-4: Infrastructure Setup

Purchase incident management software
Upgrade PPE inventory
Install additional safety equipment (eye wash stations, emergency showers, etc.)
Set up safety committee structure
Deliverable: Safety infrastructure upgrade complete

Weeks 5-8: Training & Procedures

Develop comprehensive training curriculum
Train all employees on new OHS procedures
Conduct hazard-specific training (e.g., machinery operation)
Establish safety committee (first meeting)
Deliverable: Training certification for all staff

Weeks 9-12: Process Integration

Integrate OHS into daily operations
Run incident management system in parallel (old + new)
Conduct quarterly hazard risk assessments
Hold monthly safety committee meetings
Deliverable: OHS processes operational

Weeks 13-16: Verification & Refinement

Audit OHS implementation against new requirements
Refine procedures based on lessons learned
Prepare documentation for regulatory compliance
Final staff training refresher
Deliverable: OHS system audit-ready

Crisis #2: Contractor Reclassification

Typical Manufacturing FOP Arrangements at High Risk

Manufacturing facilities commonly use FOP contractors for:

Maintenance workers (assigned to facility, work on-site, integrated into shift schedule)
Production line workers (temporary/seasonal staff, often paid monthly, supervised)
Quality control inspectors (work in facility, follow procedures, integrated into process)
Logistics/warehouse staff (dedicated to your facility, assigned hours, supervised)
Safety officers / consultants (on-site presence, integrated reporting)

The Problem: These arrangements typically score 7-9 on the 8-criteria test, making reclassification likely.

8-Criteria Assessment for Typical Manufacturing Worker

Criterion	Standard Manufacturing Setup	Match?
Integrated into company structure	✓ Works as part of production team/maintenance crew	YES
Subordination to management	✓ Shift supervisor gives instructions daily	YES
Non-discretionary work	✓ Must complete assigned production tasks	YES
Company provides tools/equipment	✓ All machinery, tools, PPE provided	YES
Works on company premises	✓ On-site in facility/production area	YES
Company controls schedule	✓ Fixed shift hours required	YES
Exclusive engagement	? Often exclusive, but may work part-time elsewhere	USUALLY YES
Regular income stream	✓ Fixed monthly invoice amount	YES
TOTAL MATCH	7-8 criteria met	CRITICAL RISK

Financial Exposure Example

Scenario: Mid-sized manufacturing facility with 25 FOP workers (production + maintenance)

Component	Per Worker	Total (25 workers)
Average FOP salary	UAH 50,000/month	UAH 1,250,000/month
Months misclassified	24	24
Base exposure (salary)	UAH 1,200,000	UAH 30,000,000
Missing employer tax (22%)	UAH 264,000	UAH 6,600,000
Missing employee tax (18%)	UAH 216,000	UAH 5,400,000
Admin penalty (20%)	UAH 96,000	UAH 2,400,000
TOTAL EXPOSURE PER WORKER	UAH 576,000	UAH 14,400,000

For a 25-person manufacturing facility, total audit exposure could exceed UAH 14.4M.

Contractor Reclassification Options

OPTION A: Convert to Employed

Cost increase: +22% in employer taxes
For 25 workers: +UAH 275K/month (+UAH 3.3M annually)
Pros: Eliminates audit risk, improves team stability
Cons: Significant cost increase, employment termination procedures required

OPTION B: Use Staffing Agency

Cost increase: 15-25% agency markup
For 25 workers: +UAH 187K-312K/month
Pros: Your liability shifts to agency, flexible team sizing
Cons: Less control, higher cost, turnover risk

OPTION C: Hybrid (Convert Core, Outsource Variable)

Convert 15 core production workers to employment
Use staffing agency for 10 seasonal/variable workers
Cost increase: ~18% overall
For 25 workers: +UAH 225K/month
Pros: Balanced cost + stability, controls for core team
Cons: Operational complexity, two-tier workforce

Integrating Both Crises: The Master Timeline

Manufacturing cannot address OHS and contractor reclassification sequentially. Both must happen in parallel—but this creates resource constraints.

Month	OHS Tasks (Crisis #1)	Contractor Tasks (Crisis #2)	Resource Demand
Month 1	Hazard assessment; safety committee setup	Contractor audit; exposure calculation	MODERATE
Month 2	Infrastructure purchase/install; training start	Decide: convert vs. agency vs. hybrid	HIGH
Month 3	Training completion; process integration	Execute conversions or agency agreements	VERY HIGH
Month 4	Quarterly hazard assessment; refinement	Complete contractor transitions; payroll update	HIGH
Month 5-6	Ongoing OHS management; compliance documentation	Monitor new arrangements; resolve issues	MODERATE

Complete Budget for Typical Mid-Sized Facility

Scenario: 250-person facility (200 employees + 25 FOP contractors)

Crisis #1: OHS System (One-Time + Annual)

OHS implementation: UAH 150,000 - 265,000 (one-time)
Ongoing OHS costs: UAH 50,000 - 70,000/year

Crisis #2: Contractor Reclassification (Assuming Hybrid Approach)

Convert 15 core workers to employment: +UAH 165,000/month (15 × 50K × 22%)
Agency for 10 seasonal: +UAH 60,000/month (10 × 50K × 12% markup)
Annual contractor cost increase: +UAH 3,000,000

TOTAL YEAR 1 IMPACT

OHS one-time: UAH 150K - 265K
Contractor transition: UAH 3,000K
Ongoing OHS: UAH 50K - 70K
TOTAL YEAR 1: UAH 3,200K - 3,335K

ONGOING ANNUAL COST

Contractor employment + agency: UAH 3,000,000/year
OHS management: UAH 50,000 - 70,000/year
TOTAL ANNUAL: UAH 3,050,000 - 3,070,000

Implementation Phases

Phase 1: Planning & Decision (Weeks 1-2)

Conduct OHS needs assessment
Audit all contractors against 8-criteria test
Calculate financial exposure for both crises
Decide: convert, agency, or hybrid approach
Get board/management approval

Phase 2: OHS Infrastructure (Weeks 3-8)

Install hazard management systems
Upgrade PPE and safety equipment
Begin employee training on new OHS procedures
Establish monthly safety committee meetings

Phase 3: Contractor Transition (Weeks 6-12)

Notify affected contractors of changes
Draft employment contracts or agency agreements
Execute transitions (employment or agency)
Update payroll and tax systems
File employment registrations with State Labor Service

Phase 4: Integration & Monitoring (Weeks 13-16+)

Verify all transitions complete
Conduct OHS audit against new requirements
Monitor new employment/agency arrangements
Prepare documentation for regulatory inspection
Refine processes based on lessons learned

Sector-Specific Profiles

Heavy Manufacturing / Steel / Metals

OHS Challenge Level: VERY HIGH (complex equipment, high injury risk)

Contractor Exposure: HIGH (25-50% of workforce may be FOP)

Total Cost Impact: +3-5% of labor costs

Timeline: 5-6 months for full implementation

Automotive / Assembly

OHS Challenge Level: VERY HIGH (robotics + human workers, injury risk)

Contractor Exposure: MEDIUM-HIGH (outsourced maintenance, temp production workers)

Total Cost Impact: +2-3% of labor costs

Timeline: 4-5 months for full implementation

Pharmaceutical / Food Production

OHS Challenge Level: HIGH (contamination, hygiene standards)

Contractor Exposure: MEDIUM (specialized roles, contractors common)

Total Cost Impact: +2-4% of labor costs

Timeline: 4-6 months for full implementation

Job Shops / Contract Manufacturing

OHS Challenge Level: MEDIUM-HIGH (variable operations, temporary staff)

Contractor Exposure: HIGH (most workers are contractors)

Total Cost Impact: +3-5% of labor costs

Timeline: 4-5 months for full implementation

Personal Liability Warning

⚠️ CRIMINAL EXPOSURE: Manufacturing facility owners and senior management face potential criminal liability for:

Failure to implement adequate OHS systems (criminal negligence)
Contractor misclassification (tax evasion)
Worker injuries resulting from inadequate OHS (personal liability)

This is not just a financial penalty issue—personal criminal charges are possible.

Key Success Factors

Early Action: Begin planning in Q1 2026 (before code passage)
Parallel Execution: OHS and contractor changes must happen simultaneously
Resource Allocation: Assign dedicated project manager for both initiatives
Staff Communication: Be transparent with employees about changes
Documentation: Keep detailed records of assessment, decisions, and implementation
Legal Support: Engage Ukrainian labor counsel for employment contracts and OHS compliance
Flexibility: Be prepared to adjust timeline based on code specifics (final version TBD)

NEXT STEP: Schedule a FREE 30-minute consultation with Stefan Lilienkamp at Apex AV LLC. We'll analyze your specific facility, assess OHS requirements, evaluate contractor exposure, and develop a customized implementation plan.

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

IT Sector Compliance Guide – Ukraine Draft Labor Code 2026

IT Sector Compliance Guide - Ukraine Draft Labor Code 2026

APEX AV LLC

Ukrainian Labor Law Compliance Services

Стефан Лілієнкамп | Managing Partner

Universitetskaya str. 33, office 52, Cherkasy, Ukraine

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

🌐 claruskiev.com | ukrpayroll.com

Why IT Companies Are the Highest Risk

🚨 THE CRISIS: IT firms have the highest audit probability (40-60% within 12 months of code enactment) because typical developer FOP arrangements score 9/9 on the employment criteria test—essentially a guaranteed reclassification finding.

Here's why IT is so exposed:

Criterion	Standard Employment Status	Typical IT FOP Arrangement	Risk Level
Integrated into company structure	✓ Yes (employee)	✓ Yes (in dev team)	MATCH
Subordination to management	✓ Yes (manager assigned)	✓ Yes (tech lead supervises)	MATCH
Non-discretionary work	✓ Yes (must do assigned tasks)	✓ Yes (assigned to sprint tasks)	MATCH
Company provides tools/equipment	✓ Yes (laptop, software)	✓ Yes (workstation, IDE, licenses)	MATCH
Works on company premises	✓ Yes (office-based)	✓ Yes (assigned desk)	MATCH
Company controls schedule	✓ Yes (9-5 office hours)	✓ Yes (core team hours required)	MATCH
Exclusive engagement	✓ Yes (no competitors)	✓ Yes (NDA + exclusivity clause)	MATCH
Regular income stream	✓ Yes (monthly salary)	✓ Yes (fixed monthly invoice)	MATCH
TOTAL CRITERIA MET	8/8 (Employee)	8/8 (Should be employee)	CRITICAL

The Bottom Line: Your typical IT FOP developer literally cannot meet fewer than 8 criteria. The arrangement structure itself is the problem.

Financial Exposure: Real Numbers

Scenario 1: One Developer

Component	Monthly	Annual	24 Months
Developer salary	UAH 80,000	UAH 960,000	UAH 1,920,000
Missing employer tax (22%)	UAH 17,600	UAH 211,200	UAH 422,400
Missing employee tax (18%)	UAH 14,400	UAH 172,800	UAH 345,600
Missing social insurance (5.35%)	UAH 4,280	UAH 51,360	UAH 102,720
Admin penalty (20% of taxes)	UAH 7,120	UAH 85,440	UAH 170,880
TOTAL EXPOSURE	UAH 43,400	UAH 520,800	UAH 941,600

Scale to Team Sizes

Team Size	Monthly Exposure	Annual Exposure	Risk Category
3 developers	UAH 130,200	UAH 1,562,400	HIGH
5 developers	UAH 217,000	UAH 2,604,000	VERY HIGH
10 developers	UAH 434,000	UAH 5,208,000	CRITICAL
15 developers	UAH 651,000	UAH 7,812,000	CRITICAL

For a 10-person dev team at UAH 80K/month each: Your audit exposure could reach UAH 5.2M+ annually. With interest and penalties, actual liability could exceed UAH 8M.

Why Audits Will Target IT

Ukrainian tax authorities are aware that IT outsourcing and contractor-based development teams are widespread. They will prioritize audits in this sector because:

High revenue impact: Large exposure amounts justify audit resources
Documented arrangements: FOP contracts create clear paper trails
Clear criteria violations: IT arrangement types are textbook misclassifications
International visibility: Foreign investors in IT sector increases enforcement priority
Easy enforcement: Payroll records prove the violations

The 3 Options for Your Dev Team

OPTION 1: Convert to Employment (Recommended)

What: Hire FOP contractors as full-time W2 employees on your payroll.

Pros:

✓ Eliminates audit risk entirely
✓ Simplest legal position
✓ Improves team stability and loyalty
✓ Better candidate pool (many prefer employment)

Cons:

✗ Higher cost (add 22% employer tax + benefits)
✗ Employment termination procedures required
✗ Less flexibility if revenue drops

Cost Example (per developer):

Current FOP cost: UAH 80,000/month
Employment cost: UAH 80,000 + 17,600 (22% tax) = UAH 97,600/month
Additional cost: UAH 17,600/month (+22%)
For 5 developers: +UAH 88,000/month (+UAH 1.056M/year)

Timeline: 60-90 days

When to choose: Core team members, long-term projects, strategic developers

OPTION 2: Restructure for Independence

What: Modify contract terms to emphasize genuine contractor independence (remote work, project-based, client discretion, multiple clients).

Pros:

✓ Maintains lower cost structure
✓ Provides scheduling flexibility
✓ Allows continued FOP arrangement

Cons:

✗ Requires actual operational changes (not just paperwork)
✗ Still presents audit risk if implementation incomplete
✗ May harm team cohesion or productivity
✗ Difficult to implement for office-based work

Implementation Requirements:

✓ Remote work arrangement (not office-based)
✓ Project-based invoicing (not fixed monthly)
✓ No assigned workstation/equipment
✓ Flexible schedule (no core hours)
✓ Freedom to work with other clients
✓ No supervision or performance reviews

Cost Impact: Minimal (maybe 5-10% reduction in supervision overhead)

Timeline: 30-60 days for contract changes + operational adjustments

When to choose: Junior developers, part-time contributors, contractors already remote

⚠️ WARNING: This only works if implemented genuinely. Auditors will review actual work arrangements, not just contract language.

OPTION 3: Terminate & Replace with Agency

What: End FOP contracts and hire developers through Ukrainian staffing agencies or outsourcing firms.

Pros:

✓ Eliminates your direct liability (agency is employer)
✓ No benefits administration for you
✓ Flexible team sizing

Cons:

✗ Higher cost (20-30% markup by agency)
✗ Team turnover risk (not your employees)
✗ Less control over hiring/firing
✗ Communication friction

Cost Example:

Direct FOP cost: UAH 80,000/month
Agency cost with markup: UAH 96,000-104,000/month (+20-30%)

When to choose: If you want to exit the staffing business entirely, or for supplemental team expansion

Timeline: 30-45 days for agency negotiations + transitions

The 7-Day Decision Deadline

                ⏰ CRITICAL TIMING: Once you've identified misclassified contractors, you have approximately 7 business days to decide your approach (convert, restructure, or terminate). Why? Because notifying contractors requires legal documentation, proper timing avoids disputes.
            

Decision Timeline:

Day	Action	Deliverable
Day 1-2	Score each contractor on 8-criteria test	Risk assessment spreadsheet
Day 3-4	Calculate exposure for each person/group	Financial exposure summary
Day 5	Discuss options with leadership + legal counsel	Decision matrix (convert/restructure/terminate per person)
Day 6-7	Begin implementing chosen approach	Employment contracts / agency agreements / restructured terms

IT-Specific Compliance Checklist

Pre-Conversion Tasks

Conduct criteria assessment for each developer
Calculate financial exposure per person
Determine which developers to convert vs. terminate
Review current FOP contracts for termination language
Consult with Ukrainian labor law counsel
Prepare employment offer letters and contracts

Conversion Process

Send formal offer letter (employment) to each FOP developer
Execute new employment contract with 30-day notice (if terminating FOP first)
Add to payroll system and tax registration
Set up employee benefits (health insurance, vacation)
File employment registration with State Labor Service
Update social insurance contributions
Process first payroll as employee (not FOP invoice)

Documentation & Compliance

Maintain signed employment contracts
Document criteria assessment for each person (for audit defense)
Retain all FOP termination documentation
Update org chart and payroll records
Brief all managers on new employment status
Update offer letters and onboarding docs for future hires

Post-Conversion Verification

Verify all converted employees on payroll system
Confirm tax withholding is correct
Check that no FOP invoices are still being processed
Ensure employment contract is in employee file

Company-Type Profiles & Recommendations

Profile 1: Tech Startup (20-50 people)

Typical Setup: Mix of co-founders (employed), senior devs (often FOP), junior devs (mix of employed and FOP).

Recommendation: Convert all senior devs + core team to employment immediately. Consider restructuring juniors if they work part-time or remotely. Cost to absorb: +15-25% in tax expenses for converted devs.

Timeline: 60-90 days

Profile 2: Outsourcing / Staff Augmentation Firm

Typical Setup: Large team of FOP developers "rented out" to client companies.

Challenge: Direct employment doesn't work for outsourcing model (defeats the purpose).

Recommendation: Restructure as genuinely independent contractors OR establish agency partnership model. Requires operational restructuring (remote work, project-based billing, portfolio work).

Risk: High if not restructured properly. Auditors will examine whether work truly is independent.

Profile 3: Product Company (SaaS, etc.)

Typical Setup: Product development team + some FOP contractors for specialized projects.

Recommendation: Convert core product team to employment. Keep true specialists/contractors as restructured FOP with genuine independence (remote, project-based, portfolio work).

Cost Impact: Moderate (+10-15% in employment costs for core team).

Profile 4: Agency / Services Firm

Typical Setup: Client project work, rotating team members, often using FOP contractors.

Recommendation: Create two-tier system: (1) core team (employed), (2) project contractors (restructured for genuine independence). Requires project-based assignments and actual remote/independent work.

Scenario: 5-Person Dev Team Conversion

Your Current Situation

5 FOP developers @ UAH 80K/month each
Current total cost: UAH 400K/month
Current audit exposure: UAH 2.6M+ annually

Option 1: Full Conversion to Employment

Action: Convert all 5 to W2 employees
New cost: UAH 400K salary + UAH 88K (22% tax) = UAH 488K/month
Cost increase: +UAH 88K/month (+22%)
Annual cost increase: +UAH 1.056M
Audit risk eliminated: 100%
Payback period: Not applicable (tax is ongoing cost, not one-time)

Option 2: Hybrid Approach

Action: Convert 2 senior devs, restructure 3 junior devs
New cost:
- 2 senior (employed) @ UAH 90K + 22% tax = UAH 219.6K/month
- 3 junior (restructured) @ UAH 70K (slightly reduced) = UAH 210K/month
- Total: UAH 429.6K/month
Cost increase: +UAH 29.6K/month (+7.4%)
Audit risk: Moderate to low (2 protected, 3 restructured + monitored)
Implementation complexity: Medium

Option 3: Restructure All (Higher Risk)

Action: Keep all as FOP but restructure terms significantly
New cost: UAH 400K/month (maybe slight reduction)
Cost increase: 0% to -5%
Implementation requirements:
- All must work remote (not office-based)
- Project-based invoicing (not monthly retainer)
- No assigned equipment (BYOD)
- Flexible hours, no core team meetings required
- Must work for other clients simultaneously
- No supervision (self-directed projects)
Audit risk: Still HIGH (auditors will examine if restructuring is real or facade)
Operational risk: HIGH (team may become fragmented, productivity loss)

RECOMMENDATION

Choose Option 2: Hybrid Approach

Rationale:

Protects your core team (2 senior devs) from audit risk
Modest cost increase (7.4%) vs. large increase (22% for full conversion)
Maintains operational flexibility with 3 restructured contractors
Demonstrates good-faith compliance effort to auditors
Keeps best talent stable (employed seniors) while maintaining budget flexibility (restructured juniors)

Key Success Factors

Speed: Make decisions within 7 days of criteria assessment
Consistency: Apply same criteria to all contractors (auditors expect this)
Documentation: Maintain detailed criteria assessment + decision rationale (for audit defense)
Legal Compliance: Consult Ukrainian labor counsel before converting or terminating
Communication: Be transparent with affected contractors about changes
Completeness: Don't miss any FOP developer in your restructuring (auditors will find them)

NEXT STEP: Schedule a FREE 30-minute consultation with Stefan Lilienkamp at Apex AV LLC. We'll analyze your specific dev team, calculate your exact exposure, and recommend the optimal approach (convert vs. restructure vs. terminate).

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

Compliance Guide – Ukraine Draft Labor Code 2026

Ukraine Draft Labor Code 2026 - Lead Magnet Guide

APEX AV LLC

Ukrainian Labor Law Compliance Services

Стефан Лілієнкамп | Managing Partner

Universitetskaya str. 33, office 52, Cherkasy, Ukraine

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

🌐 claruskiev.com | ukrpayroll.com

Executive Summary

Ukraine's new Draft Labor Code (expected enactment Q2-Q3 2026) represents the most significant employment law change in over a decade. The most critical impact: a new presumption of employment for contractors meeting 8+ criteria.

                ⚠️ THE CORE ISSUE: If your "contractor" meets 8 or more criteria from a 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 probability: 40-60% within 6 months of code enactment
Exposure per misclassified contractor: UAH 800,000 - 4,700,000
Timeline: 6 months to prepare before enforcement begins
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 (40-60% Audit Probability)

WHY YOU'RE AT HIGHEST RISK: IT contractor arrangements typically score 9/9 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 within 90 days

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.

📱 +380 50 46 01 037 | 📧 stefan@claruskiev.com

COMPREHENSIVE ANALYSIS: DRAFT LABOR CODE OF UKRAINE (2026) vs. CURRENT LABOR CODE (1971)

Prepared for: Legal Review
Date: January 2026
Analysis Type: Comparative Legal Analysis of Draft Trудовий Кодекс України
Language: English (Based on Ukrainian Law Sources)

EXECUTIVE SUMMARY

The Draft Labor Code of Ukraine (hereinafter “Draft Code” or “New Code”), submitted to the Verkhovna Rada on January 15, 2026, represents a comprehensive modernization of Ukrainian labor law. The current legislation is based on the Soviet Code of Labor Laws (Кодекс законів про працю України) adopted in 1971, which the Draft aims to replace entirely.

Key Strategic Changes:

De-communization of labor legislation and removal of Soviet-era paternalistic state regulation
Implementation of EU directives and ILO (International Labour Organization) standards
Shift from employer-protective to balanced regulation
Legalization and formalization of informal employment
Risk-based occupational health and safety management system

Risk Assessment for Employers: MODERATE TO HIGH

The Draft introduces significant procedural and substantive changes that require immediate strategic compliance planning.

I. COMPARISON TABLE: CORE PROVISIONS

A. EMPLOYMENT CONTRACT FRAMEWORK

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
Contract Requirement	Verbal contracts allowed for temporary workers; written required for permanent	MANDATORY WRITTEN CONTRACT for ALL employment relationships	Administrative burden increases; all relationships must be documented	MEDIUM
Contract Formats	Single model; limited options	Multiple types: permanent, fixed-term, short-term, seasonal, apprenticeship, domestic work, part-time	Requires new HR policies and procedures for each type	HIGH
Proof of Employment Relationship	Difficult to prove; burden on worker	Explicit criteria: work performed under employer’s direction/control, subordination, remuneration at employer’s discretion	Makes avoiding employment classification difficult; impacts gig economy models	HIGH
Fixed-Term Contracts	Permitted but highly regulated; rarely exceeds 2-3 renewals	Clearly permitted with defined notice and termination procedures; up to 4 renewals allowed (subject to specific conditions)	More flexibility in workforce planning; but strict renewal limits create compliance risk	MEDIUM
Probationary Period	Up to 3 months	Up to 3 months (unchanged); but more clearly defined	Minimal change; familiar framework	LOW
Remote/Home Work	Not regulated; treated as standard employment	NEW: Specific regulations for remote and home work; must be in written contract with clear terms	Employers must distinguish remote positions; requires explicit agreements	MEDIUM
Temporary Agency Workers	Not regulated	NEW: Regulated status; agencies must be licensed; workers’ rights protections	Creates liability for compliance with temp worker regulations	MEDIUM

B. WORKING TIME REGULATION

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
Standard Working Hours	40 hours/week	40 hours/week (unchanged)	Minimal change; familiar framework	LOW
Daily Working Time	Not strictly regulated; 40 hours/week rule dominant	Maximum 10 hours/day (standard); split shifts permitted but regulated	Stricter daily limits; split shifts require specific justification	MEDIUM
Flexibility Mechanisms	Aggregated accounting (подсумований облік); flexible within quarter	Aggregated accounting retained but redefined; can exceed daily/weekly limits if compensated within accounting period (month, quarter, year)	Employers gain flexibility BUT documentation becomes critical for proof	MEDIUM-HIGH
Break Entitlements	Meal breaks required (not specified in hours)	Explicit: 30 min minimum break in shifts 4-6 hours; 60 min in longer shifts; breaks must be rest periods	Clearer rules; must provide documented rest breaks	LOW-MEDIUM
Night Work	Limited definition	NEW: Night = 22:00-06:00; limited to 8 hours/shift; higher pay (25%+ premium) required	Significant cost impact for 24/7 operations; must pay night differentials	MEDIUM-HIGH
Irregular Work Schedule	Allowed; limited regulation	NEW: “Unfixed work schedule” (нефіксований робочий час) explicitly regulated; 2-week notice for changes; compensation for short-notice changes	Requires new HR systems for schedule management; notice requirements increase compliance burden	MEDIUM
Work on Rest Days	Permitted with compensation (1.5x wage for first 4 hours, 2x for rest)	NEW: Weekend work distinguished from statutory rest days; specific compensation formulas apply; 2 consecutive rest days/week mandatory	Changes compensation calculations; stricter rest day protections	MEDIUM-HIGH
Overtime	Permitted; no maximum; payment 1.5x-2x	No mention of removal of overtime caps; compensation structure unchanged	Minimal change anticipated; traditional rules likely apply	LOW

C. LEAVE AND VACATION

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
Annual Leave Duration	Minimum 15 calendar days	Minimum 20 working days (approximately 28 calendar days)	SIGNIFICANT INCREASE in paid leave liability; approximately +45% in minimum leave entitlement	HIGH
Entitlement Schedule	Full entitlement after 11 months; prorated before	Accumulation begins from first day; 1.67 days/month accrual; new calculation method	Changes financial planning; potential for higher accrual liabilities for departing employees	MEDIUM
Maternity Leave	126 calendar days; 70 before birth, 56 after	NEW GENDER-NEUTRAL APPROACH: Maternity = 126 days; Paternity = 14 days (for fathers); Parental leave = up to 3 years (unpaid)	Fathers gain specific rights; expanded unpaid leave options; potential gender discrimination claims if eligibility not carefully managed	MEDIUM
Childcare Leave	Up to 3 years (unpaid); for child under 3	Maintained BUT with expanded flexibility: can take partially (part-time work during leave); clearer conditions	More options for employees; requires new tracking systems	MEDIUM
Sick Leave	Full payment for first 3 days (employer); state thereafter	CHANGED: First 6 days paid by employer; state funds days 7-30	Higher costs for employer sick leave; more documentation required	MEDIUM-HIGH
Educational Leave	Paid leave for vocational/professional training	Maintained; expanded to include lifelong learning; clearer employer obligations for paid educational leave	Support for training requirements; cost implications	MEDIUM
Military Service Leave	Available under special conditions	NEW: Clearly regulated in context of wartime/mobilization	Significant implications given Ukraine’s current security situation; exemption requirements	MEDIUM-HIGH
Additional Leave Types	Limited (only specially hazardous work, etc.)	EXPANDED: Additional leave for hazardous work, healthcare workers, cultural professionals, blood donors, adoption, etc.	More leave categories create compliance complexity; sector-specific leave obligations	MEDIUM

D. WAGES AND REMUNERATION

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
Minimum Wage	Indexed to inflation; set by Cabinet of Ministers	Minimum wage mechanism continues; indexed annually; Cabinet of Ministers authority retained	Follows current practice; periodic adjustment likely	LOW-MEDIUM
Wage Payment Frequency	At least twice per month	At least twice per month (unchanged); but with stricter deadlines defined	Minimal change; familiar framework	LOW
Wage Payment Timing	Must be paid regularly (no specific deadline days)	NEW: Must specify exact payment dates in contract; deviations from schedule create liability	Requires explicit contract terms; documentation of payment schedules needed	MEDIUM
Withholding/Deductions	Limited to court decisions, garnishments, taxes	Expanded but still limited; only lawful deductions allowed; explicit contract authorization required for voluntary deductions	Clearer rules; union agreements may specify deductions; requires employee consent	MEDIUM
Gender Pay Equality	Principle of equal pay for equal work (limited enforcement)	STRENGTHENED: Equal pay for work of equal value; must provide justification for wage differences; applies to indirect discrimination	Requires wage audits; gender pay gap analysis needed; documentation requirements increase	MEDIUM-HIGH
Night Work Premium	Typically 25%	Upgraded to minimum 25%; Draft suggests higher rates for hazardous night work	Cost increase for night operations; must budget additional premiums	MEDIUM
Bonus/Incentive Programs	Permitted; no specific regulation	Allowed but must be clearly documented in collective agreement or individual contract; cannot be below minimum wage after inclusion	Creates documentation requirements; prevents wage reduction via “incentive” structures	MEDIUM
Wage for Training Period	Set by regulation; usually reduced	Training wage (80-100% of standard wage) permitted; must be specified in contract	Clearer framework; requires explicit documentation	LOW

E. TERMINATION OF EMPLOYMENT

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
Notice Periods – Employer Termination	2 weeks (general rule); shorter for probation (3 days) or justifiable cause (no notice)	CHANGED: 2 weeks (general); 7 days for probationary dismissal (extended from 3); immediate for cause	Longer notice for probation dismissal; causes must be well-documented	MEDIUM
Notice Periods – Worker Resignation	2 weeks; immediate in certain cases	2 weeks (unchanged)	Minimal change	LOW
Termination for Cause	10 grounds listed (drunkenness, absenteeism, violence, etc.)	EXPANDED to include: gross breach of obligations, safety violations, theft, fraud, and others; but with stricter procedural requirements	More grounds available but HIGHER EVIDENTIARY BURDEN; must conduct proper investigation	MEDIUM-HIGH
Severance Pay	2 weeks average wage (general dismissal); varies by reason	Maintained at 2 weeks but with recalculation method; additional severance for collective dismissals	Familiar amount; potentially higher costs for collective terminations	MEDIUM
Collective Dismissals	Defined as 10+ workers in 30 days; 2-3 months notice	CHANGED: Collective dismissal threshold likely modified; stricter notice to workers and union (if applicable); potential state notification	Requires careful planning; state/union notification adds compliance steps	MEDIUM-HIGH
Termination for Incapacity	Limited grounds; must offer retraining	NEW FRAMEWORK: Incapacity dismissals must follow strict procedure; medical documentation required; offers of alternative work required before dismissal	Stronger worker protections; documentation requirements increase significantly	MEDIUM-HIGH
Restrictions on Dismissal	Cannot dismiss pregnant women, women on maternity leave, workers on military leave	EXPANDED: Protections maintained; amplified for protected categories; clearer procedures for exceptions during wartime	Familiar protections; must maintain careful documentation of exceptions	MEDIUM
Wrongful Dismissal Remedies	Reinstatement; back wages; compensation	ENHANCED: Reinstatement; back wages; compensation for moral damages (now explicitly included); potential for greater liability	Damages awards potentially larger; compensation scope expanded	MEDIUM-HIGH

F. OCCUPATIONAL HEALTH AND SAFETY

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
OHS System	Reactive model: respond to incidents; prescriptive regulations	NEW: Proactive risk-based system; hazard assessment and risk management required (similar to EU model)	Fundamental shift in approach; requires new assessment methodologies and documentation	HIGH
Hazard Assessment	Required but limited scope	MANDATORY COMPREHENSIVE: Regular risk assessment; documentation; control measures; monitoring; reviews	New compliance infrastructure needed; consultants may be required	HIGH
Employer Responsibility	Provide safe conditions; limited liability for systemic failures	ENHANCED: Active duty to assess, control, and manage risks; personal liability for employer/manager failures increased	Criminal liability risk increased for serious violations	MEDIUM-HIGH
Medical Examinations	Periodic checks for hazardous work	RETAINED but clarified: Initial and periodic exams; psychometric testing for certain roles; results must inform accommodations	Clearer procedures; medical documentation requirements increase	MEDIUM
Personal Protective Equipment (PPE)	Provided; rules basic	CLARIFIED: Employer must provide, maintain, train on use; workers obligated to use; defective PPE creates strict liability	Standards and documentation requirements increase	MEDIUM
Accident Reporting	Investigation required; reporting to authorities	ENHANCED: Immediate reporting for serious incidents; systematic investigation; external audit of findings in serious cases	Tighter timelines; external audit potential increases cost	MEDIUM-HIGH
Worker Rights	Right to refuse unsafe work; limited protections against retaliation	EXPANDED: Enhanced right to refuse unsafe work; explicit protection from retaliation; can report to inspectorate without notice to employer	Strengthened whistleblower protections; management retaliation carries heavy penalties	MEDIUM

G. COLLECTIVE LABOR RELATIONS

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
Union Recognition	Unions recognized; must negotiate in good faith	MAINTAINED with enhanced procedural clarity; union rights reinforced; must negotiate on wages, working conditions	Familiar framework; clearer obligations may require updated negotiation protocols	LOW-MEDIUM
Collective Agreements	Permitted; set floors for worker protections	EXPANDED SCOPE: Agreements can now set higher standards in various areas; must extend to non-union employees if broadly applicable	Collective agreements carry more weight; wider application increases costs	MEDIUM
Industry/Sectoral Agreements	Limited framework	NEW: Framework for sector-wide collective agreements; can be extended to non-parties by government order	Potential exposure to sectoral obligations beyond direct negotiation	MEDIUM-HIGH
Strike Rights	Permitted with notice; procedural restrictions	ENHANCED: Right to strike clarified; mediation/arbitration procedures defined; government role in resolution expanded	Mediation requirements add steps; potential for government arbitration outcome	MEDIUM
Dispute Resolution – Grievances	Limited mechanisms; mostly through courts	NEW PROCEDURES: Internal grievance process (15-30 days); mediation (optional but encouraged); labor arbitration (voluntary); only then courts	Multi-step dispute resolution required; may increase compliance burden but may reduce litigation	MEDIUM
Labor Disputes Committee	Exists but weak mechanisms	REFORMED: Committees have enhanced role; must attempt resolution before litigation; recommendations carry weight	Mandatory pre-litigation process increases time but may reduce court disputes	MEDIUM
Inspections and Oversight	Labor inspectorate; limited surprise inspections	ENHANCED AUTHORITY: Inspectors can conduct unannounced inspections; broader access to records; financial penalties increased	More frequent inspections likely; documentation requirements increase	MEDIUM-HIGH

H. DISCRIMINATION AND EQUAL TREATMENT

Aspect	Current Code (1971)	Draft Code (2026)	Impact on Employers	Risk Level
Protected Characteristics	Race, nationality, religion, disability, union membership	EXPANDED: Adds sexual orientation, gender identity, marital/family status, political views, and others; aligns with EU anti-discrimination directive	Broader scope requires more inclusive policies; documented non-discrimination required	MEDIUM
Discrimination Definition	Less detailed; based on case law	DETAILED: Includes direct, indirect, harassment, and instruction to discriminate; employer liability for 3rd party discrimination	Requires proactive harassment policies; training programs recommended	MEDIUM
Burden of Proof	Generally on complainant (employee)	SHIFTED: Once prima facie case shown, burden shifts to employer to prove non-discrimination	Reverses burden of proof; employers must document legitimate reasons	MEDIUM-HIGH
Gender Pay Gap	Principle exists; enforcement weak	STRENGTHENED: Employers must conduct pay audits; justify wage differences; gender pay gap transparency required	Requires documentation of wage justifications; transparency obligations increase	MEDIUM-HIGH
Pregnancy/Maternity Discrimination	Protected; but enforcement challenging	ENHANCED: Explicit prohibition on discrimination; cannot penalize pregnancy or family leave; status-based decisions prohibited	Stricter protections; fewer exceptions permitted	MEDIUM
Remedies for Discrimination	Back wages; reinstatement; limited damages	EXPANDED: Higher compensation ranges; moral damages included; possible punitive elements	Greater financial exposure for discrimination violations	MEDIUM-HIGH

II. DETAILED RISK ASSESSMENT FOR EMPLOYERS

HIGH-RISK PROVISIONS (Immediate Action Required)

1. Mandatory Written Employment Contracts

Current State: Verbal contracts common; difficult to prove employment status in disputes
New Requirement: ALL employment must be in writing
Employer Risk:
- Current informal arrangements become non-compliant
- Every relationship requires documented contract
- Disputes over contract terms easier to resolve (but must be documented correctly)
Mitigation Strategies:
- Develop comprehensive contract templates for each employment type
- Implement new hire procedure with mandatory written contract
- Digitize contract management system
- Conduct audit of current informal employment relationships

2. Increased Annual Leave Entitlement (20 working days minimum)

Current State: 15 calendar days
New Requirement: 20 working days (~28 calendar days) minimum
Employer Risk:
- Approximately 40-50% increase in annual leave liability
- Higher accrual rates impact balance sheet
- Staff scheduling complexity increases
Financial Impact Example:
- Employee salary: 40,000 UAH/month = 480,000 UAH/year
- Daily rate: 480,000 ÷ 248 working days = 1,935 UAH/day
- Current: 15 days × 1,935 = 29,025 UAH
- New: 20 days × 1,935 = 38,700 UAH (+33% cost increase per employee)
Mitigation Strategies:
- Review and adjust annual compensation budgets
- Evaluate leave scheduling software
- Model multi-year accrual liability
- Consider phased implementation for sector-specific adjustments

3. Enhanced Occupational Health & Safety (Risk-Based System)

Current State: Reactive, prescriptive regulations; limited risk assessment
New Requirement: Proactive hazard identification, assessment, and management; documentation required
Employer Risk:
- Requires fundamental shift in OHS management approach
- Regular risk assessments with documentation needed
- Non-compliance with risk management = presumption of negligence
- Personal liability of employer/managers for serious violations
Compliance Burden:
- Hire or train OHS specialists
- Conduct comprehensive risk assessments
- Document control measures
- Implement monitoring/review system
Mitigation Strategies:
- Engage external OHS consultants for baseline assessment
- Implement ISO 45001 or similar system
- Document all hazard assessments and corrective actions
- Train management on new OHS obligations
- Budget for OHS infrastructure improvements

4. Termination for Cause with Expanded Grounds but Stricter Procedures

Current State: 10 defined grounds; limited procedural requirements; quick dismissal possible
New Requirement: Expanded grounds BUT with mandatory investigation, documentation, right to response
Employer Risk:
- Cannot dismiss without proper procedure
- Wrongful dismissal claims easier to succeed if procedure flawed
- Back wages + moral damages award potential
- Retaliation claims possible if discharge perceived as retaliation
Specific Procedures Required:
- Written notification of violation
- Opportunity for employee response/explanation (period not specified; likely 3-10 days)
- Investigation documentation
- Disciplinary decision in writing with grounds
- Notice period (7 days for some cases)
Mitigation Strategies:
- Develop documented investigation procedures
- Create templates for disciplinary letters
- Train HR personnel on proper termination procedure
- Document all performance issues contemporaneously
- Consider progressive discipline approach

5. Wage Payment Deadlines and Schedule Requirements

Current State: “Regular” payment required; no specific schedule mandated
New Requirement: Exact payment dates must be specified in contract; deviation creates liability
Employer Risk:
- Must have consistent, documented payment schedule
- Delayed payment triggers automatic interest charges
- Worker can claim breach even for 1-day delay
Mitigation Strategies:
- Specify exact payment dates in all contracts
- Implement accounting system to ensure on-time payment
- Document any delays with explanations
- Plan for payroll timing well in advance

6. Enhanced Strike and Collective Action Rights

Current State: Strikes permitted but limited; minimal procedures
New Requirement: Clearer strike procedures; mediation/arbitration requirements; broader participation rights
Employer Risk:
- Potential for more frequent labor actions
- Mediation required before formal labor arbitration
- Government arbitration outcome binding
- Retaliation against strikers is strictly prohibited
Mitigation Strategies:
- Establish labor relations department
- Develop communication protocol with unions
- Understand mediation/arbitration procedures
- Document all labor relations interactions
- Avoid any action that could be perceived as retaliation

MEDIUM-RISK PROVISIONS (Planning Required)

1. Expanded Maternity/Paternity Leave Structure

Risk: Gender discrimination claims if paternity leave not properly offered
Action: Update HR policies to address gender-neutral parental leave

2. Working Time Flexibility and “Unfixed Schedule” Regulation

Risk: Must provide 2-week notice for schedule changes; compensation required for short-notice changes
Action: Evaluate current scheduling practices; plan for transition

3. Sick Leave Payment (First 6 Days by Employer)

Risk: Increased sick leave costs; requires documentation
Action: Budget for increased sick leave liability; implement medical certification process

4. Collective Agreement Extension to Non-Union Workers

Risk: Sectoral agreements may apply broadly; employers not party to negotiation
Action: Monitor sector-level collective agreement developments

5. Discrimination Claims with Shifted Burden of Proof

Risk: Once employee shows prima facie case, employer must prove non-discrimination
Action: Document all employment decisions; maintain objective criteria records

III. UNCLEAR/AMBIGUOUS PROVISIONS REQUIRING CLARIFICATION

1. Definition of “Work of Equal Value” for Gender Pay Equity

Current Text: States “equal pay for work of equal value” but does not define methodology
Problem: Different calculation methods produce different results
Guidance Needed:
- What factors constitute “equal value”?
- Can employers use job evaluation systems?
- What documentation satisfies the requirement?
Recommendation: Await implementing regulations from Ministry of Economy

2. Aggregated Working Time Accounting Period Parameters

Current Text: References accounting periods but exact rules unclear
Problem: Can exceed daily/weekly limits within month? Quarter? Year?
Guidance Needed:
- Clear maximum accounting periods
- Compensation rules for exceeding limits
- Dispute resolution for calculation disagreements
Recommendation: Seek clarification in implementing regulations

3. Unfixed Work Schedule (Нефіксований Робочий Час) Definition

Current Text: References “nonfixed work schedule” but definition sparse
Problem: Not clear which industries/positions qualify
Guidance Needed:
- Criteria for “unfixed” designation
- Distinction from part-time or flexible scheduling
- Compensation formulas
Recommendation: Wait for ministerial guidance; consult sector agreements

4. Protected Categories in Discrimination Definition

Current Text: Lists 10+ protected characteristics but some vague (e.g., “other grounds”)
Problem: “Other grounds” creates uncertainty about what’s protected
Guidance Needed:
- What qualifies as “other grounds”?
- Case law development needed
Recommendation: Adopt broadest interpretation; review case law as Code implemented

5. Collective Dismissal Threshold and Notification

Current Text: References collective dismissal but threshold may be modified from 10 workers/30 days
Problem: Exact threshold not clear in Draft excerpts
Guidance Needed:
- Is 10+/30 days maintained?
- What authorities must be notified?
- State approval needed?
Recommendation: Clarify with Ministry before implementing mass layoffs

6. Relationship Between Collective Agreements and Individual Contracts

Current Text: States agreements can extend to non-party workers if “broadly applicable”
Problem: “Broadly applicable” undefined; creates exposure for non-union employers
Guidance Needed:
- Percentage of workforce coverage threshold?
- Can employers opt out of sectoral agreements?
- Government authority to extend agreements?
Recommendation: Monitor government decisions on sectoral agreement extension

7. Hazard/Risk Categories for Enhanced Leave and Protections

Current Text: References “hazardous work,” “special conditions,” etc. but categories undefined
Problem: Existing lists (e.g., 1997 Cabinet Decision No. 1290) may not align with new Code
Guidance Needed:
- Which occupations/industries get additional leave?
- How are new categories added?
- Retroactive application to existing employees?
Recommendation: Request Ministry guidance; review industry-specific regulations

8. Night Work Premium Rates for Different Sectors

Current Text: Minimum 25% but suggests “higher rates for hazardous night work”
Problem: No definition of which sectors get higher rates
Guidance Needed:
- Specific percentages for hazardous industries
- Determination process
Recommendation: Baseline at 25%; adjust based on sector guidance

9. Mediation Procedure Timelines and Binding Effect

Current Text: References mandatory mediation but procedures sparse
Problem: Not clear if mediation recommendation binding; timelines vague
Guidance Needed:
- Mandatory vs. recommended mediation
- Mediator qualifications
- Timeline for mediation before arbitration
- Effect of “agreement” in mediation
Recommendation: Await detailed implementing regulations

10. Interim Provisions and Transition Rules

Current Text: References “transitional provisions” but scope unclear
Problem: Not certain how existing contracts/agreements transition
Guidance Needed:
- Do existing contracts auto-convert to new framework?
- Phase-in periods for compliance
- Treatment of ongoing disputes under old Code
Recommendation: Carefully track final version of transitional provisions

IV. POTENTIAL COMPLIANCE GAPS AND RISKS

Gap 1: Technology and Data Privacy

Issue: Draft addresses remote work but does not reference data privacy regulations (GDPR-equivalent)
Risk: Monitoring remote workers may violate privacy rights
Recommendation: Review compliance with Ukrainian data protection laws

Gap 2: Interaction with Collective Security/Wartime Provisions

Issue: Ukraine is in active conflict; military mobilization/service leave requirements unclear
Risk: Potential conflict between demobilization and new labor code
Recommendation: Await clarification on interaction between defense laws and Labor Code

Gap 3: Apprenticeship and Training Wage Framework

Issue: Training wages mentioned but detailed framework sparse
Risk: Disputes over classification as “training” vs. regular employment
Recommendation: Develop clear apprenticeship program documentation

Gap 4: Applicability to Special Employment Categories

Issue: Civil servants, military, public utilities workers may have separate rules
Risk: Unclear which provisions apply to all employers vs. private sector only
Recommendation: Clarify with Ministry whether special categories fully covered

V. IMPLEMENTATION TIMELINE AND RECOMMENDATIONS

Phase 1: IMMEDIATE (Now – February 2026)

Conduct Legal Audit
- Review all employment contracts against new requirements
- Identify non-compliant arrangements (verbal contracts, foreign-only contracts)
- List all informal employees
Prepare Policy Updates
- Contract templates (all types)
- Leave calculation procedures
- Wage payment schedule documentation
- Termination procedures
- OHS risk assessment methodology
Budget Planning
- Quantify increased leave liability
- Model increased sick leave costs
- Plan for compliance infrastructure

Phase 2: PRE-ENACTMENT (February – Expected Passage Q2-Q3 2026)

Stakeholder Engagement
- Monitor Verkhovna Rada committee discussions
- Participate in public consultations if available
- Join employer associations to coordinate advocacy
Technical Compliance Preparation
- Implement payroll system updates for payment deadlines
- Develop leave tracking software
- Plan OHS assessment methodology
Training
- HR staff training on new procedures
- Management training on disciplinary process
- OHS coordinator training on risk assessment

Phase 3: POST-ENACTMENT (Upon passage; likely 6-month transition)

Immediate Conversion
- Convert all contracts to written form
- Update existing contracts to comply with new requirements
- File written evidence of agreements
System Implementation
- Launch new payroll procedures
- Activate leave management system
- Begin OHS risk assessments
Compliance Monitoring
- Quarterly audits of compliance
- Track labor inspectorate guidance and case law
- Update policies as clarifications emerge

VI. RECOMMENDATIONS FOR EMPLOYERS

1. Strategic Recommendations

Engage external legal counsel specializing in Ukrainian labor law for specific guidance
Join employer associations for collective advocacy and guidance
Conduct gap analysis against Draft provisions now, before enactment
Plan financial impacts separately by functional area (HR, payroll, OHS)

2. Immediate HR Policy Updates Needed

Written contract requirement (all new hires immediately)
Leave calculation methodology (new 20-day minimum)
Payment schedule documentation (specify exact dates)
Termination procedure with investigation and documentation
Anti-discrimination policy with expanded protected categories
Occupational health and safety risk assessment procedure

3. Documentation and Record-Keeping

Maintain detailed employment records
Document all employment decisions with reasoning
Create investigation files for disciplinary actions
Track leave accrual and usage carefully
Maintain hazard assessment and OHS control records

4. Sectoral Considerations

24/7 Operations (Security, Healthcare, Hospitality): Prepare for night work premiums and aggregated time accounting
Hazardous Industries: Early implementation of risk-based OHS system
Unionized Workforces: Prepare for expanded collective agreement obligations
Remote/Flexible Work Organizations: Develop explicit schedule policies
Sector with High Turnover: Prepare for increased severance/exit costs

5. Risk Mitigation Priorities (in order of implementation)

Convert all informal employment to written contracts
Update termination procedures to include documentation and investigation
Implement leave tracking and recalculation system
Establish occupational health and safety risk assessment program
Conduct wage audit for gender pay equity
Update discrimination and anti-harassment policies
Modify payment schedule to specify exact dates
Prepare for collective bargaining under new framework

VII. CONCLUSION

The Draft Labor Code of Ukraine represents a fundamental modernization of Ukrainian labor law, moving from Soviet-era paternalistic state regulation to a balanced framework emphasizing worker protections while enabling business flexibility. For employers, the changes are substantial and require immediate planning.

Overall Assessment:

Compliance Complexity: MEDIUM-HIGH
Financial Impact: HIGH (primarily due to increased leave entitlement)
Operational Impact: MEDIUM-HIGH (new procedures required)
Timeline to Full Compliance: 6-12 months post-enactment

The most significant challenges will be:

Increased leave liability (40-50% increase in minimum annual leave)
Shift to proactive occupational health and safety management
Enhanced procedural requirements for termination
New documentation and record-keeping obligations

Critical Success Factor: Proactive engagement with legal counsel and sector peers to develop transitional implementation strategy before the Code takes effect.

APPENDICES (Recommended for separate research)

Current Labor Code Articles (1971) – key provisions
Draft Code Articles (2026) – comparative sections
Implementing Regulations – issued by Ministry of Economy
EU Directives referenced in Draft – comparative text
ILO Conventions – summary of obligations
Case Law – Ukrainian Supreme Court decisions on key issues
Collective Agreement Templates – sector-specific examples
OHS Risk Assessment Methodologies – EU/ILO standards
Sample Contracts – new code-compliant templates
Financial Impact Model – template for cost calculation

Document Prepared By: Ukrainian Labor Law Analysis Team
Verification Status: Based on Draft Code as of January 15, 2026
Caveat: This analysis is based on the Draft Code as submitted. Final enacted version may differ. Legal counsel should review final enacted text.

Complete List of Payroll-Relevant Human Resource Documents for Employees in Ukraine

Reference Guide for Ukrainian Labour Law Compliance (2026)

Pre-Employment Documents
Hiring and Onboarding Documents
Personnel Records and Registration
Ongoing Employment Documents
Time and Attendance Records
Leave Management Documents
Payroll and Compensation Documents
Tax and Social Insurance Documents
Employment Changes and Transfers
Termination and Exit Documents
Compliance and Regulatory Documents
Digital Records (2026 Transition)

1. PRE-EMPLOYMENT DOCUMENTS

Documents Required from Employee

Document	Ukrainian Name	Legal Basis	Mandatory?	Notes
Passport or ID Card	Паспорт громадянина України	Labour Code Art. 24	✓ Yes	Primary identification document
Taxpayer Identification Number (TIN)	Реєстраційний номер облікової картки платника податків (РНОКПП)	Tax Code	✓ Yes	10-digit unique tax ID
Labour Book	Трудова книжка	Labour Code Art. 48	✓ Yes (if exists)	Physical book being phased out by June 2026
Employment History Extract	Виписка з Реєстру застрахованих осіб	Pension Fund	✓ Yes (alternative to labour book)	From State Register of Compulsory State Social Insurance
Education Documents	Диплом, атестат, сертифікат	Labour Code Art. 24	~ If required by position	Diplomas, certificates, professional qualifications
Medical Certificate	Медична довідка	Labour Code Art. 24	~ If required by law	Mandatory for certain industries (food, childcare, healthcare)
Military Registration Documents	Військово-облікові документи	Law on Military Duty	✓ Yes (for conscripts)	For Ukrainian citizens liable for military service
Social Insurance Certificate	Страхове свідоцтво	Pension Fund regulations	~ Optional	Being replaced by electronic records
Bank Account Details	Реквізити банківського рахунку	Internal requirement	✓ Yes (for salary transfer)	IBAN for bi-weekly salary payments
Work Permit	Дозвіл на працевлаштування	Law on Employment	✓ Yes (for foreigners)	Required for non-residents unless exempt

Internal Pre-Employment Documents

Document	Purpose	Retention
Job Application	Formal request for employment	3 years
CV/Resume	Candidate background information	During employment + 3 years
Consent to Personal Data Processing	GDPR compliance (Law on Personal Data Protection)	During employment + 1 year after termination
References/Background Checks	Due diligence records	3 years
Medical Examination Results	Health clearance (if required)	During employment + 50 years (if hazardous work)

2. HIRING AND ONBOARDING DOCUMENTS

Form P-1: Employment Order (Наказ про прийняття на роботу)

Detail	Information
Legal Basis	Labour Code Art. 24, Order No. 489 of 05.12.2008
Purpose	Official document confirming employment commencement
Mandatory Fields	– Employee full name – Position/job title – Structural unit/department – Employment start date – Salary amount – Type of employment (permanent/fixed-term) – Probationary period (if applicable) – Basis for hiring (employment contract reference)
Signatures Required	– Authorised company representative (director/HR) – Employee (acknowledgement)
Copies	Original in personnel file, copy to employee, copy to accounting/payroll
Retention Period	75 years

Employment Contract (Трудовий договір)

Detail	Information
Legal Basis	Labour Code Art. 21-29
Form	Must be in writing (mandatory since 2022)
Language	Ukrainian (state language) – translations permitted but Ukrainian version binding
Mandatory Content	– Employer and employee identification – Job title and duties – Place of work – Start date (and end date if fixed-term) – Salary (in UAH) – Working hours and days off – Leave entitlements – Probationary period (max 3 months, extendable to 6 months) – Termination conditions – Compensation and benefits
Copies	Original to employee, copy in personnel file
Retention	During employment + 75 years after termination

Additional Onboarding Documents

Document	Purpose	Mandatory?
Job Description	Detailed duties, responsibilities, KPIs	Recommended
Non-Disclosure Agreement (NDA)	Confidentiality obligations	If applicable
Conflict of Interest Declaration	Anti-corruption compliance (Law on Prevention of Corruption)	For public officials, SOEs
Workplace Safety Training Certificate	Occupational health and safety training completion	✓ Yes
Internal Labour Regulations Acknowledgement	Confirmation employee received and read the internal rules	✓ Yes
Password/Access Control Forms	IT systems, physical access	As needed

3. PERSONNEL RECORDS AND REGISTRATION

Form P-2: Personal Card (Особова картка працівника)

Detail	Information
Legal Basis	Order No. 489 of 05.12.2008
Purpose	Comprehensive personnel record for each employee
Maintenance	Not legally mandatory since labour liberalisation, but widely maintained
Sections	Section I: General Information – Full name, date of birth – Citizenship, passport details – Tax ID (RNOCPP) – Address, contact information – Education, qualifications – Previous work experienceSection II: Military Registration – Military rank, speciality – Military registration documents – Recruitment centre informationSection III: Professional Development – Training courses – Qualifications obtained – CertificationsSection IV: Appointments and Transfers – Position changes – Department transfers – Promotion history Section V: Leave Records – Annual leave – Sick leave – Unpaid leave – Maternity/paternity leave
Updates	Throughout employment (transfers, promotions, training, leave)
Employee Signature	Required on key entries (hiring, transfers, termination)
Photo	3×4 cm colour photograph attached
Retention	75 years after termination

Labour Book (Трудова книжка) – Physical Format (Until June 10, 2026)

Detail	Information
Legal Basis	Labour Code Art. 48; Resolution of CMU No. 301 (25.03.1993)
Purpose	Official record of employment history
Employer Obligations	– Make entry within 5 days of hiring – Record all position changes, awards – Record termination with legal basis – Return to employee on last working day – Store if employee works >5 days
Entry Requirements	– Chronological order – Reference to Form P-1 (hiring) or P-4 (termination) order – No abbreviations – No corrections without attestation – Seal and signature required
Transition Deadline	June 10, 2026 – All labour books must be scanned and uploaded to the electronic Register of Insured Persons
2026 Note	⚠️ After June 10, 2026, paper labour books no longer be accepted for pension calculations

Electronic Labour Book / Employment History (Електронна трудова книжка)

Detail	Information
Legal Basis	Law No. 1217-IX (05.02.2021) “On Electronic Recordkeeping of Employee Work Activity”
Effective Date	June 10, 2021 (5-year transition period ending June 10, 2026)
Administrator	Pension Fund of Ukraine via the State Register of Mandatory State Social Insurance
Access	Employees access via portal.pfu.gov.ua with a digital signature
Employer Obligations	– Upload employment data to the Register – Scan physical labour books (all pages, 300 dpi, colour, JPG/PDF, <1MB) – Submit via XML file or web portal – Complete by June 10, 2026
Data Included	– Employment periods – Positions held – Salary contributions (post-2004 automatic) – Termination reasons
Benefits	– No loss/damage risk – Automatic pension calculation – Instant access for employees – Reduced administrative burden

Staffing Table (Штатний розпис)

Detail	Information
Purpose	Organisational structure showing all positions, salaries, and headcount
Mandatory?	Recommended but not legally required for private companies
Content	– Position titles – Number of positions per title – Salary ranges – Department/unit allocation – Total payroll budget
Updates	When organisational changes occur
Approval	Company director/owner

4. ONGOING EMPLOYMENT DOCUMENTS

Personnel Orders (Накази з особового складу)

Order Type	Form	Purpose	Retention
Hiring Order	P-1	Document employment commencement	75 years
Transfer Order	Custom/internal	Document position/location changes	75 years
Promotion Order	Custom/internal	Document advancement, salary increase	75 years
Leave Order	P-3	Grant annual, sick, unpaid leave	75 years
Termination Order	P-4	Document employment end	75 years
Business Trip Order	P-6	Authorize official travel	5 years
Disciplinary Action Order	Custom	Document warnings, sanctions	75 years
Award/Bonus Order	Custom	Document recognitions, bonuses	75 years

Employment Agreements and Amendments

Document	Purpose	Legal Basis
Amendment to Employment Contract	Modify essential terms (salary, hours, duties)	Labour Code Art. 32
Notice of Contract Change	2-month advance notice to employee (or immediate if martial law)	Labour Code Art. 32
Supplementary Agreement	Add new terms (benefits, responsibilities)	Labour Code Art. 9

5. TIME AND ATTENDANCE RECORDS

Form P-5: Timesheet (Табель обліку робочого часу)

Detail	Information
Legal Basis	Order No. 489 of 05.12.2008
Purpose	Record actual hours worked by each employee
Frequency	Monthly (covers full calendar month)
Recording Method	– Continuous recording (daily entries) – Registration of deviations only (absences, overtime, holidays)
Codes Used	– Я (Робота) – Work – В (Вихідний) – Day off – СВ (Святковий) – Holiday – ВД (Відпустка) – Annual leave – ЛН (Лікарняний) – Sick leave – НВ (Неявка без поважних причин) – Unauthorized absence – РВ (Робота у вихідний) – Work on day off – НС (Надурочна робота) – Overtime
Content	– Employee name, tabular number – Daily attendance marks – Total hours worked – Total days worked – Overtime hours – Absences with reasons
Signatures	– Prepared by: HR/timekeeper – Approved by: Department head – Authorised by: HR director
Use	Basis for payroll calculation (hourly wages, overtime, leave deductions)
Retention	3 years (general) / 75 years (hazardous work)

Related Time Records

Document	Purpose	Retention
Overtime Work Record	Track 120-hour annual overtime limit per employee (Labour Code Art. 65)	3 years
Night Work Register	Document work between 10 PM – 6 AM (Labour Code Art. 54)	3 years
Shift Schedule	Pre-approved work schedules for shift workers	1 year
Vacation Schedule	Annual plan for employee leave (Labour Code Art. 79)	3 years

6. LEAVE MANAGEMENT DOCUMENTS

Form P-3: Leave Order (Наказ про надання відпустки)

Detail	Information
Legal Basis	Order No. 489 of 05.12.2008
Purpose	Authorise employee leave (annual, unpaid, study, etc.)
Types of Leave	– Annual basic leave (min 24 calendar days) – Additional annual leave (hazardous work, irregular hours) – Unpaid leave – Study leave – Maternity/paternity leave – Social leave (family reasons)
Mandatory Fields	– Employee name, position – Type of leave – Start and end dates – Number of days – Basis (vacation schedule, employee application, medical certificate)
Advance Payment	Vacation pay must be paid at least 3 days before leave starts (Labour Code Art. 21)
Signatures	Authorised representative, employee acknowledgement
Retention	75 years

Supporting Leave Documents

Document	Ukrainian Name	Purpose	Mandatory?
Employee Leave Application	Заява працівника про надання відпустки	Request for leave	✓ Yes
Vacation Schedule	Графік відпусток	Annual plan approved at the beginning of the year	✓ Yes (Labour Code Art. 79)
Sick Leave Certificate	Листок непрацездатності	Medical proof of illness	✓ Yes (for sick leave)
Maternity Leave Certificate	Лікарняний лист (вагітність та пологи)	Medical certificate (issued at 30 weeks of pregnancy)	✓ Yes
Birth Certificate (for paternity leave)	Свідоцтво про народження дитини	Proof of child’s birth	✓ Yes
Certificate of Child Care	Довідка про догляд за дитиною	For parental leave entitlement	✓ Yes
Unpaid Leave Justification	Документи, що підтверджують причини	Proof of family/personal reasons	~ If required

7. PAYROLL AND COMPENSATION DOCUMENTS

Form P-7: Employee Payroll Statement (Розрахунково-платіжна відомість)

Detail	Information
Legal Basis	Order No. 489 of 05.12.2008
Purpose	Detailed payroll calculation and payment record for each employee
Frequency	Bi-weekly (Ukraine mandates 24 payroll cycles/year – Labour Code Art. 115)
Content	– Employee identification (name, tabular number, position) – Gross salary breakdown: • Base salary • Overtime • Bonuses • Allowances • Vacation pay • Sick pay (first 5 days employer-paid) – Mandatory deductions: • Personal Income Tax (18%) • Military Tax (5% since Oct 2024, was 1.5%) – Voluntary deductions (loans, alimony) – Net salary – Payment method (bank transfer, cash) – Employee signature (if cash payment)
Retention	3 years

Form P-8: Consolidated Payroll Statement (Зведена відомість)

Detail	Information
Purpose	Summary of total payroll costs for accounting purposes
Content	– Total gross payroll – Total taxes withheld (PIT, Military Tax) – Total net payroll – Breakdown by department/cost centre – Employer social contributions (USC – 22%)
Use	Financial reporting, budgeting, and cost allocation
Retention	3 years

Payslip (Розрахунковий листок)

Detail	Information
Legal Basis	Labour Code Art. 110
Mandatory?	✓ Yes – employer must provide an itemised payslip
Distribution	Each pay period (bi-weekly)
Required Information	– Employee name, position, pay period – Salary components (base, overtime, bonuses) – Hours worked – Gross salary – Deductions: • Personal Income Tax (18%) • Military Tax (5%) • Other deductions – Unified Social Contribution (22% – employer pays, shown for transparency) – Net salary – Payment date and method
Format	Paper or electronic (email, employee portal)
Retention	Employee keeps, employer retains payroll register (3 years)

Salary Payment Documents

Document	Purpose	Retention
Bank Transfer Register	Record of salary payments via bank	3 years
Payroll Deposit Slips	Bank confirmation of payroll transfer	3 years
Cash Payment Register	If salary is paid in cash (discouraged, rare)	3 years
Advance Payment Record	First half of bi-weekly payment	3 years

Personal Income Tax (PDFO – ПДФО) – 18%

Document	Ukrainian Name	Purpose	Frequency	Deadline
Monthly PIT Report	Податковий розрахунок сум доходу, нарахованого (сплаченого) на користь платників податків – фізичних осіб, і сум утриманого з них податку	Report income paid and PIT withheld	Monthly (since 2025)	20th of the following month
PIT Payment	Перерахування ПДФО до бюджету	Remit withheld PIT to the State Tax Service	Monthly	20th of the following month
Annual PIT Reconciliation	Річна податкова декларація про майновий стан і доходи	Annual tax return (if employee has additional income)	Annual	May 1 following year

Military Tax (Військовий збір) – 5%

Document	Purpose	Frequency	Deadline
Military Tax Report	Included in monthly PIT report since 2025	Monthly	20th of the following month
Military Tax Payment	Remit withheld military tax	Monthly	20th of the following month
Notes	Rate increased from 1.5% to 5% effective October 2024 (Law No. 4015-IX)

Unified Social Contribution (ЄСВ – Єдиний соціальний внесок) – 22%

Document	Ukrainian Name	Purpose	Frequency	Deadline
Monthly USC Report	Звіт про суми нарахованого єдиного внеску на загальнообов’язкове державне соціальне страхування	Report USC contributions on payroll	Monthly (since 2025)	20th of the following month
USC Payment	Сплата ЄСВ	Pay employer USC (22% of gross payroll)	Monthly	20th of the following month
Minimum USC		UAH 1,760/month per employee (22% × UAH 8,000 min wage 2025)	Monthly
Maximum Base		Capped at 20× minimum wage = UAH 160,000/month (2025)	Monthly
Rate Variations		– Standard rate: 22% – People with disabilities: 8.41% – Diia.City residents: UAH 1,760 fixed (minimum contribution)	Monthly

Employee Tax Card (Картка податкового обліку)

Detail	Information
Legal Basis	Tax Code Art. 176
Purpose	Document employee’s tax status, dependents, and eligibility for deductions
When Submitted	Upon hiring or when requesting tax benefits
Content	– Employee personal information – Number of dependent children (for monthly tax credit: UAH 1,200 per child if salary ≤ min wage × 2.5) – Disability status – Veteran status – Other tax deductions
Employer Use	Calculate correct PIT withholding
Updates	When an employee’s circumstances change

Social Insurance Records

9. EMPLOYMENT CHANGES AND TRANSFERS

Transfer Order (Наказ про переведення)

Detail	Information
Purpose	Document internal transfer (position, department, location)
Types	– Temporary transfer (up to 1 month, employee consent required) – Permanent transfer (employee consent required) – Transfer to another location (with employer)
Legal Basis	Labour Code Art. 32-33
Content	– Employee details – Current position – New position – Effective date – Reason for transfer – New salary (if changed) – Employee consent
Labour Book Entry	Required for permanent transfers
Retention	75 years

Salary Change Documents

Document	Purpose	Legal Basis
Salary Increase Order	Formalise raise, bonus structure change	Labour Code Art. 97
Indexation Notice	Notify employee of mandatory salary indexation if inflation > 3%	Labour Code Art. 95
Amendment to Employment Contract	Update contract terms (2-month notice required unless martial law)	Labour Code Art. 32

10. TERMINATION AND EXIT DOCUMENTS

Form P-4: Termination Order (Наказ про звільнення)

Detail	Information
Legal Basis	Order No. 489 of 05.12.2008; Labour Code Art. 36-47
Purpose	Officially terminate the employment relationship
Grounds for Termination	Must cite specific Labour Code article: – Art. 38: Employee initiative (14 days’ notice) – Art. 39: Mutual agreement – Art. 40: Fixed-term contract expiration – Art. 41: Draft/conscription – Art. 36: Redundancy (2 months notice) – Art. 40: Disciplinary dismissal (single gross violation) – Art. 40: Incompetence (poor performance) – Others as per the Labour Code
Mandatory Fields	– Employee name, position – Termination date (last working day) – Legal basis (Labour Code article and reason) – Reference to supporting documents (resignation letter, redundancy notice, etc.)
Employee Rights	– Copy of Form P-4 on the last working day – Labour book returned with termination entry – Final settlement (all wages, unused vacation pay, and severance if applicable) – Written notice of amounts paid
Labour Book Entry	Termination recorded with order number, date, and legal basis
Retention	75 years

Resignation Documents

Document	Purpose	Timeline
Resignation Letter	Employee’s written notice to resign	14 calendar days’ notice (Labour Code Art. 38)
Acceptance of Resignation	Employer acknowledgement	Within 14 days
Exit Interview Form	Capture feedback (optional)	On or before the last day

Final Settlement Documents

Document	Purpose	Deadline
Final Payslip	Itemized final payment (salary + unused vacation + severance)	Last working day
Certificate of Income Paid	Tax year-to-date income for the employee’s records	Last working day
Written Notice of Amounts Paid	Detailed breakdown of the final payment	Last working day
Certificate of Employment	Confirmation of employment dates, position, and salary (upon request)	Within 3 days of the request
Work Book Handover Receipt	Employee acknowledges receipt of the labour book	Last working day

Severance Pay (Вихідна допомога)

Situation	Amount	Legal Basis
Redundancy	1-month average salary	Labour Code Art. 44
Employer breach of labour laws	Min 3 months average salary	Labour Code Art. 44
Company official (managing director)	6 months’ average salary (upon termination of corporate mandate)	Labour Code Art. 41
Mutual agreement	As agreed in the employment contract or settlement	Labour Code Art. 36

11. COMPLIANCE AND REGULATORY DOCUMENTS

Internal Labour Regulations (Правила внутрішнього трудового розпорядку)

Detail	Information
Legal Basis	Labour Code Art. 142
Mandatory?	✓ Yes (for all employers)
Approval	Must be approved by the labour collective (general meeting of >50% employees) and the trade union (if it exists)
Content	– Working hours and breaks – Start and end times – Lunch/rest periods – Payroll dates (must specify bi-weekly schedule) – Leave procedures – Disciplinary rules – Employee rights and obligations – Employer rights and obligations – Dress code (if applicable) – Health and safety rules
Language	Must be in Ukrainian
Access	Must be accessible to all employees (posted, intranet, distributed)
Updates	When organisational policies change

Occupational Health and Safety Documents

Document	Purpose	Retention
Health and Safety Policy	Company-wide safety rules	Permanent
Risk Assessment	Identify workplace hazards	3 years (update regularly)
Safety Training Register	Record of employee safety inductions	75 years
Accident Investigation Report	Document workplace accidents	75 years
Medical Examination Records	Periodic health checks (for hazardous work)	50 years

Anti-Corruption and Conflict of Interest

Document	Legal Basis	Applicability
Declaration of Assets and Income	Law on Prevention of Corruption	Public officials, state-owned enterprises
Conflict of Interest Declaration	Law on Prevention of Corruption	Public sector employees, certain private sector
Gift Register	Law on Prevention of Corruption	Public officials

Data Protection and Confidentiality

Document	Purpose	Legal Basis
Consent to Personal Data Processing	GDPR compliance	Law on Personal Data Protection No. 2297-VI
Confidentiality Agreement	Protect trade secrets, sensitive information	Civil Code, employment contract
Non-Compete Agreement	Restrict post-employment competition (limited enforceability in Ukraine)	Civil Code

12. DIGITAL RECORDS (2026 TRANSITION)

Electronic Employment Record (Електронний облік трудової діяльності)

System	Administrator	Access	Purpose
State Register of Insured Persons	Pension Fund of Ukraine	portal.pfu.gov.ua	Central repository of employment history
Electronic Cabinet for Employers	Pension Fund of Ukraine	User account with a digital signature	Upload employee data, submit reports
Diia.Employment (Planned)	Ministry of Digital Transformation	Diia mobile app	Employee access to the digital labour book

2026 Digital Transition Requirements

Requirement	Deadline	Action Required
Scan all physical labour books	June 10, 2026	– All pages in colour, 300 dpi, JPG/PDF, <1MB – Upload to Pension Fund portal
Return labour books to employees	After scanning	Employee signs receipt acknowledging return
Submit employment data via XML	June 10, 2026	For all employment periods, especially pre-2004
Verify employee records	Before June 10, 2026	Employees should check their electronic records for accuracy

Digital Reporting (2025 onwards)

Report Type	Frequency	Submission Method	Portal
PIT, Military Tax, USC	Monthly	Electronic filing (XML format)	tax.gov.ua (State Tax Service)
Statistical Salary Reports	Monthly/Quarterly	Electronic filing	ukrstat.gov.ua (State Statistics Service)
Employment Data Updates	Real-time (hiring, termination)	Electronic notification	portal.pfu.gov.ua (Pension Fund)

SUMMARY TABLE: CRITICAL PAYROLL-RELEVANT DOCUMENTS

Document	Form	Frequency	Retention	Payroll Impact
Employment Order	P-1	Upon hiring	75 years	Establishes salary, start date
Employment Contract	Custom	Upon hiring	75 years	Defines salary, benefits, and terms
Personal Card	P-2	Ongoing (updates)	75 years	Tracks position, salary changes
Labour Book	Physical/Electronic	Ongoing	Lifetime (employee)	Confirms employment history, pension eligibility
Timesheet	P-5	Monthly	3 years	Basis for salary calculation, overtime, leave deductions
Leave Order	P-3	Per leave	75 years	Vacation pay calculation
Payroll Statement	P-7	Bi-weekly	3 years	Salary payment record
Payslip	Custom	Bi-weekly	3 years (employer)	Employee payment transparency
PIT Report	Tax form	Monthly	5 years	Tax withholding and remittance
Military Tax Report	Tax form	Monthly	5 years	Tax withholding and remittance
USC Report	Social insurance form	Monthly	5 years	Social contribution remittance
Termination Order	P-4	Upon termination	75 years	Final settlement, severance calculation

DOCUMENT RETENTION SCHEDULE

Retention Period	Document Types
75 years	Personnel orders (P-1, P-3, P-4), employment contracts, personal cards (P-2), transfer orders, disciplinary actions, termination records
50 years	Medical examination records (hazardous work)
5 years	Tax reports (PIT, USC, military tax), business trip orders (P-6)
3 years	Timesheets (P-5), payroll statements (P-7, P-8), vacation schedules, sick leave certificates, overtime records
1 year	Shift schedules, temporary correspondence
Permanent	Regulatory documents (internal labour regulations, health and safety policies), collective agreements

KEY DEADLINES FOR 2026

Date	Requirement	Consequence of Non-Compliance
10th of each month	Notify the State Fiscal Service of new hires	Fine: UAH 4,723 per unreported employee
20th of each month	Submit PIT, Military Tax, USC reports and payments	Penalties: 10% of the unpaid amount + daily interest
June 10, 2026	Scan and upload all labour books to the electronic Register	⚠️ Paper labour books no longer valid for pension calculations
Bi-weekly	Pay salaries (max 16-day interval between payments)	Fine: UAH 510-1,700 per violation
May 1 (annually)	Employees file personal income tax returns (if additional income)	Penalties for late filing
August 1 (annually)	Employees pay annual PIT (if applicable)	Penalties for late payment

LEGAL REFERENCES

Labour Code of Ukraine (Law No. 322-VIII)
Tax Code of Ukraine (Law No. 2755-VI)
Law on Personal Data Protection (No. 2297-VI)
Law on Prevention of Corruption (No. 1700-VII)
Law on Electronic Recordkeeping of Employee Work Activity (No. 1217-IX, 05.02.2021)
Order of State Statistics Committee No. 489 (05.12.2008) – Standard forms P-1 through P-8
Resolution of Cabinet of Ministers No. 301 (25.03.1993) – Labour Book regulations

NOTES

Martial Law Adjustments (2022-present): Certain labour law provisions modified during martial law, including:
- Immediate termination permitted (not 14-day notice)
- 60-hour workweek allowed for critical infrastructure
- Suspension of employment contracts permitted
- 90-day unpaid leave for employees leaving Ukraine or becoming IDPs
Payroll Cycle: Ukraine mandates bi-weekly salary payments (24 cycles/year, max 16 days between payments) per Labour Code Article 115.
Language Requirement: All employment documents must be in Ukrainian (state language) per Law on State Language (2019).
Electronic Signatures: Legally recognised for employment contracts and internal documents per the Law on Electronic Documents and Electronic Document Flow.
Minimum Wage 2025: UAH 8,000/month (updated annually, typically in January).
Tax Rates 2025-2026:
- Personal Income Tax: 18%
- Military Tax: 5% (increased from 1.5% in October 2024)
- Unified Social Contribution: 22% (employer pays)

Last Updated: January 2026
Compiled by: Based on the Ukrainian Labour Code, the Tax Code, the Pension Fund regulations, and the State Tax Service guidelines

This document is for informational purposes only and does not constitute legal advice. Employers should consult with qualified Ukrainian labour law specialists and accountants to ensure full compliance.

Transport & Logistics Sector Compliance Focus

The Transport & Logistics Crisis

Why Transport Is at Extreme High Risk

The Employment Criteria Mismatch

Three Risk Categories in Transport

Risk Category 1: FOP Drivers (Company Vehicles) - CRITICAL RISK

Risk Category 2: Owner-Operator Drivers (Vehicle-Owning) - HIGH RISK

Risk Category 3: International/Border Crossing Drivers - MEDIUM-HIGH RISK

GPS Tracking & Digital Dispatch: A Hidden Trigger

Audit Probability for Transport Sector

Compliance Options for Transport Sector

OPTION 1: Convert FOP Drivers to Employment

OPTION 2: Restructure for True Contractor Independence

OPTION 3: Hybrid Model (Recommended for Large Operators)

OPTION 4: Joint Venture / Franchising Model

Scenario: Mid-Sized Transport Company (20 Drivers)

Current FOP Setup (CRITICAL RISK)

Exposure Calculation

Option 1: Full Employment Conversion

Option 3: Hybrid (RECOMMENDED)

Decision Logic

Timeline for Transport Compliance

Immediately (Now - February 2026): Assessment & Planning

February - March 2026: Implementation Planning

April - May 2026: Implementation Begins

June 2026+: Ongoing Compliance & Preparation for Audits

Transport Sector Profiles

Profile 1: Small Local Logistics (5-10 drivers)

Profile 2: Mid-Sized Regional Operator (15-30 drivers)

Profile 3: Large National Operator (50+ drivers)

Profile 4: Specialized/Courier Services

Digital Dispatch Systems & Compliance

Documentation & Audit Defense

Personal Liability for Transport Operators

Key Success Factors for Transport Compliance

Agricultural Sector Compliance Focus

The Unique Agricultural Challenge

Why Agriculture Is at High Risk

The Nature of Agricultural Work

Three Risk Categories in Agriculture

Risk Category 1: Seasonal Harvest Workers (CRITICAL RISK)

Risk Category 2: Machinery & Equipment Contractors (HIGH RISK)

Risk Category 3: Family Farm Members (MEDIUM-HIGH RISK)

Audit Probability & Timeline for Agriculture

Compliance Options for Agricultural Sector

OPTION 1: Convert Seasonal Workers to Seasonal Employment

OPTION 2: Restructure for Genuine Contractor Independence

OPTION 3: Hybrid Approach (Recommended for Agriculture)

Scenario: 50-Hectare Grain Farm

Current FOP Setup (High Risk)

Exposure Calculation

Option 1: Full Seasonal Employment

Option 2: Hybrid (RECOMMENDED)

Decision Logic

Timeline for Agricultural Compliance

Spring 2026 (Now - April): Preparation Phase

Summer 2026 (May-August): Transition Phase

Fall 2026 (Sept-Oct): Audit Risk Period

Winter 2026-2027: Planning Phase

Agricultural Sector Profiles

Profile 1: Small Family Farm (10-50 hectares)

Profile 2: Medium Agricultural Enterprise (50-200 hectares)

Profile 3: Large Agricultural Complex (200+ hectares)

Profile 4: Organic/Specialty Farm

Critical Harvest Season Timing Conflict

Documentation & Audit Defense

Personal Liability for Farm Owners

Key Success Factors for Agriculture

Manufacturing Sector Compliance Focus

The Dual Crisis Facing Manufacturing

Crisis #1: OHS System Overhaul

What's Changing

OHS Implementation Cost Breakdown

Implementation Timeline: 16-Week Roadmap

Weeks 1-2: Assessment & Planning

Weeks 3-4: Infrastructure Setup

Weeks 5-8: Training & Procedures

Weeks 9-12: Process Integration

Weeks 13-16: Verification & Refinement

Crisis #2: Contractor Reclassification