Companies looking for outsourcing opportunities in Ukraine are always curious about the country’s legislation. One of the primary fears, and often misconceptions about Ukraine is that the country relies heavily on “out of date legislation”, and practices inherited from the Soviet Union. Although understandable, the government has made significant steps towards improving processes, and creating favorable conditions for international cooperation. As a result of those efforts, Ukraine has become home to over 12,500 IT companies, most of whom are providing software development services for organizations around the globe. Not only has Ukraine fostered the growth of homegrown talent such as Grammarly, Petcube and Deposit photos, Ukraine has become home to global brands such as Samsung, Wargaming, ABBYY, Rakuten, and many more.
Whether you want to hire a developer or are looking for outsourcing opportunities, this article will give you an idea of the baseline legal aspects of hiring in Ukraine.
Working hours | Conditions
Like in many European countries, a full-time employee in Ukraine works 8 hours per day, which amounts to 40 hours per week. Employees are to take a 1-hour unpaid lunch break after 4 hours of work. According to the Labor Law of Ukraine, overtime is allowed in exceptional cases and in many cases is limited to 4 hours of overtime within two days in a row. The law also requires employers to pay a double wage rate for overtime. Of course, this regulation applies neither to freelancers nor self-employed workers. With this in mind, many companies strive to create a stable workflow and take anti-burnout measures, ensuring employees don't wind up stretched out too thin.
IQ business center, Kyiv
IT companies are among the biggest tenants of business centers in Ukraine. Downtown Kyiv is filled with modern business centers occupied by IT companies of all sizes. The city offers several classes of business centers, such as A, B and C. IT companies typically occupy cream-of-the crop offices within A and B class premises.
Class A: Kyiv downtown.
Class B: Along the main urban highways.
Class A: A new building: 3 or less years in occupation.
Class B: A new or reconstructed building: 4–7 years in occupation.
Class A: Professional building management according to international standards.
Class B: Professional maintenance service.
Class A: 24/7 security, modern security systems, and automated access control to premises.
Class B: 24/7 security, modern security systems.
Class A: Guarded ground-level and underground parking.
Class B: Guarded ground-level parking.
In addition, business centers provide the following amenities:
- Ergonomic office furniture;
- Workstations with modern PCs or laptops;
- Meeting rooms equipped with video conferencing facilities;
- Conference rooms;
- Receptionist desk and guest welcoming zone;
- Dining area with a microwave, tea and coffee making facilities;
- Break rooms with a Playstation, TV, VR helms, tennis tables, massage chairs, etc;
- Office cleaning and maintenance.
Not only does it create a reliable infrastructure for doing business but also ensures pleasant working conditions for employees. Essentially, Kyiv has a reliable Internet connection, with an average download speed of 41.78 Mb/second versus 47.66 Mb/second upload speed.
Many IT companies in Ukraine deal with the personal data of European citizens. Thus, a reasonable question arises, is data protection regulated in any way?
Yes, it is. First of all, the country legislates data protection via the act "On Personal Data Protection" passed in 2010. Secondly, given that GDPR directly affects outsourcing companies, the government has introduced a range of changes to Data Protection Legislation aimed to whip it into shape and make it compliant with European standards. We can now observe a full alignment of the Ukrainian legal system with the EU Data Protection Doctrine.
Moreover, following the new data protection standards promoted by GDPR, many IT companies have invested both time and resources into bringing their activities and strategies in line with the GDPR.
While Canadian data protection law, PIPEDA, has a lot in common with GDPR, which most Ukrainian companies are familiar with, the common concern relates to USA data regulations. Since data protection in the USA is regulated by a wide range of federal and state laws, outsourcing companies have to go the extra mile to be compliant with regulations valid in their clients’ location. Thus, data protection should always be detailed in the Service Agreement, especially when it comes to Health Insurance Portability and Accountability (HIPAA) regulations.
Holidays. Employees can take a maximum of 24 calendar days of paid leave per year after the first 6 months of employment. In Ukrainian IT companies, where projects' needs should always come first, contractors usually plan and negotiate vacations with managers/team leads on the client's side in advance. Overall, Ukrainian developers, on the caveat of passing the probation period (typically, from 1 to 3 months), can take up to 20 days of paid leave per annum.
Public holidays. There are ten public holidays observed in Ukraine. The most important rule here is that when a public holiday falls on a Saturday or Sunday, it's usually moved to the following Monday. For example, since Easter is celebrated on a Sunday, the following Monday is an extra holiday.
Sick leaves. In Ukraine, employees are paid while being on sick leave. The allowance ranges between 50% to 100% of an employee's average salary. The law requires providing a doctor's note issued on the first day of sickness to be entitled to compensation.
When it comes to contractors working in IT, the sick leave policy can vary, given that each employer decides on their own rules regarding sick leaves and compensation. In many cases, the employer compensates up to 10 days in sick leaves. It's also worth mentioning that most IT companies in Ukraine provide health insurance as an employee benefit assuming free treatment for common illnesses.
Ukraine has significant income taxes, constituting roughly 40% of an employee's salary. Yet, there's a flat tax system for self-employed specialists: 5% of income. That's why, in most cases, Ukrainian developers working at outsourcing companies are registered as self-employed contractors, which makes them eligible for a 5% tax. Companies typically compensate for a tax fee by including it into the employee's salary. When you hire developers in Ukraine, the employment taxes usually fall on the vendor's shoulders, which is a good way to cut costs compared to an in-house team in Europe or North America.
Since IT generates significant value from foreign exchange, the government actively supports the industry by reforming laws on employment, taxation, and data protection.
Most Ukrainian IT companies follow the Labor Law of Ukraine regulations regarding working hours, breaks, holidays, sick leaves, and vacations, simply because they make sense and promote a healthy work-life balance. Nevertheless, each company offers individual benefit packages to attract developers to come and work for them. The benefits only improve from year to year, given the fierce competition for the top tech talent among IT companies.
If you have any questions (or concerns) regarding legal aspects of working with Ukrainian developers, just drop us a line, and we’ll be happy to address them. Let’s connect.