Introduction of a free labour contract for small and medium-sized businesses in Ukraine

Tuesday, April 20, 2021
Introduction of a free labour contract for small and medium-sized businesses in Ukraine

The Verkhovna Rada supports Bill №5371 on the simplification of labour relations regulation in the area of small and medium-sized enterprises

The new labour reform implies a contractual regime of labour relations, where each employee’s working conditions are determined in accordance with an individual contract, but not the Labour code.

According to the internet resource "The Observer", the proposed employment contract, submitted to Rada on the of 13 April 2020, allows prescribing any conditions of employment agreed by the employee and the employer, even if they do not fall within the framework of the labor law. The parties to an employment contract are given the opportunity to regulate, on mutually advantageous terms and conditions of employment and payment of wages, leaves, bonuses and allowances, etc. At the same time, the draft law guarantees the preservation of the rights and guarantees stipulated in the Labour law: the duration of the working week and rest, compensation and decrees, the protection of the employee before the State, the amount of the salary, taking into account the lower limit.

The purpose of the bill is to eliminate unnecessarily complex labour law procedures, with the aim of creating a new level of labour relations and legalizing them. In the opinion of the deputies who proposed Bill 5371 to Parliament, "the freedom of labour relations will lead to a significant increase in employees' wages". This, in turn, will optimize the process of doing business in Ukraine, catalyse the emergence of a new stage of economic prosperity and create favourable conditions for foreign investment.

"In the Office of simple decisions and results", the main argument in favour of freedom of employment is called a significant decrease in the percentage of informal employment. Today, there are a large number of undocumented workers, because legal work is expensive. Simplification is to make the business want to formalize the employees and pay the official salary," said the representative of the Office George Tshakai.

Under the terms of the bill, employers in small and medium-sized businesses are entitled to conclude free fixed-term or indefinite contracts of employment under a contractual regime. Both the employer and the employee have the following conditions for concluding a free contract:

  • Number of employees in the employer’s business up to 250 per calendar year
  • The salary of an employee is more than 8 minimum salaries per month

The bill defines the conditions under which paid leave and leave at one’s own expense may be granted under the terms of a contractual regime:

  • Full annual leave or separation for periods of any duration at the discretion of the staff member
  • Personal leave for more than 15 calendar days (under the current Code, such leave was granted for up to 15 days)

Payment of compensation for leave shall be made not later than the first day of leave

It should be noted that under the terms of a free contract, the employer reserves the right to reschedule the employee’s annual leave without the latter’s consent.

The Bill regulates the characteristics of the payment of wages: it can be specified in a contract of employment in foreign currency and its equivalent in hryvnias. Payment at least once a month.

Under the contract regime, the employer may, on his own initiative and without prior notice, terminate the employment contract with the employee. However, as compensation for the unilateral nature of the termination, the employer is obliged to pay the employee an amount equal to three minimum wages.

Chairman of the Committee on politics and protection of veterans' rights Galina Tretyakova, participating in the online conference organized by the Ukrainian business council, said that bureaucratic procedures burden labour relations and force employers to pay less for employees' salaries. The Chair is confident that the transition to free labor, like Japan, France, Spain, Switzerland, the US, will eliminate this problem.

Advisor of the all-Ukrainian Agrarian council Dmitry Kohan supports the opinion of Galina Tretyakova and notes that labor relations based on individual agreements will lead to a salary increase and will induce skilled workers to stay in Ukraine.

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