Hire employees in Ukraine using an Employer of Record

Your competitor just hired three developers in Kyiv while you're still waiting for legal to figure out entity setup. They're shipping features faster, and you're stuck in paperwork limbo.

Here's the reality: setting up a legal entity in Ukraine costs €15,000-40,000 upfront and takes 4-6 months minimum. Your perfect hire can't wait that long, and frankly, neither can your business. Most companies don't realize Ukraine requires specific registrations with the State Employment Service, mandatory trade union notifications, and detailed employment reporting that can trigger €5,000+ penalties if you get it wrong.

You've got three ways to hire in Ukraine legally, and the math matters more than you think.

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-15,000 annual maintenance

• Timeline: 4-6 months minimum

• Complexity: Tax registration, employment service registration, payroll system, ongoing compliance

• Makes sense when: Hiring 20+ people long-term, permanent market commitment

Option 2: Hire contractors

• Cost: None upfront, but major control limitations

• Timeline: Immediate

• Risks: Misclassification fines up to €12,000 per employee, back taxes, employment law disputes

• Makes sense when: Short projects under 6 months, highly specialized skills

• Note: Hire with Columbus also handles compliant contractor agreements

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee

• Timeline: 2-3 days to hire

• Complexity: Zero - we handle everything

• Makes sense when: 1-50 employees, testing the market, multi-country expansion

The math is straightforward: hiring 3 employees costs $537/month with an EOR versus €25,000+ for entity setup plus €10,000+ yearly maintenance. If you're hiring across multiple countries, you'd need separate entities everywhere. An EOR like Hire with Columbus handles employment contracts, payroll processing, tax compliance, mandatory benefits, and keeps you updated on Ukraine's frequently changing employment laws.

Ready to hire in Ukraine without the compliance headaches? Get started with Hire with Columbus and have your team member onboarded this week, not next quarter.

What employment types can you use?

You've got three ways to bring someone onboard in Ukraine. Here's how the costs and risks compare.

Before diving into contract types, you need to decide your hiring approach. Each option has different costs, timelines, and complexity levels.

Set up your own entity

This means incorporating a Ukrainian subsidiary and handling everything yourself. You'll pay €15,000-25,000 upfront for incorporation, plus ongoing legal and accounting fees of €3,000-5,000 monthly.

The timeline? Four to six months before you can legally pay anyone. You'll need full tax registration, payroll systems, and HR infrastructure. It makes sense if you're planning 20+ employees long-term and want permanent market presence.

Hire contractors/freelancers

You can start immediately, but Ukraine's labor authorities don't mess around with misclassification. If someone works like an employee (set hours, company equipment, integrated into your team), they legally are one.

Misclassification penalties hit €50,000+ in back taxes and fines per person. Plus you can't control contractors like employees or integrate them fully into your team. This works for genuine short-term projects under six months with specialized skills.

Note: Hire with Columbus also handles compliant contractor agreements and payment processing if you need the flexibility.

Use an employer of record (Recommended)

Hire with Columbus becomes the legal employer in Ukraine while you manage day-to-day work and performance. We handle employment contracts, payroll, tax compliance, benefits, and legal requirements.

Cost is $179/month per employee. Timeline? You can hire in 2-3 days instead of months. For five employees, you'll pay $895/month versus €25,000+ entity setup plus ongoing compliance costs.

Employment contract types in Ukraine

Once you've chosen your hiring approach, you need the right contract type. Ukraine recognizes several employment contract structures, each with specific rules and restrictions.

Permanent employment contracts

This is your go-to for core team members. No end date, full employment protections, and standard termination procedures. Ukrainian law assumes permanent employment unless you specify otherwise.

Permanent employees get full benefits, unlimited contract renewals (obviously), and stronger job security. Use this for roles you expect to last over a year or positions central to your operations.

Fixed-term contracts

These have specific end dates and work for temporary needs, seasonal work, or covering maternity leave. But Ukraine limits fixed-term contracts to prevent abuse.

You can't use fixed-term contracts for permanent work or renew them indefinitely. After two consecutive fixed-term contracts with the same employee, the third automatically becomes permanent. Maximum duration is five years total.

Fixed-term employees get the same benefits and protections as permanent staff. They just end automatically on the specified date (though you still need proper documentation).

Part-time employment

Part-time means anything under 40 hours weekly. These employees get prorated benefits and full legal protections. Overtime kicks in after their contracted hours, not after 40 hours.

You can combine part-time with either permanent or fixed-term structures. Popular for specialized roles, consulting positions, or employees splitting time between companies.

Trial periods

You can include trial periods in any contract type. Maximum three months for most positions, six months for senior management roles. During trials, either side can terminate with three days' notice instead of standard notice periods.

Trial periods must be explicitly stated in the employment contract. You can't add them later or extend them beyond legal limits.

How Hire with Columbus handles contracts

We draft compliant employment contracts for any type you need. Our legal team ensures proper trial periods, benefit calculations, and termination clauses. You tell us the role requirements and work arrangement - we handle the legal structure.

For fixed-term contracts, we track renewal limits and automatically flag when positions should convert to permanent. For part-time arrangements, we calculate prorated benefits and handle complex overtime scenarios.

The result? Compliant contracts that protect both you and your employees, without the legal headaches of figuring out Ukrainian employment law yourself.

How does payroll and taxation work?

Your €60,000 employee in Ukraine actually costs €81,600 per year once you factor in all employer contributions. That's a 36% markup on base salary. Higher than most Western European countries but still competitive for the region.

Ukraine's payroll system involves multiple moving parts: income tax, military tax, social security contributions, and mandatory insurance. Miss a deadline or miscalculate contributions, and you're looking at penalties starting at ₴8,500 (about €200) plus interest.

Income tax brackets

Ukraine uses a progressive tax system with rates that changed in 2025 to help fund reconstruction efforts:

Plus a flat 1.5% military tax on all income above the minimum wage threshold. This military tax is separate from income tax and applies to everyone.

Social security contributions breakdown

This is where it gets expensive. Employers pay way more than employees:

That 24.07% employer contribution is why your €60k employee costs €81,600 total. And unlike some countries, there's no cap on contributions. You pay the full percentage regardless of salary level.

Payment schedule and requirements

Ukrainian employees expect monthly salaries paid in two installments: an advance by the 16th of each month (usually 40-50% of salary) and the remainder by the 1st of the following month. This split payment system is legally required and non-negotiable.

You'll also need to budget for the 13th-month bonus, typically paid in December. While not legally mandatory, it's expected in most professional roles and considered part of standard compensation packages.

Total employment cost example

Breaking down that €60,000 annual salary:

• Base salary: €60,000

• Employer social contributions (24.07%): €14,442

• Additional costs (vacation coverage, sick leave): ~€2,158

• Total annual cost: €76,600

The employee receives €60,000 minus their 7% social contributions (€4,200) and income tax on €55,800 at 25% rate (€13,950), plus 1.5% military tax (€900). Their net monthly income is about €3,413.

Payroll cycle and deadlines

Payroll taxes must be filed and paid by the 20th of the following month. Social security contributions are due by the same date. Miss these deadlines and penalties start immediately. There's no grace period.

You'll also need to file quarterly reports by the 20th of the month following each quarter, and annual reconciliation reports by February 20th of the following year.

Common payroll mistakes

The biggest mistake? Treating Ukraine like other EU countries when it's not in the EU. Ukrainian tax law is complex and changes frequently, especially since 2022.

Other costly errors include:

• Forgetting the military tax (1.5% on all income)

• Miscalculating the split payment requirements

• Missing quarterly social security filings

• Not accounting for the 13th-month bonus in annual budgets

• Using incorrect exchange rates for UAH/EUR conversions

Setting up payroll in Ukraine yourself:

• Local accounting firm: €800-1,200/month

• Payroll software: €300-500/month

• Compliance risk: Fines up to €5,000 for errors

• HR expertise needed: €45k+ salary

With Hire with Columbus: $179/month per employee, fully compliant, zero risk.

We handle all the complexity, from split payments to military tax calculations to quarterly filings. Your employees get paid on time, taxes get filed correctly, and you focus on running your business instead of deciphering Ukrainian payroll law.

What benefits and leave are required?

Ukraine employees can take up to 5 days of sick leave before needing a doctor's note, and social insurance covers 60-100% of their salary after the first day. Beyond that, you're looking at mandatory health insurance, pension contributions, and unemployment insurance that'll add about 22% to your employment costs.

Here's what you legally owe every employee in Ukraine.

Annual vacation leave

Every employee gets a minimum of 24 calendar days of paid vacation per year. That's about 18 working days if you're counting business days only.

Vacation accrues monthly at 2 calendar days per month of work. New employees can use their vacation after 6 months of employment, though you can be generous and allow it earlier.

Carryover rules:

• Unused vacation must be taken within 12 months

• You can't force employees to forfeit vacation days

• If they don't use it, you must pay it out when they leave

Vacation payout: When someone quits or gets terminated, you pay their unused vacation days at their current daily salary rate. No exceptions, and it's due with their final paycheck.

Sick leave entitlements

Employees can take unlimited sick leave with proper medical documentation. The first 5 days don't require a doctor's note - just the employee's written statement.

Payment breakdown:

• Days 1-2: No pay (employee responsibility)

• Days 3-5: Employer pays 60% of average salary

• Day 6 onwards: Social insurance pays 60-100% depending on tenure

Medical certification: After day 5, employees need a medical certificate from a licensed doctor. Fake certificates can get both you and the employee in legal trouble, so don't mess around with verification.

The social insurance fund handles most long-term sick pay, but you'll still deal with the paperwork and initial payments.

Parental leave breakdown

Maternity leave: 126 calendar days (70 before birth, 56 after) at 100% of average salary. For complicated pregnancies or multiple births, this extends to 140 days.

Paternity leave: 14 calendar days within the first month after birth at 100% pay. Fathers can take this all at once or split it up.

Extended parental leave: Either parent can take up to 3 years of additional leave. The first year pays social benefits (around 25% of minimum wage), and years 2-3 are unpaid but job-protected.

Adoption leave: Same rules apply if employees adopt children under 3 years old.

You can't reduce someone's position or responsibilities while they're on parental leave. Their job must be waiting when they return.

Public holidays 2025

Ukraine has 11 official public holidays. Employees get the day off with full pay, or double pay if they work.

Holiday pay rules: If a holiday falls on a weekend, the following Monday becomes a paid day off. If employees work holidays, they get double their daily rate plus a compensatory day off.

Mandatory benefits and contributions

You'll pay social security contributions on top of every salary. Here's the breakdown:

What social security covers:

• Unemployment benefits

• Sick leave payments

• Maternity/paternity leave

• Work injury compensation

• Pension contributions

Health insurance: Ukraine doesn't have mandatory private health insurance, but the social security contributions fund the national healthcare system.

Work injury insurance: Rates vary by industry risk level, from 0.2% to 13.8% of payroll. Office work typically falls in the lowest category.

Optional competitive benefits

Most companies offer these extras to attract talent:

Private health insurance: Costs €300-800 per employee annually. Popular with tech companies and international businesses.

Meal allowances: Up to €50 monthly tax-free. Either meal vouchers or direct payments.

Professional development: Training budgets of €500-2,000 per employee per year. Language courses are especially popular.

Flexible work: Remote work options became standard post-2022. Most employees expect at least hybrid arrangements.

13th month salary: Not legally required, but common as a year-end bonus equivalent to one month's salary.

Transportation allowances: €30-100 monthly for commuting costs, especially in Kyiv and other major cities.

Common benefit mistakes

Skipping work injury insurance registration: You must register with the Social Insurance Fund within 10 days of hiring. Penalties start at €500 per unregistered employee.

Miscalculating vacation pay: Use average salary from the last 12 months, not current monthly salary. Getting this wrong means back-payments plus penalties.

Ignoring military tax deductions: This 1.5% employee deduction is mandatory and goes directly to defense funding. Forget it and you'll face tax authority audits.

Treating contractors like employees: If someone works exclusively for you, uses your equipment, and follows your schedule, Ukrainian authorities will reclassify them as employees. Then you owe back-taxes and benefits.

Missing social security deadlines: Monthly contributions are due by the 20th of the following month. Late payments incur 120% annual interest penalties.

Administering these benefits correctly requires local HR expertise (€40k+ annual salary), benefits software (€200+/month), and legal review (€5k+/year). Risk of errors can cost €10k+ in potential fines.

Hire with Columbus handles all benefit administration, compliance, and payments for $179/month per employee. We calculate contributions, file reports, and ensure you never miss a deadline or requirement.

What are the compliance requirements?

Written contracts are mandatory in Ukraine. Verbal agreements don't count and expose you to claims for back pay, benefits, and wrongful termination. Here's what you need to get right.

Employment contract requirements

Every employment contract in Ukraine must be in writing and signed within three days of the employee's start date. Miss this deadline and you're looking at fines starting at ₴17,000 (about $460) per violation.

The contract must be in Ukrainian, even if your employee speaks perfect English. You can include a translated version, but the Ukrainian text is what counts legally. Required clauses include job title, workplace location, salary amount, working hours, vacation entitlement, and termination conditions.

Contracts must be registered with the State Employment Service within 10 days of signing. Skip this step and the contract is considered invalid, meaning you'll owe back payments for any benefits or protections the employee should have received.

Probation periods

Standard probation in Ukraine is three months for most positions, with a maximum of six months for management roles. During probation, either party can terminate with just three days' notice instead of the usual longer periods.

After probation ends, full employment protections kick in immediately. This means longer notice periods, severance requirements, and just-cause termination rules. You can't extend probation once it's set in the original contract.

Working time regulations

The standard work week is 40 hours maximum, typically spread across five days. Overtime is capped at 120 hours per year and must be paid at 150% of regular wages for the first two hours, then 200% after that.

Employees need at least 42 consecutive hours of rest per week (usually weekends) and a 30-minute lunch break for shifts over six hours. You're required to keep detailed records of all working hours, including start times, breaks, and overtime.

Notice periods

Notice periods depend on how long someone has worked for you:

These are minimums - you can offer longer notice periods, but you can't go shorter without risking wrongful termination claims.

Termination process

You can't fire someone in Ukraine without documented cause and proper procedure. Valid reasons include poor performance (with written warnings), misconduct, redundancy, or company closure. Each requires different documentation and timelines.

For performance issues, you need at least two written warnings with improvement plans and reasonable time to improve. Redundancy requires 60 days' advance notice and consultation with employee representatives if you're laying off more than 10 people.

Termination for cause still requires a formal investigation, written notice of allegations, and opportunity for the employee to respond. Skip these steps and you'll face reinstatement orders plus back pay.

Severance pay

Severance is required for most terminations except resignation or firing for serious misconduct:

Severance is based on average monthly earnings over the last 12 months, including bonuses and overtime. Payment is due on the last day of work.

Data protection

Ukraine follows GDPR-style data protection rules under their Personal Data Protection Law. You need explicit consent to collect employee data beyond what's required for employment, and you must have data processing agreements with any third parties handling employee information.

Employees have the right to access, correct, and delete their personal data. Data breaches must be reported to authorities within 72 hours. Fines for violations can reach ₴272,000 (about $7,400) for individuals or ₴1.36 million (about $37,000) for companies.

Common compliance mistakes

The biggest mistake is using outdated or translated contracts that miss mandatory Ukrainian clauses. This makes the entire agreement invalid and exposes you to claims for all employment benefits and protections.

Wrong termination procedures are equally costly. Firing someone without proper documentation, warnings, or notice periods can result in reinstatement orders, back pay, and legal fees that often exceed the original severance cost.

Missing registration deadlines is another expensive error. Late registration of contracts or employment changes triggers automatic fines and can invalidate your employment agreements.

Penalties for violations

Common compliance failures in Ukraine carry specific penalties:

• Invalid employment contract: ₴17,000-34,000 fine plus contract void, requiring back payments for all missed benefits

• Wrong termination process: 3-6 months' salary in compensation plus legal fees and potential reinstatement order

• Missing mandatory contract clauses: Contract deemed invalid, employee entitled to maximum legal benefits

• Late contract registration: ₴8,500-17,000 fine per contract plus potential contract invalidity

• Working time violations: ₴51,000-102,000 fine plus overtime back pay at penalty rates

• Data protection breaches: Up to ₴1.36 million fine plus potential criminal liability

Hire with Columbus ensures every contract includes all mandatory Ukrainian clauses, follows proper registration procedures, and handles terminations according to local law. Our legal team reviews every employment action to prevent these costly mistakes before they happen.

What has changed recently?

Ukraine's job market went through some major changes in 2025. New labor protections and updated economic policies are changing how companies hire and manage employees here.

The government bumped up minimum wage standards in January 2025, raising the monthly minimum to ₴8,000 (about $195), up from ₴7,100. That's a 12.7% increase that affects payroll for thousands of international companies working in the country.

New remote work regulations

Ukraine rolled out detailed remote work rules in March 2025 that caught a lot of companies off guard. You now need written agreements for any remote work setup, clear equipment responsibilities, and defined working hours.

Companies must give remote workers the same benefits as office employees. That includes internet allowances and ergonomic equipment stipends. The new laws also added "right to disconnect" rules, so you can't contact remote workers outside agreed hours unless there's a real emergency.

Updated tax incentives for tech hiring

The IT sector got better tax breaks in 2025. The government extended preferential rates to companies hiring Ukrainian developers for international projects, now covering cybersecurity, fintech, and green tech roles specifically.

Qualifying companies can get reduced corporate tax rates of 5% instead of the standard 20%. But there's a catch: you need at least 75% Ukrainian staff in technical roles. This makes Ukraine even more appealing for tech companies setting up development centers.

Enhanced employment protection measures

New termination rules started in June 2025. Employers now need more detailed justification for firing people and longer notice periods for employees with over five years of service. Certain employment disputes also require mandatory mediation now.

Severance calculations include extra compensation for employees let go due to "economic restructuring." This adds roughly 15-20% to typical severance costs. If you're using an EOR like Hire with Columbus, we handle all these compliance updates automatically and adjust our processes as regulations change.

Social security contribution adjustments

Ukraine tweaked its social security system in September 2025, adding new contribution categories for high earners. Employees making over ₴100,000 monthly now pay additional contributions to the state pension system.

The changes also simplified reporting for international companies by combining multiple forms into one monthly submission. But the deadlines got stricter. Late submissions now start with ₴5,000 penalties instead of the old warning system.