Employer of Record in Ukraine

Navigating the complexities of international employment requires a clear understanding of local regulations and practices. When considering hiring employees in Ukraine, businesses have several established avenues to explore. Each option presents distinct advantages and requirements, from direct employment through a locally established entity to more flexible solutions designed for rapid market entry and compliance.

For companies looking to onboard talent in Ukraine, the primary methods include:

• Establishing a local entity: This involves setting up a subsidiary or branch office, a process that typically requires significant time, capital investment, and a deep understanding of Ukrainian corporate and employment law.
• Utilizing an Employer of Record (EOR): Services like Rivermate allow companies to hire employees in Ukraine without needing to establish their own legal entity. The EOR acts as the legal employer, handling all local compliance while the client company manages day-to-day operations.
• Hiring independent contractors: Engaging individuals as independent contractors can offer flexibility, but it's crucial to ensure compliance with Ukraine's labor laws to avoid misclassification risks, which can lead to severe penalties.

How an EOR Works in Ukraine

An Employer of Record simplifies global expansion by taking on the legal and administrative burdens of employment. In Ukraine, an EOR typically handles:

• Legal Compliance: Ensuring all employment contracts, policies, and practices adhere to Ukrainian labor laws, including specific regulations regarding hiring, termination, and working conditions.
• Payroll Processing: Managing accurate and timely salary payments, bonuses, and severance in compliance with local regulations.
• Tax Management: Calculating, withholding, and remitting all required employer and employee taxes and social contributions to the relevant Ukrainian authorities.
• Benefits Administration: Administering mandatory benefits, such as social security, health insurance, and paid leave, and often facilitating optional benefits if desired.
• HR Support: Providing ongoing support for HR-related inquiries, managing employee onboarding and offboarding, and addressing any employment-related disputes.

Benefits of Using an EOR in Ukraine

For companies aiming to tap into Ukraine's talent pool without establishing a local presence, an EOR offers compelling advantages:

• Rapid Market Entry: Hire employees in Ukraine quickly, often within days, bypassing the lengthy process of entity establishment.
• Reduced Risk: Mitigate the complexities and risks associated with navigating unfamiliar Ukrainian labor laws, payroll, and tax regulations.
• Cost-Effectiveness: Avoid the significant upfront and ongoing costs of setting up and maintaining a local subsidiary.
• Focus on Core Business: Reallocate internal resources away from administrative burdens to strategic initiatives and business growth.
• Access to Talent: Gain immediate access to a skilled workforce in Ukraine without geographical limitations or the need for a physical office.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Ukraine includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Ukraine.

Employers in Ukraine must contribute 22% of each employee's gross salary to the Unified Social Contribution (USC), with the maximum base capped at 15 times the minimum monthly wage (UAH 120,000 as of April 2025). Additional payroll taxes are generally included within this framework. Employers are responsible for withholding 18% personal income tax (PIT) and 1.5% military tax from employees' gross salaries, with taxable income calculated after deductions.

Tax compliance involves monthly reporting (Form 1DF within 30 days), quarterly declarations for certain taxpayers, and annual reconciliation. Taxes (PIT, military, USC) are due with salary payments, with penalties for late submissions or payments. Foreign entities must consider residency status, double tax treaties, and permanent establishment rules, which influence their Ukrainian tax obligations.

Ukraine's salary landscape in 2025 varies by industry, role, and experience, with competitive annual salaries ranging from $12,000 for quality control inspectors to $70,000 for project managers in IT. Key sectors include IT, finance, manufacturing, and marketing, with salaries influenced by location and skill level. Employers must ensure compliance with minimum wage laws, which are set at 8,000 UAH/month in January 2025 and 8,300 UAH/month in July 2025.

Compensation packages often include bonuses—annual, performance, and holiday—as well as allowances for transportation, meals, or housing, especially in larger cities. The typical payroll cycle is monthly, with salaries paid via bank transfer, and employers are responsible for withholding taxes and social contributions. Salary growth is expected to continue driven by demand for skilled workers, though economic and geopolitical factors may influence the pace.

Ukrainian labor laws guarantee employees a minimum of 24 calendar days of annual paid leave, which can be divided into parts, with at least one part lasting 14 days. Additional leave days may be granted for hazardous work conditions or long service. Employers must pay employees their average salary for the leave period, with payments due no later than three days before leave begins.

Public holidays in Ukraine include New Year's Day, Orthodox Christmas, International Women's Day, Orthodox Easter (date varies), Labor Day, Victory Day, Constitution Day, and others, often resulting in non-working days or substitute days if falling on weekends.

Sick leave benefits are provided for illness or injury, with the employer covering the first five days and the Social Insurance Fund covering subsequent days. Compensation ranges from 50% to 100% of the salary, depending on service length. Parental leave includes 70 days before and 56 days after childbirth, paid at 100%, with paternity leave of 14 days and childcare leave up to three years, protected by job security. Adoption leave lasts 56 days, paid by the Social Insurance Fund.

Ukraine's employee benefits are governed by mandatory legal requirements and evolving employee expectations. Employers must provide core benefits such as a minimum of 24 days of paid annual leave, sick leave with employer and social insurance payments, maternity and parental leave, paid public holidays, and contributions to the Unified Social Contribution (USC) covering social security, pension, unemployment, and healthcare. These statutory benefits ensure legal compliance and a baseline work environment.

In addition to mandatory benefits, many companies offer optional perks like private health insurance, life and disability insurance, extra paid leave, professional development, transportation allowances, wellness programs, and childcare support. Private health insurance is increasingly expected, providing access to higher-quality care and shorter wait times, with costs varying based on coverage and employee age.

Benefit packages differ by company size and industry. Large enterprises tend to offer comprehensive benefits, including private health, life, and disability insurance, pension contributions, and additional perks, while SMEs primarily meet legal requirements with limited extras. The IT sector is notably competitive, often providing high salaries, flexible hours, private health insurance, and stock options to attract skilled talent.

Employment agreements in Ukraine are fundamental for defining employer-employee relations and must comply with labor law standards. They specify key terms such as parties involved, job description, start date, compensation, working hours, workplace, leave entitlements, termination conditions, social insurance, and confidentiality clauses. Ukrainian law recognizes various agreement types based on duration: indefinite-term, fixed-term, temporary (up to 2 months), and seasonal (up to 6 months).

Probation periods are regulated, typically lasting up to three months for most employees, with shorter durations for specific categories. During this time, employees enjoy the same rights as permanent staff, and employers can terminate employment with a three-day notice. Confidentiality and non-compete clauses are common but require reasonableness for enforceability. Changes to contracts must be in writing and mutually agreed upon, with specific procedures for termination and severance pay, depending on the reason for dismissal.

Ukraine's remote work landscape is rapidly evolving, supported by recent amendments to the Labor Code that recognize employees' rights to request remote arrangements. Employers must formalize remote work in employment contracts, specify conditions, and ensure occupational safety, with legal compliance being crucial. Key legal aspects include work-from-home rights, contract stipulations, safety obligations, and termination conditions.

Flexible work options such as hybrid work, flextime, compressed workweeks, job sharing, and part-time arrangements are increasingly adopted to meet diverse needs. These options enhance talent access and employee satisfaction while reducing operational costs, but require clear policies and adherence to legal standards.

Employers should stay updated on legal developments and consult legal counsel to ensure compliance with Ukraine's evolving remote work regulations.

Terminating an employee in Ukraine requires strict compliance with the Labor Code, emphasizing proper procedural steps, notice periods, and grounds for dismissal. Employees are protected against wrongful termination, with specific procedures needed to avoid legal challenges. Employers must adhere to detailed notice periods based on employee categories and reasons for termination, such as two weeks for standard employees, three days during probation, and at least two months for mass layoffs.

Severance pay varies depending on the grounds for termination and length of service, with minimum entitlements outlined in the law. Common severance amounts include at least one month's average salary for redundancy, military conscription, or employee reinstatement, and three months' salary for unilateral employee-initiated termination due to employer violations. Employees are also entitled to compensation for unused vacation days.

Key grounds for justified termination include misconduct, poor performance, organizational restructuring, and health-related inability to work. Unjustified dismissals can lead to reinstatement and compensation claims. Procedural compliance involves documentation, notice, trade union consultation, formal orders, and final settlements. Employees have protections such as reinstatement, wage compensation, and moral damages if wrongful dismissal occurs.

Ukraine has experienced a notable increase in the number of freelancers and independent contractors, driven by the burgeoning IT sector, enhanced global connectivity, and a preference for flexible work setups. Both local and international companies frequently hire these professionals for their specialized skills and project-based work. Understanding the legal framework is essential for businesses to ensure compliance, as misclassifying workers can result in penalties, back taxes, and the need to formalize employment relationships. Key distinctions between employees and contractors include control over work, integration into the company, economic dependence, and provision of tools.

Independent contractor agreements in Ukraine are typically formalized through civil law contracts, specifying scope, deliverables, timelines, payment terms, and confidentiality. Intellectual property rights must be explicitly transferred to the client within the contract to ensure ownership. Contractors are responsible for their own taxes and social contributions, often utilizing the Simplified Taxation System (STS), which offers lower rates and simpler reporting. Freelancers typically register as individual entrepreneurs and fall under Group 2 or 3 of the STS.

Independent contractors are prevalent in sectors like IT, creative services, consulting, marketing, education, and support services, offering flexibility and access to a wide talent pool. Clients are not responsible for withholding taxes but must report payments to contractors in their tax filings.

Foreign nationals seeking employment in Ukraine generally require a work permit, which serves as the basis for obtaining a long-term "D" visa. The application process, managed by employers through the State Employment Service, involves submitting company documents, employee qualifications, and proof of no Ukrainian candidate availability. Processing typically takes 7-15 business days, with fees varying based on administrative costs. Once approved, the foreign national can apply for the visa, enabling legal employment.

Key visa types include the long-term "D" visa for employment and other purposes, and the short-term "C" visa for visits up to 90 days. Dependents such as spouses and minor children can also apply for visas based on family reunification, requiring proof of relationship and sufficient funds. Employers and employees must comply with legal obligations, including maintaining valid permits, reporting changes, and adhering to labor laws. Non-compliance can result in fines, deportation, or future entry bans.