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Regulation of labor relations: a new bill

Analysis of Ukraine's bill No.5371 on amendments to some legislative acts to simplify the regulation of labour relations in small and medium-sized businesses (SMEs) and reduce the administrative burden on business activities


The bill elaborated in pursuance of the decision of the National Reform Council under the President of Ukraine dated March 19, 2021 by NGO "Office of Simple Solutions and Results" along with MPs, the business associations "Ukrainian Business Council" and "Union of Ukrainian Entrepreneurs" and with the technical support of experts as part of USAID Competitive Economy Program in Ukraine (CEP), to settle problems requiring immediate solutions. At present, the bill has been submitted to the Verkhovna Rada of Ukraine.


Significance of the bill

The bill provides for amendments and additions to the following legislative acts:

  1. Labour Code of Ukraine
  2. Law of Ukraine on labour protection
  3. Law of Ukraine on leaves
  4. Law of Ukraine on trade unions, their rights and guarantees for activities

In general, the adoption and implementation of the bill's provisions should contribute to the modernization and harmonization of outdated methods of government regulation of labour relations in modern market conditions and working conditions in a market economy. It also should reduce bureaucratic burden on employers and create economic incentives for unshadowing of employment.

Meanwhile, it should be noted that once again, the amendments do not take into account the importance of adopting the new version of the Code.


Perspective changes to labour relations' regulation

1. The contractual regime of labor relations regulation is introduced (Part 5 of Article 49 of Chapter III-B), which is applied to labour relations arising between:

  • an employee and an employer who is a small or medium-sized business entity with no more than 250 employees during the reporting period (calendar year);
  • an employer and an employee, who earns more than eight times the minimum monthly wage.

The contractual regime of labour relations regulation (hereinafter referred to as the contractual regulation) is the possibility that the individual terms of employment of an employee may directly be determined by the employment agreement. The treaty regime may be applied voluntarily between employees and employers who are entitled to use it.

2. New features of the granting of annual paid and unpaid leaves are being introduced under the the contractual regulation, namely:

  • at the request of the employee, the annual leave can be divided into parts of any duration or granted to the employee for its full duration, taking into account the regulations on annual leaves established by the Labour Code of Ukraine;
  • an employee may be granted unpaid compassionate leave and leave for other reasons for a period of more than 15 calendar days per year, if such a condition is stipulated in the employment agreement;
  • salaries of employees for the entire period of annual leave shall be paid no later than the first day of the leave.

The specific period for granting annual leave is agreed between the employee and the employer.

3. It is established that salaries are paid at least once a month (new Article 49-7).

Under the contractual regulation, the amount of salaries is determined by the employment agreement, taking into account the legal minimum wage, and salaries are paid to employees within the timeframes specified in the employment agreement, but at least once a month (new Article 115). In addition, by agreement of the parties, the amount of the employee's salary in foreign currency may be determined, together with the indication of its equivalent in the currency of Ukraine.

4. The procedure for terminating an employment agreement under the contractual regulation is defined, including termination of the employment agreement at the initiative of the employer with payment of compensation to the employee (new Article 498).

5. It is expected that it is not permitted to require business entities to maintain and provide documents on issues that are regulated by the employment agreement (new Article 49-5).

Thus, there is no direct requirement to record maintenance on issues that are regulated by the employment agreement of business entities.

6. It is established that the contractual regulation does not apply to labour relations between employees and employers who are legal entities of public law (new Article 49-5).

7. The trade union's power is restricted, thereby simplifying procedures.

The procedure for the exercise of certain powers by the elected agency of the primary trade union organization under the treaty regime for regulating labour relations is specified (Article 38). In particular, the consent of the elected agency of the primary trade union organization to terminate the employment agreement on the initiative of the employer with an employee who is a member of the trade union operating at the enterprise is not required if such a condition is provided for in the employment agreement.

8. The basic regulatory functions, substantive provisions and the procedure for concluding an employment agreement under the contractual regulation (new Article 49-6) are determined.

An open-ended or fixed-term employment agreement may be concluded by mutual consent between the employee and the employer. The agreement's terms shall be established with respect for the rights and guarantees provided for by the Labour Code of Ukraine.

9. In case of worsening essential working conditions, the employer is obliged to notify the employee due to the established employment agreement, no later than two months in advance.

The need to notify the employee of a change in essential working conditions, not related to their worsening, is determined upon consultation between the parties when concluding an employment agreement. The intention is to explicitly prohibit the coercion of an employee to conclude an employment agreement containing terms on which no mutual consent is reached between the employee and the employer (new Article 9).


If you have any questions regarding labor law, please do not hesitate to contact Attorney-at-law, Partner at Legal Alliance Company Illya Kostin at kostin@l-a.com.ua.


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