During the second quarter of 2015, a number of new laws have become effective, providing for new compliance requirements in labor & employment as well as in payroll taxation. This labour & employment quarterly newsletter was prepared by Vasil Kisil & Partners to keep our clients and partners updated on legislative changes.
New Hire Notification Procedure Finally Adopted
On June 27, 2015 new hire notification procedure1 (the “Procedure”) became effective. This Procedure has been awaited since January 1, 2015, when the new hire notification obligations became effective. In the absence of a procedure, the State Fiscal Service later clarified that no special notification is required until a procedure is eventually adopted. Employers must submit this form to the territorial bodies of the State Fiscal Service of Ukraine at their place of registration as a payer of Single Social Contribution in one of the following ways:
- by electronic means using the digital signature of responsible persons in accordance with the legislation about electronic documents and electronic signatures;
- in paper form together with a copy in electronic form; and
- in paper form, if the signed labor agreements concluded with no more than five persons.
From the practical standpoint, we have independently confirmed with at least one major tax return software developer that they plan to add the functionality for performing the new hire notification as soon as the State Fiscal Service upgrades its software to support it.
IMPACT: All employers | RISK: Administrative fine on companies of up to €60 per each failure to notify and on corporate officers responsible for the breach–of up to €85 | RECOMMENDATIONS: follow the new rules by performing notification in paper form together with a copy in electronic form (if applicable) and, when available, switch to using commercially available tax return software |
Additional Guarantees for Mobilized Military Servants
On April 15, 2015 the Law of Ukraine2 extending guarantees for mobilized military servants became effective. In particular, it envisages the extending of labour guarantees (workplace and position maintenance, average salary compensation) from 1-year period to longer periods for following categories:
- for injured military servants – for all time of medical treatment until they are re-registered at local military recruitment offices;
- for captured military servants – for the duration of their detention until they return;
- for missing military servants – for all time until they return or are announced by court as dead.
Furthermore, on June 11, 2015 entered into force the Law of Ukraine3 which prolongs this period of workplace and position maintenance and average salary compensation from one year to 18 months for all mobilized military servants. For those employees, who continue their service under the military contract regardless of their demobilization, abovementioned guarantees are also granted for the term of such contract.
IMPACT: employers that have mobilized employees | RISK: failure to pay average salary may lead to civil and administrative sanctions | RECOMMENDATIONS: ensure that human resources are aware of and follow the new rules |
Redundancy Rules Clarified
On April 1, 2015 the Supreme Court of Ukraine delivered its Ruling4 (the “Ruling”) in case concerning employer’s obligation to offer vacant positions for employees affected by redundancy. The Court’s legal position expressed in the Ruling provides that an employer is obliged to offer for affected employee not just positions which are vacant on the day of his/her notification about forthcoming dismissal, but also vacant positions which appear during 2-months redundancy period including the day of dismissal.
IMPACT: all employers planning or in the process of redundancies | RISK: redundancy termination may be held illegal, employee reinstated and back salary paid | RECOMMENDATIONS: offer all vacancies that become available during the 2-months redundancy notice period Changes of Payroll Taxation |
New Official Holiday
On March 25, 2015 the Law of Ukraine5 establishing new official non-working day came into effect. The new holiday is called the “Ukraine’s Defender’s Day” and it will be celebrated on October 14. It is important to follow the new holiday as well as to amend current labor agreements, collective bargaining agreements and policies to avoid breaches of employees’ rights.
IMPACT: all employers | RISK: new holiday may affect business plans, failure to follow the new holiday may lead to additional costs for employers as well as to administrative fines | RECOMMENDATIONS: follow the holiday, amend local policies and adjust business plans |
Changes of Payroll Taxation
On April 7, 2015, new law on tax cut of personal income tax6 (the “Law”) was adopted. It aims at equation of taxation base for income tax and respective base for unified social contribution withholding. The Law enlarges the taxation base of income which is taxed at rate of 15% from 10 to 17 minimal monthly wages (approx. from EUR 520 to EUR 880). Hence, this difference will be taxed at rate of 15% instead of 20%, which allows employees to get an annual taxation discount of up to EUR 220. If signed into law by the President, the new rules will become effective starting from the next month after publication.
IMPACT: all employers | RISK: extra tax may be illegally witheld which may lead to civil and administrative sanctions | RECOMMENDATIONS: ensure that payroll does not withold extra tax |
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4 - Ruling of the Supreme Court of Ukraine in case No. 6-40цс15, dated April 1, 2015