Amended Rules for Employment of Foreigners in Ukraine: Requirements of Modern Globalized World?

14 11 2017

Employment of foreigners in Ukraine has always been a burdensome issue. To employ an expat, the Ukrainian employer needs to undergo a sophisticated procedure with several steps that require applying to different governmental institutions and obtaining a number of documents. According to the effective policy, the employer and the employee in most cases have to apply for five different procedures at five different governmental institutions with all these processes disconnected one from another.

Tough Process

Firstly, with very few exceptions, the employer must apply to the State Employment Service of Ukraine to obtain the work permit for the foreign employee who will be hired. The work permit is a one-place document, meaning that it allows employing the expat only by the employer who has obtained the permit. Every new employer of this expat shall start from obtaining another work permit to get a legal ground for hire. The regular duration of the work permit is 1 year with an unlimited number of extensions.

Next, the prospective employee, after the work permit was obtained by the future employer, applies for the long-term D-type visa. It is issued by Ukrainian embassies and consulates around the globe. Absurdly, but in case of the prospective employees who enjoy the tourist visa-free regime (e.g. EU and the US nationals) and stay in Ukraine while their future employer obtains the work permit, there is a need for them to fly abroad (although they are already in Ukraine) to one of Ukrainian embassies or consulates to obtain this long-term visa.

Following this, the employee must apply to the State Migration Service of Ukraine (which is the third state body so far) for the temporary residence permit. Although it is fully the employee’s responsibility, in most cases the employers assist with this due to the complicated procedure and even due to the absence of English version of filing documents (they are in Ukrainian only).

Afterwards, the employee who has obtained the temporary residence permit has 30 days to “register the place of residence”. This is the requirement left from the Soviet era, meaning that each Ukrainian citizen or foreign inhabitant need to have a registration stamp in passport or residence permit containing information about the address of official registration (which is not necessarily the address of the actual inhabitancy). The registration of a residence is done by the municipalities, namely by centers for administrative services of each city or district.

Finally, the fifth document and the fifth state body that the expat needs apply to are the tax ID and the State Fiscal Service of Ukraine (the fifth state body), respectively. This document allows the expat to receive Ukraine-sourced income (e.g. salary), purchase property, pay taxes and other withholdings.

All in all, having completed this Mary-go-round procedure, the expat gets finally legalized in Ukraine and, at least, well-acquainted with the local motley bureaucratic system. Needless to say that this process takes a lot of time, from 2 to 4 months, while all the steps are completed.

Recent Changes

To simplify the existing system of the foreign workforce legalization, on May 23, 2017, the Parliament of Ukraine has adopted the Law “On Amending Certain Legislative Acts of Ukraine to Remove Barriers for Foreign Investments Attraction” of 23 May 2017, No. 2058-VIII (the “Law”). It has become effective on September 27, 2017.

The Law with such a pretentious name should have brought many improvements to the existing procedure, but actually made a few. First of all, the Law shortened the list of documents required for the work permit obtainment. Namely, such documents as vacancy report (3-on form), medical certificate, non-conviction certificate, an apostilled copy of university diploma will no more be filed by the employers to the State Employment Service of Ukraine.

Surprisingly, but the Law introduced special minimum wages for foreign employees, bringing more barriers for foreign investments attraction, contrary to its very purpose. For those foreigners, who will work in NGOs, charity organizations and educational establishments the minimum wage is established at UAH 16,000 (approx. EUR 550), which is five times higher than the minimum salary for Ukrainian employees. This discriminatory norm went even further with all other categories of foreigners, including those employed by private businesses, where the minimum wage shall be UAH 32,000 (approx. EUR 1,100), or ten times higher than the minimum salary for Ukrainian employees. Although the new rules are applied from September 27, 2017, the State Employment Service of Ukraine expects these minimum salary requirements to be met in respect of all expats, including those whose work permits were issued before the Law became effective.

Furthermore, the Law highlights several categories of prioritized foreign employees: highly paid professionals (with a salary exceeding UAH 160,000 or EUR 5,500); shareholders or ultimate beneficiaries of employing companies; top-100 world universities graduates; creative workers, and; IT specialists. These categories will benefit from 3 years-long work permits, instead of ordinary ones with a 1-year duration. In addition, the requirements to the minimum wage will not be applied to prioritized foreign employees.

Finally, the Law lifts the state fees for a work permit issuance and introduces the same fees for its prolongation (previously work permits were prolonged free of charge). After the Law becomes effective, the work permit for a term up to 6 months will be issued/prolonged for UAH 3,200 (approx. EUR 110); for a term of 6 months to 1 year – UAH 6,400 (approx. EUR 220); for a term of 1 year to 3 years – UAH 9,600 (approx. EUR 330). It is hardly understandable so far how such a measure shall attract foreign investments.

International Experience

There are plenty of states to look at, who attract millions of investments with liberal labor migration rules. No doubts, the European Union with its freedom of workers’ movement holds the first place here, but we would like to discuss the experience of non-European countries. Most of them issue a work visa, as a single document that acts simultaneously as work permit, travel permit, and inhabitancy permit.

Israel issues one type of temporary employment visa, B1 visa. It enables foreign workers to work only for the specific employer for which the visa is issued. The B1 visa is usually issued for a period of 1 to 12 months, or in rare cases 24 months, with a possibility of extension up to a maximum of five years. It grants the foreign employee with rights to work, live and travel to and from Israel, without the necessity to obtain any additional documents.

In the United States, employers frequently use the H-1B non-immigrant visa. The main requirements for this visa category are the prospective employee’s bachelor’s degree, as well as a salary and working conditions at least as favorable as those that are available to similarly situated US workers. Likewise, with Israeli B1 visa, H-1B is a single document stamped into the foreigner's passport, that allows working and residing in the US.

Dubai International Financial Centre, which is a federal financial free zone of the United Arab Emirates administered by the Government of Dubai, has a very favorable migration rules. Individuals who are not nationals of the UAE or the Gulf Co-operation Council are required to obtain a residence visa and DIFC identity card in order to work anywhere in the UAE. The complete process takes them from seven to ten days with the possibility to apply online.

Conclusions

In its attempt of attracting the foreign investments this year, the Ukrainian Parliament seems to have inversely brought more barriers to employment of foreign workforce than existed before by establishing the minimum salary for expats and lifting the state fees. We do believe that the key to easing the expats’ employment lays not in simplification of the existing burdensome procedures but in the reformation of the existing system, where the international experience could be taken as an example. Unfortunately, this key remains unseen for Ukrainian lawmakers so far.

Authors: Valeriya Savchuk, Oleksandr Melnyk

Published: Lexology, 14 November 2017