Employment Agencies And Businesses In 2023: Who Shall Pay For Services, Changes In Legislation And Other News
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As specialists in the field of licensing of overseas employment agencies, we are often asked for advice on building and formalizing relationships with foreign partners.
Today we will elaborate on one of the most interesting inquiries in this sphere. Maybe you will find something similar to your case and the way to address your issue.
We will also talk about upcoming changes to legislation and their impact on the process of licensing of overseas employment agencies.
You may also like: Common Mistakes In Obtaining The Employment Agency License
The foreign partner wants to shift the payment for employment agency services on the employee
We were once contacted by a Client who had a foreign partner in Germany, for whom he recruited workers for seasonal agricultural work. The foreign partner (employer) wanted the payment for the services of a Ukrainian intermediary to be deducted from the employees’ salaries.
So, we explained to the Client that:
- According to the current licensing regulations, the employment intermediary is entitled to receive payment for its services from its clients (job seekers)
- The Ukrainian law does not prohibit employment intermediary from receiving payment for its services from a foreign partner. Moreover, as far as the Ukrainian intermediary and the foreign partner (the employer) conclude a foreign economic agreement for the provision of relevant services, this already implies a paid basis for such relations. Thus, the Ukrainian intermediary receives double payment for the same work;
- If the job seekers/employees pay the employment agency services also instead of the employer, it turns out that the employees pay twice for the same service, which actually is wrong.
But realizing that this Client and his German partner had to find a middle ground, our specialists have developed the following algorithm of cooperation:
- To make sure that the laws of the country of employment do not prohibit from deducting the payment for employment agency services from an employee’s salary;
- To divide the service payment into several monthly payments so that the actual salary received shall not be less than the minimum wage and the employee does not feel financially uncomfortable with such payments;
- To describe the procedure of payment for recruitment services by installments in the foreign economic agreement concluded by and between the Ukrainian intermediary and the foreign employer. At the same time, the procedure and amount of deductions shall be provided for in the employment agreement concluded with the employees.
Changes to legislation: Licensees will be prohibited from entering into consulting agreements and individual entrepreneurs will be no longer able to apply for this license
Despite the fact that no changes have been introduced to legislation for a certain period of time, the practice of the Ministry of Social Policy has been changing almost every month. Since January 2020, licensing of this sphere has been delegated to the Ministry of Economic Development. In addition, the draft of the new licensing regulations is now being considered by the Verkhovna Rada of Ukraine.
The main developments to be implemented within this draft, as well as related myths:
- Strengthening of the licensee’s responsibility for their activities. There are cases where a consulting agreement is concluded instead of an agency agreement. Licensees are thus trying to disclaim liability for the future fate of the job seekers, although such a scheme is illegal.
Fines and even license revocations are further envisaged if it is found that the employees were sent to work in another country under consulting agreements rather than under an employment agency agreement;
- Individual entrepreneurs will not be able to obtain the Overseas Employment Agency License. This is a myth that roams the Internet and frightens those who want to get the license.
In fact, individual entrepreneurs with a criminal record of human trafficking, as well as legal entities whose managers have such a criminal record, will not be able to obtain the Employment Agency License. But in general, individual entrepreneurs will continue to have the same rights as legal entities.
The terms of doing business with a foreign partner have changed, so it is necessary to adjust the foreign economic agreements as well
According to the licensing regulations, the licensing authority must be notified of any changes introduced to the documents submitted for the license.
The key risk of this situation lies in the uncertainty of the procedure: how the licensing authority should act if the new version of the agreement or the additional agreement to it does not comply with the law.
The licensee can provide the licensing authority with a new version of the documents without knowing that something is wrong with them up to the very review. Therefore, in case of changing the terms and conditions of the agreement, it is recommended to take their legal analysis very seriously.
Please note! When doing employment business, in particular, when concluding or amending a foreign economic agreement, one should be guided not only by the Ukrainian legislation, but also by the legislation of the contracting party’s country.
So, if you want to start an overseas employment agency and need to get reliable information about the licensing procedure, don’t hesitate to call us.
We will explain all the aspects and nuances of such business and help you get all the necessary documents and permits.