Amending Rules for Employment of Foreigners in Ukraine

Amending Rules for Employment of Foreigners in Ukraine
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Globalization is a powerful trend that has involved almost all countries worldwide. Ukraine amends its legislation and implements new instruments, procedures for evolving its legislation and harmonization it with the modern requirements for economic development process to enjoy as more benefits of the globalized world as possible. Creation better opportunities for investors, easing the procedures for the legalization of foreigners in Ukraine is one of the trends in the policy of Ukrainian government.

On 23 May 2017, the Parliament of Ukraine adopted the Law of Ukraine No. 2058-VIII On Amendments to Certain Legislative Acts of Ukraine on Removing Barriers to Attracting Foreign Investments, which significantly changed the procedure for issuing and prolonging permits for the employment of foreigners in Ukraine. Thus the Law of Ukraine No. 5067-VI On Employment of Population (hereinafter - the "Law") was amended a lot.

The new procedure for issuing work permits entered into force on 27 September 2017 and is actively applied by the Employment centers, which issue the work permits. Considering the fresh results of the first experience of applying for work permits (and issues related thereto) according to the changed order, it is already possible to analyze whether changes to the legislation were appropriate and effective.

We would like to remark the decrease in the bureaucratic burden on employers implied by the aforesaid amendments to the Ukrainian legislation. The procedure for filing documents was significantly simplified. Now it is not necessary to provide the criminal records of employee and medical documents to the employment center. The procedure for applications for work permits of foreigners considering was also liberalized: the suspension in the process of issuing work permits (as a procedural instrument) was added. Now employer, after suspending the consideration of the application, can eliminate errors in the documents and inaccuracies (for example, previously, even clerical error was interpreted as providing false information to the state authority, which was the ground for refusing to consider the package documents) without receiving a formal refusal.

Simplification of the procedure for obtaining of the work permits for foreign employers is also seen in the fact that now there is no need to confirm the qualification of the employee, to confirm the absence of qualified employees in the labor market of Ukraine. For example, the requirement for the provision of documents about the education of candidate was abolished.

These changes are logical: previously the Ukrainian government restricted the employers` freedom to choose the employee (i.e. it was necessary for a foreigner to have a university diploma of the same specialization as his work in Ukraine would be related to; that no Ukrainian can perform such a work etc.). Moreover, the changes also have reduced the time losses: no more obtaining an apostille for education documents required, the procedure for opening and closing the vacancy, which took at least 3 weeks, now is not mandatory.

Of course, there is also the other side of such "liberalization": the level of foreigner’s salary should be at least 10 minimal amounts of the minimal salary determined in the legislation of Ukraine (with the exception of certain categories of employees, such as founders of business, foreign IT professionals, employees of creative professions, graduates of universities, which are included in the first hundred world ratings).
Separately, it should be noted that the state really has taken a step towards investors: for the first time the term of work permits for foreigners can be up to 3 years (moreover, the employer has the right to determine the accurate term at its discretion) for shareholders and beneficiary owners who work in the business. The increase of the validity term for the work permits should positively affect the investment attractiveness of Ukraine.

At the same time now, the legislation also gives the right to the investors (shareholders and beneficiary owners) to get Ukrainian residency permits for 2 years while being not employed by their companies The only requirement is the amount of investment – not less than 100 000 Euro. Globally, such an amendment creates the opportunity for the foreign investors to be members of company's controlling board without holding a managing position (as the conflict of interest between the two statuses will exist no more). So, now foreigners have more options for the legalization of their staying in Ukraine.

A noteworthy fact is that after the adoption of the Law, the procedure for granting permits for the employment of foreigners is comprehensively regulated by the norms of the legislative act (the text of which was supplemented by the adoption of the Law of Ukraine "On Amending Certain Legislative Acts of Ukraine on Removing Barriers to Attracting Foreign Investments"), and not at the level of the by-law normative legal act, as it was earlier with the Procedure for issuing, extending the validity and annulling the permit to The employment of foreigners and stateless persons approved by the Resolution of the Cabinet of Ministers of Ukraine as of 27 May 2013 (hereinafter - the Procedure).

Nevertheless, the law does not settle the procedure of issuing work permits for foreigners in Ukraine. Some legal relations, which were regulated by the Procedure, remain vague in the Law and, obviously, there is a need for additional, specified regulation. At the same time, the norms of the Procedure do not correspond and even contradict the Law, and consequently, the Procedure must be amended (the Procedure is not currently applied, however, it is still in effect). For example, there is still no approved the form of applications for the issuing, extension, exchange of work permits for foreigners (at the moment, preliminary forms are published on the websites of employment centers).

It is worth noting that the text of the Law does not provide for transitional provisions at all. Thus, issues of application of the Law to previously issued work permits remains unregulated. For example, previously the minimum wage level for foreigners was the same as for citizens of Ukraine. Now there is a gradation (as already mentioned above). And if there are no issues with obtaining new work permits for foreigners (the corresponding salary level is stipulated in the employment contract), in the case of prolongation this fact (level of salary) is not verified in practice: in the list of documents that are submitted for the extension of permits for the employment of foreigners, there is neither one that would confirm this fact.
Another issue is that according to the current requirements of the Law when the company submits for the work permit for the shareholder (ultimate beneficiary owner) of the company, it is necessary that the authorized capital of the company had been completed already. According to para. 2, point 5, part 2, article 42-2 of the Law, this fact should be established by the territorial employment agency itself.

The implementation of this rule of law seems to us quite problematic for several reasons. First, it is necessary to establish in what form the authorized capital is formed (monetary, in the form of property, property rights, etc.). Secondly, it is not clear in what form, and from whom such confirmation can and should be requested. Moreover, due to the clearly defined short period of consideration of the work permit application, (7 working days), the implementation of such a provision, in general, seems almost impossible: the timing of the ending of the relevant requests, the preparation of the answer, its sending and receiving may take a long time. In practice, together with the application, employers should submit certificates, guarantee letters, which confirm compliance with the requirements of the law.

There is one more reason: the requirement for the formation of the authorized capital in full is quite difficult to implement in companies with a large list of founders. After all, formally, not making a one-hundredth share of the authorized capital results in a refusal to issue the work permits for all shareholders of the company.
In addition, we would like to attract the attention to another category of persons for whom specific rules are stipulated for the issuing of the work permits - these are representatives of creative professions (according to clauses 8-4, part 1, article 1 of the Law, they include persons whose labor obligations provide for the creation of the objects of copyright and/or related rights). In fact, they include photographers, writers, journalists, theatrical figures, artists, performers, scientists and many others. And if it suddenly becomes necessary to design such a foreign employee (a rather rare in practice basis for issuing permits for the employment of foreigners), the employer will need to file a notarized copy of the document that identifies such an object of copyright and/or related rights and confirm authorship (although the text of the Law clearly determines that the main characteristic of this group of foreign employees is the presence of the main labor function in creating objects of copyright and/or related rights. It is obvious that this requirement is unjustified in principle (objects will be created in the future, for this, in fact, it is necessary to obtain a work permit). Moreover, according to the current legislation of Ukraine in the field of intellectual property (Article 11 Law of Ukraine No. 3792-XII On Copyright and Neighboring Rights) there is no need to register copyright (or an object of copyright), and the author is the person designated as the author of the work (in the absence evidence of another). Moreover, not all objects of copyright can be fixed in the form that is generally allowed for notarization in Ukraine (for example, video materials etc.).

Summarizing the results of the first “new way” experience, we would like to note that the current procedure really involves a relatively simplified process for work permits, brings it into line with modern requirements for administrative procedures (clear and short terms for processing of applications, the possibility of suspension, correction of minor errors, the possibility of selecting the necessary time for issuing a permit, etc.). At the same time, the issues of "transitional" provisions, the adoption of a subordinate legal and regulatory act (procedural nature) that will fill the gaps left by the Law, as well as the presence of the above inaccuracies of the Law, remain. This allows us to conclude that we should expect additions and changes in legislation in the sphere of the employment of foreigners in Ukraine.

Prepared for The Ukrainian Journal of Business Law. #12 December 2017

About EXPATPRO
EXPATPRO is a leading boutique law firm in Kiev that focuses on immigration to Ukraine and offers personalized, top-quality legal services for foreign expats. Our clients are foreign individuals, businesses and investors who are pursuing business, employment or personal opportunities in Ukraine. Through comprehensive knowledge of legal, political and business areas, our migration experts will walk you through the jungles of Ukrainian law.