‘Golden exemption’ and competitor orders: how employee exemption schemes work in Ukraine and how much they cost

Ukrainian businessmen are complaining about significant issues with staff deferment during mobilization.

Although formally, strategically important enterprises can reserve up to 50% of their employees, and some even more, in practice, even these enterprises often struggle to secure deferments for their workers.

“While the deferment is being processed, people can still be handed summonses. So, they never actually get the deferment,” said Alexander Barsuk, head of the Yaroslav conglomerate.

He also mentioned that “territorial recruitment centers can shut down a business in a day” by issuing summonses to key employees, making the company unable to continue its operations.

However, there are ways to bypass general rules for reserving employees.

“There are several schemes for deferment, usually involving good connections or paid deferment,” said a leader of a large company.

At the beginning of this year, the Cabinet of Ministers changed the rules for reserving personnel, with the main criterion being the recognition of the enterprise as strategically important for the economy. Obtaining such status can be done through the Ministry of Economy and the Ministry of Strategic Industries, but the process is lengthy and involves substantial paperwork.

There are two types of strategic enterprises: those that can reserve up to 50% of employees and those allowed to reserve more than 50%. The first group includes enterprises that:

• Produce goods for the military
• Develop, modernize, and repair military and special equipment and parts
• Manufacture ammunition and other defense-related goods

The second group includes companies in:

• Industry
• Aircraft manufacturing
• Space activities

Additionally, these enterprises must meet at least three of five criteria, such as fulfilling government defense orders or having over 50% of production for the defense industry.

According to Cabinet Resolution No. 76, strategic enterprises must also:

• Have no social security debt
• Pay taxes and fees totaling at least 1.5 million euros
• Have an average salary not lower than the regional average

Even companies with strategic status face many nuances in reserving employees.

“We have strategic status, but it only applies to factory workers, not the central office. So, we can’t reserve key people like the sales department head, financial director, or IT director,” said Sergey Vovchenko, head of the “Milk Alliance.”

Alexander Barsuk added that often, deferment isn’t processed in time. Employees need to visit the recruitment center, where they might receive a summons. Lawyer Rostislav Kravets confirmed this:

“To get deferment, you need to update military registration data. In practice, when a person comes to the recruitment center, even with a guarantee letter from the Ministry of Economy, they can be mobilized on the spot.”

Moreover, summonses are often issued to workers whose six-month deferment has expired.

“While processing the next deferment, many receive summonses,” added Kravets.

Currently, there are other schemes for deferment, bypassing official channels. One reliable method involves government authorities: the President’s Office and the Cabinet leadership can send lists to military commissariats, bypassing the Ministry of Economy and strategic status requirements. However, these lists are hard to get on without excellent connections.

Another method is paying the recruitment center directly. The fee depends on deferment details, often around $1,000 per employee for strategic enterprises. This “guarantee” from the commissariats typically lasts up to two months, enough time to process the deferment. However, companies must pay substantial sums to keep their workforce, sometimes up to $100,000 for 100 employees.

If an enterprise lacks strategic status, it can try to obtain it through relevant ministries, but this also requires connections and significant money—up to $100,000 or more. Additionally, separate payments are needed to ensure workers don’t receive summonses while deferment is processed.

Recently, sending employees through the military medical commission to declare them unfit for service was an option, costing $5-6,000 per person. However, a new mobilization law requires repeated medical commissions, and prices are expected to double.

“Military commissars can shut down any business in a day by issuing summonses to key employees, making further operations impossible. There have been cases where recruitment centers ‘neutralize’ competitors by issuing summonses,” said a businessman. For example, in the construction industry, there was a case where military commissars issued summonses to almost all builders on a site, halting the project.

Arranging such “targeted” summonses can cost several tens of thousands of dollars with the recruitment center.