Unofficial employment in Ukraine: fine for employers — around €5,000 per employee

Working without an official employment contract deprives Ukrainian workers of wage guarantees, social benefits, and pension contributions, while employers face fines of up to around €5,000 for each unregistered employee.

This was explained by lawyer and master of law Yevhen Bulimenko in a comment to RBC-Ukraine.

If an employment relationship is not officially formalized, an employer can unilaterally change working conditions or refuse to pay part of a salary in the event of a dispute. Legally, an informally employed person has no right to a number of social guarantees provided for by law.

These include, in particular, paid leave and sick pay. The employee also loses guarantees related to training, pregnancy, and childbirth.

A separate consequence concerns the future pension: periods of work without official registration are not counted toward the insurance record, which may in the future result in a lower pension or loss of entitlement to one.

At the same time, the absence of an employment contract does not mean that a worker is unable to defend their rights. Under clause 6 of Article 232 of the Labor Code of Ukraine, an employee has the right to go to court with a claim to formalize the employment relationship and establish the period of such work. If the court rules in favor of the employee, the employer may be required to formalize the employment relationship, and the court will award the employee wages of no less than the average for the relevant region — without taking into account the amount actually paid. For the established period of work, the employer will also be charged personal income tax and the unified social contribution.

Liability is also provided for the employer itself. For actually allowing an employee to begin work without formalizing an employment contract or agreement, a fine of ten times the minimum wage at the time the violation is detected may be imposed for each employee. According to Bulimenko, this currently amounts to 86,470 hryvnias — around €2,000. If the same violation is detected again within two years of the first discovery, the fine will rise to 30 minimum wages — 259,410 hryvnias, or around €5,000 per employee.

RBC-Ukraine previously reported on the worsening labor shortage in Ukraine and how employers are trying to retain staff: 78% of companies are already experiencing a shortage of personnel and are expanding bonuses, yet for most candidates salary, a convenient schedule, and proximity of work to home remain the top priorities. The outlet also reported on the growing employment of Ukrainians aged 50 and over: according to the State Employment Service, older people account for 32% of all those placed in jobs through the service, and most commonly find work as drivers, salespeople, cooks, accountants, and nurses.