Changes in Ukrainian Labor Law: Labor Remuneration, New Fines, and Additional Controlling Authority

On 1 January 2017, the Law of Ukraine "On Amendments to Certain Ukrainian Laws" of 6 December 2016 No. 1774-VIІI became effective (the "Law").

The Law has introduced, amongst others, the following amendments to Ukrainian law concerning labor remuneration and employer liability.

1. The Law has amended the assessment, structure, and application procedure with regard to the statutory minimum salary: The statutory minimum salary now contemplates a minimum level of payment for a monthly (hourly) worktime standard that is performed by an employee. Previously, the law provided that the statutory minimum salary was to be regarded as a minimum payment guarantee for simple, unskilled labor; Fewer types of payments are now to be excluded while assessing an employee's salary as to its compliance with the statutory minimum salary benchmark. As of now, the list of such excluded payments comprises only supplemental payments for adverse and dangerous working conditions, payments for night work, overtimes, and mobile working conditions, bonuses for holidays and anniversaries. Previously, any supplemental payments, increments, bonuses, and compensations were to be disregarded for the purpose of assessing compliance with the minimum statutory salary; The Law requires an employer to pay a relevant extra amount to an employee if his/her salary payable for fully performed worktime standard is below the statutory minimum salary.

Notably, pursuant to the Law of Ukraine "On the State Budget of Ukraine for 2017'' the statutory minimum salary for 2017 amounts to UAH 3,200 (approx. USD 120) at a monthly rate and UAH 19.34 (approx. USD 0.7) at an hourly rate.

2. The Law has introduced new rules regarding implementation of an employee compensation plan: In order to implement any employee compensation plan, other than the so-called "tariff system" (where the amount of salary depends on the relevant employee's category in the wage scale effective within a company), the employer shall comply with certain requirements. Specifically, it is necessary to provide for such an employee compensation plan in the collective bargaining agreement or, in its absence, in a document approved by the employer following consultations with a trade union or employee representatives; The minimum base salary (tariff) under the tariff system of salaries, as a general rule, shall not be below the statutory minimum cost of living applicable to working-age persons as of 1 January of a current calendar year (as of 1 January 2017, such a statutory minimum cost of living equals UAH 1,600 (approx. USD 60)).

3. The Law has provided for additional types of fines that may apply for labor law violations:

For failing to admit competent officers to hold a labor law audit or impeding such an audit – a fine in the amount of three statutory minimum salaries as at the time of violation (currently UAH 9,600 (approx. USD 360)); If such a violation is committed in the course of a labor law audit intended to check due formalizing of employment or payment of salaries – a fine in the amount of 100 statutory minimum salaries as at the time of violation (currently UAH 320,000 (approx. USD 12,000)).

4. More state agencies are now in charge of controlling compliance with labor law requirements: Executive bodies of city councils (for capital cities of administrative regions and united municipal communities) are now empowered to control compliance with labor law requirements within relevant territories. The powers of such bodies include holding labor law audits, imposing financial penalties on violating entities, as well as issuing reports on administrative violations with regard to officers of violating entities.

For further information please contact Asters' partner Svitlana Chepurna
and senior associate Inesa Letych.

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