Changes in Ukrainian employment legislation 2017

The Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine” No. 1774-VIII of 06.12.2016 introduced significant changes to the legislation regulating the sphere of employment relations.

This Law introduces wording changes to the definition of the concept of a minimum wage both in the Labour Code (Article 95) and the Law of Ukraine “On Wages” (Article 3).

Definition before amendments

Definition after amendments

The minimum wage is the amount of remuneration established by law for the performance of a simple, unskilled work, and an employee shall not be paid less than this amount for the monthly work, as well as for the hourly work norm (scope of work) performed.

The minimum wage is the amount of remuneration established by law for the fulfillment of the monthly (hourly) work norm.

When comparing, we can see that according to the preamendment legislation, the minimum wage is the minimum social guarantee to be paid for simple, unskilled work. The new definition, as explained by the Ministry of Social Policy, is in line with the European practice and international standards. In particular, this applies to such new provisions on wages as:

  • The introduction of a new methodology for determining the minimum wage;
  • Setting the minimum official salary at the level no lower than the minimum subsistence level established for able-bodied persons as of 1 January of a calendar year;
  • Non-use of the minimum wage as an estimated value for the development of official salary schemes, determination of wages for administrative services, court fees and taxes.

Previously, the minimum wage did not include all additional payments, bonuses, incentive and compensation payments. However, today the introduced  amendments have slightly reduced the list of payments that are ignored when calculating the minimum wage. They include the following additional payments:

  • for work in unfavourable working conditions and increased health risks;
  • for night work and overtime;
  • tinerant nature of work, bonuses for holidays and anniversaries.

According to the law, the employer is obliged to make additional payments to employees if the amount of accrued wages for the work fully fulfilled is less than the minimum wage. Otherwise, if an employee fails to comply with the monthly work norm due to vacation or sick leave, or part-time work, he/she shall be paid in proportion to the work performed.

We can also see new rules established for the implementation of the wage system. Employers must follow certain procedures to introduce any other system of remuneration other than the tariff-based scheme. Such remuneration system should be established by a collective agreement or, in the absence of such an agreement, by a normative act of the employer upon agreement with the trade union or employee representatives. The tariff-based remuneration system provides that the minimum official salary (tariff rate) should be not less than the minimum subsistence level established for able-bodied persons as of 1 January of a calendar year (since 1 January, 2017, such minimum subsistence level amounts to UAH 1,600). If a person works at 0.25 or 0.5 rate, the salary shall be determined taking into account the employee’s working time, i.e. in proportion to total working time.

Changes in labour legislation have also resulted in an increase in penalties for violations of norms regulating employment relations.

According to the Article 265 of the Labor Code of Ukraine, the employer shall be subject to the following penalties for certain law violations:

1 minimum wage (UAH 3,200)

For non-notification or late notification about hiring an employee, as well as for other breaches of employment law.

3 minimum wages (UAH 9,600)

For failure to pay salary in a due time with delays exceeding one month or for failure to pay salary in full, as well as for creating obstacles to perform a state labor inspection, other than the inspection aimed at revealing the off-the-book employees and “envelop” salaries (see below).

10 minimum wages (UAH 32,000)

For every employee not provided with employment benefits and compensation entitlements established by employment law. For example, for failure to comply with the rate of remuneration for downtime, which occurred through no fault of the employee, as well as during the mastering of a new production, or in respect of employees under eighteen years of age with a reduced duration of their daily work, etc.

30 minimum wages (UAH 96,000)

For each employee working without an employment agreement; working full-time, but with an employment agreement for a part-time position; receiving salary without deduction for obligatory state social insurance and tax; for each employees who is not paid in a timely manner or in full.

100 minimum wages (UAH 320,000)

For creating obstacles to perform a state labor inspection aimed at revealing the off-the-book employees and salary paid without deduction for obligatory state social insurance and tax.

According to the amendments to the Law of Ukraine “On Local Self-Government in Ukraine”, the executive state authorities at local and regional level, as well as amalgamated territorial communities shall act as additional authorities empowered to supervise over the observance of employment law. They may supervise over the observance of labor and employment law on the respective territory. Their powers include both conducting inspections and imposing penalties for breaches of labor and employment laws.

The legislator sees these changes as guarantees of compliance with the laws and regulations governing employment relations. In addition, not only the State as a whole, but also every citizen of the country can benefit from these amendments.

Publication date: 15/03/2017

About author

Name: Volodymyr Gurlov

Position: Partner

Education: National Academy of the Security Service of Ukraine

Knowledge of languages: Russian, Ukrainian, English

Email: [email protected]

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