May 2013

Implementation of the Employment of Population Law: Social Tax Refunds for New Hires

On 30 May 2013 the Resolution of the Cabinet of Ministers "On Certain Issues of Implementing Article 26 and Section 2 of Article 27 of the Employment of Population Law" No. 347 of 15 April 2013 came into effect. The Resolution enacted the Procedure for Refund to Employers of the Unified Mandatory State Social Insurance Tax (the "Procedure").

The Procedure determines the mechanism for refunding to employers unified mandatory state social insurance tax (the "Unified Social Tax"). The employers may qualify for a refund when they hire certain categories of the unemployed or hire the unemployed in certain priority economic spheres. To qualify, the following requirements must be met:

  • the newly hired person must find employment through referral of the state employment center and must remain employed for at least two years;
  • the position, to which such a person is employed, must be new. The position is recognized as new if it is created (i) in connection with establishment of a new business undertaking, except where it is founded as a result of termination of another legal entity, or (ii) in connection with increase in headcount provided that there has been no decrease in the average monthly headcount within the preceding 12 months, or (iii) through modernization or change in production technology that requires new knowledge and skills of an employee;
  • the hired person must belong to one of the following two categories: () must have limited competitiveness in the job market (e.g., a disabled person, a person nearing age, etc.), or () must be hired by a small business entity to a position in certain priority spheres. The list of such priority spheres is also approved by the above-referred Resolution of the Cabinet of Ministers of 15 April 2013. This list includes, inter alia, several types of activities in agriculture, processing industry, IT and telecommunications, as well as activities in certain other industries.

If these requirements are met, the employer is entitled to receive a refund of the Unified Social Tax obligations assessed for the period of one year from the date of hiring.

An employer has no right to a refund if such an employer (i) has a Unified Social Tax and/or mandatory state pension insurance debt or (ii) was declared bankrupt or is subject to ongoing insolvency proceedings.

To obtain a refund, an employer must apply to a local state employment center within two months after hiring.

After receiving the application, the employment center must:

  • within five business days, decide whether to grant the refund based on available data on the hired person and on the information from the Pension Fund of Ukraine and the state registrar of companies;
  • by 30th day of the month following the reporting month, remit the refund to the employer's bank account.

Should an employer dismiss an employee for whom refund has been obtained at employer's initiative or based on agreement of the parties within two years of hiring, such an employer shall return the refund received. Alternatively, such an employer may hire a new jobless person by referral of the state employment center to fill the vacancy.

For further information please contact
counsel Svitlana Chepurna and associate Inesa Letych

© Asters 2013
Web-site  |  Contacts