As of 1 January 2017 the minimum monthly wage has been increased twice from UAH 1,200 (approx. EUR 60) to UAH 3,200 (approx. EUR 120). In parallel, the financial penalties applicable to the employing companies for payroll related breaches have increased.
The new legislative changes are aimed at increasing the welfare and protection of employees, de-shadowing wages and preventing tax evasion and off-the-books employment.
The following increases in financial penalties will apply to employers who fail to properly document employment relations with their personnel and comply with minimum wage and other salary payment requirements:
- UAH 320 000 (approx. EUR 11,200) – for creating obstacles to a state labour inspection aiming to reveal off-the-books employees and shadow wages;
- UAH 96 000 (approx. EUR 3,350) – for every employee who:
- works without an employment agreement in place;
- works full-time while his/her employment agreement is concluded for a part-time position;
- receives shadow wage;
- is not paid his/her salary or other due payments in a timely manner in the event that such delay exceeds one month; and
- is not paid his/her salary or other mandatory payments in full.
- UAH 32 000 (approx. EUR 1,110) – for every employee whose employment benefits and compensation entitlements were not provided, i.e. was not paid for night or overtime work, etc.;
- UAH 9 600 (approx. EUR 340) – for failure to pay salaries or other due payments in a timely manner in the event that such delay exceeds one month or for failure to pay such payments in full; for creating obstacles to perform a state labour inspection (other than inspections aiming to reveal off-the-books employees and payments of envelope salaries); and
- UAH 3 200 (approx. EUR 110) – breaches of other labour law requirements, i.e. failure to notify the state authority of the hire of a new employee.
Payment of the aforementioned financial penalties will not release the employers from the administrative and criminal liability (if applicable) for violations of labour legislation.
It is expected that the aforementioned legislative changes will be a step forward in fighting the shadow wages and other common breaches of the labour and tax laws related to compensation for labour and withholding relevant personal income taxes.
Legislation: the Law of Ukraine No. 1774-VIII “On amendments to certain legislative acts of Ukraine” dated 06 December 2016.