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Ukrainian Hryvnia (UAH)
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Processing payroll in Ukraine is highly regulated. Foreign employers are required to either establish a local legal entity or set up a local branch. Payroll frequency is determined by law and must be semi-monthly. Employers have withholding and submittance duties with regard to income tax payable on employee salaries. Costs for social security are solely borne by the employer.
Before non-resident companies can start processing payroll in Ukraine, they need to set up a local legal entity - or a branch or representative office. In order to do so, the legal entity (or an individual entrepreneur) must be registered with the Unified State Register of Legal Entities. Registration with the State Register automatically includes tax and social security registration with the respective authorities.
Please note that registration for branches and representative offices is processed by the Ministry for Economic Development and Trade and requires separate registration with the Ukrainian statistics and tax authorities. It is necessary to register with the statistics office first in order to obtain an identification code which is also used as identification number for tax purposes. Registration for social security purposes is done through the tax authority which is the State Fiscal Service.
The State Fiscal Service must also be informed about new hires before they start working for the company. For this purpose, a hiring notification must be submitted either in paper form or electronically. It is necessary to set up a local bank account when processing payroll in Ukraine as salaries and wages cannot be paid from a foreign account.
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Employers in Ukraine act as withholding agents for income tax deducted from employee salaries and are responsible for reporting withheld amounts to local authorities on a regular basis. They are further obliged to make social security payments for each employee.
Employment income is taxed at a standard rate of 18%. There is an additional 1.5% military tax which was introduced in 2014 and which is levied on all income.
When determining the employee’s taxable income, employers must consider all types of remuneration provided to the employee either in cash or in kind. This comprises the employee’s normal salary / wages as well as overtime pay, bonuses, benefits and more. Exempt from income tax are employer-provided accommodation (certain conditions apply), additional contributions to non-statutory pension and medical insurance provided by the employer (subject to certain limits) and expenses on training and education (also subject to certain limits). Payments to charities, interest payments on mortgages and certain medical expenses incurred by the employee are also deductible from income tax.
Ukrainian residents are taxed on their worldwide income while non-residents are only taxed on the share of their income which is earned in Ukraine and/or from Ukrainian sources. However, the tax rate is the same for residents and non-residents. Employees are considered residents if they are domiciled in Ukraine. Additional criteria for determining tax residency are the individual’s center of vital interests as well as a period of stay in Ukraine exceeding 183 days within any given calendar year.
Employers are responsible for withholding both income and military tax from employee salaries and wages and remitting the withheld amounts to the Ukrainian tax authorities. For salary payments issued via bank transfer, withheld income and military tax must be paid to the authorities on the employee’s payday. Income tax calculated and withheld from cash payments and benefits in kind must be paid within 3 days following the payment.
A payroll report must be filed with the authorities on a quarterly basis. The report is due 40 days after the quarter has ended. The tax year is the calendar year. Employees who have additional sources of income other than their employment must file an individual tax return. The filing deadline is 30 April.
In Ukraine, social security contributions are made solely by the employer in the form of the so-called Unified Social Contribution (USC). The USC standard rate is 22% - different rates apply to disabled employees. Social security payments must be made to the State Fiscal Service of Ukraine. The pay dates are the same as for submitting withheld income tax.
However, the calculation base for the contributions is capped at 15 times the current national minimum wage. In 2022, the threshold is set at UAH 97,500 (will be UAH 100,500 from October 2022). Contributions cover pension, unemployment, disability and occupational accidents. Additional charges are levied by the State Pension Fund on certain acquisitions such as vehicles and real estate.
Employees in Ukraine are entitled to various benefits. These include:
Annual leave and public holidays: 24 calendar days of paid annual leave, plus 15 unpaid days off, plus 11 public holidays
Maternity leave: 126 days, split into 70 days before and 56 after birth
Paternity leave: in 2021, the country introduced 14 days of paid paternity leave
Parental leave: unpaid childcare leave until the child is 3 years old (since 2021 available to both parents); 10 calendar days of paid additional leave are available to employees with at least two children under 15
Sick leave: 5 days paid by the employer; thereafter, employees receive sickness benefits from Social Security; pay rates vary between 50% and 100% depending on the employee’s seniority
For more information on employee benefits and other employment requirements in Ukraine (including severance pay and termination procedures), check out our Global Hiring Guide.
The Ukrainian national minimum wage is currently (as of February 2022) set at UAH 6,500 per month. Minimum pay is due to increase to UAH 6,700 per month in October 2022. Overtime work has to be paid at double rates. The same applies to work on weekends or public holidays. There is no legal obligation to provide employees with an annual bonus.
Payroll frequency in Ukraine is highly regulated. According to the regulations, employees should be paid twice a month (so-called advance payment and final payment). Payments must be issued no later than 7 days after the end of the respective pay period. The interval between two paydays cannot be longer than 16 days. Holiday pay must be provided 3 days prior to the employee’s first vacation day. It is mandatory to pay employee salaries and wages in local currency, i.e. Hryvnia (UAH).
After each pay period, employees must receive a payslip with detailed information about their salary, the withheld amount of income tax and further deductions made on their behalf. Both paper and digital payslips are accepted.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for Ukraine.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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