Amending Rules for Employment

Globalization is a powerful trend that has involved almost all countries worldwide. Ukraine makes necessary changes, implements new instruments, procedures for evolving and fitting its legislation with the modern requirements for the economic development process to benefit of the globalized world as much as possible. Some of the trends in the policy of the Ukrainian government are creating better opportunities for investors, easing the procedures for the legalization of foreigners in Ukraine.

On the 23rd of May 2017, the Parliament of Ukraine adopted the Law of Ukraine No. 2058-VIII On Amendments to Some Legislative Acts of Ukraine on Removing Barriers to Attracting Foreign Investments. This Law significantly changed the procedure of 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 of issuing work permits came into force on the 27th of September 2017 and is actively used by the Employment centers issuing the work permits. The first experience of applying for work permits as per the changed procedure (and issues related thereto), make it possible to analyze whether changes to the legislation were appropriate and effective.

The aforesaid amendments to the Ukrainian legislation remarkably decrease the bureaucratic burden on employers. The procedure of filing documents was significantly simplified. Now there is no need to provide the criminal records clearance papers and medical documents of the employee to the employment center. The procedure of applications for foreigners’ work permits review was also liberalized: the suspension in the process of issuing work permits (as a procedural instrument) was added. Now employer, after suspending the review of the application, can correct errors and inaccuracies in the documents. For example, previously, even clerical error was touted as false information and it was the reason for a set of documents review rejection

The fact that now there is no need to confirm the qualification of the employee and the absence of qualified employees in the labor market of Ukraine simplifies the procedure of obtaining the work permits for foreign employers. For example, the requirement of a candidate’s education documents provision was canceled.

These changes are logical: previously the Ukrainian government limited the employers` freedom to choose the employee by obliging a foreigner to have a university diploma of the same specialization as his intended work in Ukraine and proving that no Ukrainian can perform such a work, etc. Moreover, the changes also have reduced the time losses, as no apostille for education documents is required, and the 3 weeks long procedure of opening and closing the vacancy is no longer mandatory.

Naturally, there is also the other side of such “liberalization”. The level of foreigner’s salary should be at least 10 times more than minimal salary set by the legislation of Ukraine (except certain categories of employees, such as business founders, foreign IT professionals, employees of creative professions, graduates of universities that are among the world top 100 ratings).
Separately, the state clearly has taken a step towards investors. For the first time, the validity of work permits for foreigners can be up to 3 years for shareholders and beneficiary owners who work in the business. Moreover, the employer has the right to determine the exact term of such employment at its discretion. The increase of the work permits’ validity term should affect the investment attractiveness of Ukraine positively.

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 that the amount of investment should be not less than 100 000 Euro. Globally, such an amendment gives an opportunity for foreign investors to be members of the company’s supervisory board without holding a managing position. Thus, there will be no conflict of interest between the two statuses. Now foreigners have more options for the legalization of their stay in Ukraine.

A noteworthy fact is that the procedure of granting permits for the foreigners’ employment is completely regulated by the norms of the legislative act. The act’s text was supplemented by the adoption of the Law of Ukraine On Amending Some Legislative Acts of Ukraine on Removing Barriers to Attracting Foreign Investments. Earlier the procedure of issuing, prolongation and cancelation of employment permits for foreigners and stateless persons was regulated at the level of the by-law normative legal act, approved by the Resolution of the Cabinet of Ministers of Ukraine as of 27 May 2013 (hereinafter – the Procedure).

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

It stands to mention that the text of the Law does not provide for transitional provisions at all. Thus, the issues of the Law use to previously issued work permits remain unregulated. For example, previously the minimum salary for foreigners was the same as for citizens of Ukraine. Now there is a gradation (as already mentioned above). There are no issues with obtaining new work permits for foreigners (the corresponding salary level is specified in the employment contract). But in the case of prolongation, the level of the salary is not verified in practice. The list of documents that are submitted for the foreigners’ employment permits prolongation doesn’t contain any confirming salary level.
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, the authorized capital of the company must be already completed. According to p.2.5, 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 the law seems quite problematic for several reasons. First, it is necessary to establish in what form the authorized capital is formed (monetary, property, property rights, etc.). Second, it is not clear who and in what form can and should be requested for such confirmation. Moreover, due to the clearly defined short period of the work permit application review (7 working days), the implementation of such a provision, in general, seems almost impossible. The timing of sending of the relevant requests, the preparation of the answer, its sending and receiving may take long. In practice with the application employers should submit certificates, guarantee letters that confirm compliance with the requirements of the law.

There is one more reason: the requirement of the authorized capital formation in full is quite difficult to implement in companies with numerous 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.
Also, we would like to point out another category of specialists that has specific rules for the work permits issuing. This includes representatives of creative professions whose work duties are related to the objects of copyright and/or related rights according to clauses 8-4, part 1, article 1 of the Law. They include photographers, writers, journalists, art specialists, artists, performers, scientists, and many others. It is a rather rare basis in practice for issuing permits for the employment of foreigners. But if the employer needs to engage such a foreign employee he 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 work duty of this group of foreign employees is creating objects of copyright and/or related rights. Obviously, this requirement is unjustified as such because objects will be created in the future and for this, the work permit is obtained. Moreover, according to the current legislation of Ukraine in the intellectual property area (Article 11 Law of Ukraine No. 3792-XII On Copyright and Related Rights), there is no need to register copyright or an object of copyright, and if there is no other evidence the author is the person designated as the author of the work. Besides, not all objects of copyright can be notarized in a fixed form allowed in Ukraine (for example, video materials, etc.).

Summing the results of the first “new way” experience, we would like to note that the current procedure does involve a relatively simplified process for work permits, brings it into line with modern requirements for administrative procedures such as clear and short terms of applications review, 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 by-law normative legal act 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 amendments and changes in legislation in the sphere of the employment of foreigners in Ukraine.