Legal opinion on important provisions of the Ukrainian law “On Employment of Population” (for UBR)

Lawyer of law firm “Pravova Dopomoga” has written an article about bill “On Employment of Population” that had been adopted by the Verkhovna Rada of Ukraine during the first reading. The article has been prepared at request of Ukrainian Business Resource.

It is available on UBR website under the link http://ubr.ua/business-practice/laws-and-business/tonkosti-zakona-o-zaniatosti-chto-horosho-a-chto-ploho-143582. Translation from Russian (full text):

“Bill on employment of population is described by Sergiy Tigipko as such that “will create hundreds of thousands of new highly paid workplaces”. I cannot agree with the opinion that the innovations are of such significance since majority of the bill’s provisions are of declarative nature and duplicate current regulation. At the same time it is still possible to identify some positive aspects of the law.

First of all it is worth mentioning that the bill contains a number of provisions about reimbursement for employers that pay single contribution for obligatory state social insurance.

Thus, when hiring employees that belong to category of “insufficiently competitive on labour market” (those who have less than 10 years left until retirement, youth at the first job, incapacitated persons) for newly created jobs for the period which is not less than 2 years, the employer will have his single contribution for obligatory state social insurance reimbursed.

Besides when an employer is a small business entity (number of employees less than 50 persons and turnover up to 10 million euro) and it employs an unemployed person for a new position for the period of at least two years the law also establishes reimbursement of a single contribution for obligatory state social insurance reimbursed during the first year.

These provisions are beneficial to both employers and potential employees because savings related to single contribution will stimulate formalizing of labor relations and payment of “white” wages. However the government did not forget about its own interests: in order to receive reimbursement for single contribution payment, an employment has to be conducted due to assignments of the State Employment Service. This will significantly increase coefficient of its effectiveness since a great deal of employments will be completed with its help in order to save on single contribution payment.

The bill also stipulates that an employer who for the last year has created new workplaces and paid each employee wage in the amount of at least 3 minimum wages, in the next year will be able to pay 50% less of single contribution for each person that is employed for a newly created workplace. Such exemption will allow to lower taxation amount for many companies. But it is also beneficial due another fact – the government shows that it is eager to provide exemptions to companies which are developing and have high wages. This shows that the state is ready not only to support ineffective businesses but also to stimulate successful ones.

Authors of the bill, among other things took care of the direct procedure of employment by proposing a number of innovations:

• State Employment Service will create the list of private employment agencies;
• Only employers are allowed to pay for the services of agents;
• Vacancy description is prohibited to include information about age of an applicant, gender related limitation (with some exceptions), provision of information about personal life.

Payment for agents’ services by an employer in the process of employment must exclude participation of agencies that charge applicants without provision of service. As for the vacancies announcements this will only cause difficulties in search of job since persons who seek for job will spend time for vacancies that are not suitable for them. Because missing of requirements in an announcement do not mean that the requirements are missing de-facto.

Another important issue is an employment of youth:

• Students who have degree of “junior specialist,” “bachelor” or “master” will be entitled for up to 6 months of internship with inclusion of this internship into an employment record. And if an internship is paid for an employer is not obligated to pay a single contribution from students’ wages;
• When providing jobs for a young specialists in rural area for at least three years he will be paid a one-time allowance in the amount of 5 minimum wages but such allowances will be paid only for the specialties defined by the Cabinet of Ministers of Ukraine.

In addition the bill provides development of state programs which are to secure creation of new workplaces. However the effectiveness of this tool can be rated only after its application.

Thus, even though the bill “On Employment of Population” at first glance is of declarative nature, it contains a number of amendments which are beneficial for both employers and employees. We definitely cannot say that proposed innovations will significantly change employment situation. The most important thing is for the proposed regulations to obtain effective mechanisms of implementation and for the reimbursements and exemptions related to single contribution not to share the fate of VAT, because in this case the innovations will cause only thousands on new lawsuits instead of workplaces.

This article should not be considered as a legal advice. It basically highlights important provisions of the bill “On Employment of Population”.