What does the average Ukrainian entrepreneur associate with classic labor relations? There may be many answers to this question, but it is unlikely that among them we will find a large number of favorable ones or those that would characterize them as effective.
This state of affairs is caused by the fact that Ukraine received the basis of labor legislation (Clause of Labor, other by-laws) as a legacy from the populist Soviet regime, the goal of which was the maximum regularization of relations.
Under the conditions of the modern market economy, everything worked out with precision, but on the contrary. The “stacks” of personnel, organizational and other documentation that the employer must create are considerable and negatively affect the legal ease of doing business.
Among such documentation, we will find internal labor regulations, job instructions, time sheets, collective agreement, employee personal cards, magazines for all possible familiarization and the parallel existence with all this “goodness” of the labor contract (although under the conditions of such regulation, it is no more, rather than a loud but meaningless phrase). And this is only a documentary component, which can be overcome by grinding and hiring the appropriate employee.
If we move to legal registration, interaction and termination of relations with the employee, the situation here is much worse. An employer-entrepreneur who bears a commercial risk and must constantly assess the effectiveness of his business cannot take even the most prosaic actions:
- To impose a fine or other punishment on the employee in case of violation of the conditions of work. Labor legislation limits punishment only to reprimand or dismissal (exclusively in cases provided for by Labor Code);
- Dismiss the employee at his own will, for example, for reasons of inefficiency, etc. In order for the employer to be able to fire the employee when he needs it, it is necessary to either pressure the employee to fire on his own, or artificially create conditions for the grounds for fire to arise (for example, issue two or more reprimands to fire for systematic non-fulfillment of labor duties without good reasons).
There are more than enough other irrational rules, so it makes no sense to highlight them within the scope of this article, which does not set such a task. The worst thing in the context of this problem is that until now the employer could not legally influence such legal norms and had to conduct business within the limits of all these restrictions or move to the so-called “gray zones”, such as the organization of relations through the FOP.
In light of the liberalization that the state is consistently implementing in connection with the difficulty of doing business in the conditions of a full-scale war, changes have also been made to labor legislation, namely the Labor Code of Ukraine.
The Labor Code was supplemented by a new section III-B, which introduced special conditions for the legal regulation of labor relations for representatives of small and medium-sized businesses. The purpose of the simplified regime is to create conditions under which the employment contract will become the main regulator of relations between the employee and the employer.
The requirements set by the state for the use of the simplified regime of regulation of labor relations and all its advantages are business compliance with the following conditions (clause 1, part 1, article 49-5 of the Labor Code):
- number of employees (cannot exceed 250 people)
- the amount of income, since it is these categories that determine your belonging to a small or medium-sized business (cannot exceed 50 million euros)
ADVANTAGES OF SIMPLIFIED MODE
Minimization of documentation
As mentioned in the introduction, labor relations entail a huge amount of various types of documentation. The simplified mode allows us to forget about documentation on personnel issues, local regulations, organizational and administrative documentation, including regarding the regime of working hours and rest time, vacations. If you reduce it to a non-exhaustive list, now you can do without:
1) Staff list;
2) Internal labor regulations;
3) Time sheet;
4) Job descriptions;
5) Vacation schedule;
6) Collective agreement;
7) Accounting books, Orders on personnel matters, etc.
Nevertheless, in case of convenience, personal necessity, the employer can keep relevant documentation.
All issues that were regulated by the above documents will now need to be regulated at the level of the employment contract with the employee, so special attention should be paid to this part.
Different pay for the same positions
This change is a logical continuation of the absence of the need to maintain a staff roster. The amount of remuneration is agreed with the employee individually and is not tied to the salaries established for specific positions.
Additional forms of responsibility
Again, looking in retrospect, we know that previously the employer could apply only one of two forms of liability in case of violation of labor discipline (Article 147 of the Labor Code):
- a. Reprimand;
- b. Dismissal (not arbitrarily, but only in exceptional circumstances).
On the other hand, in the case of applying a simplified regime of legal regulation of labor relations, the parties in the labor contract can define additional forms of responsibility (Part 4, Article 21 of the Labor Code). Such forms can be a fine, deduction from wages or other negative consequences that the employee/employer must bear in case of violation of labor duties.
Additional grounds for termination of the employment contract
The changes, at the same level as additional forms of liability, allow the parties to determine their own grounds for termination of the employment contract, except for those specified in Art. 36 of the Criminal Code.
Such grounds for termination of the employment contract may be termination of the contract by the employer or its termination in case of committing a certain violation or the occurrence of a circumstance specified in the contract (failure to fulfill KPI during certain consecutive periods, etc.).
Please note: if the termination of the employment contract occurs at the initiative of the employer, then he is obliged to pay the employee a compensation payment in the amount that varies depending on the duration of the employee’s work for a particular employer. You can read more about the gradation of compensation payments in Part 2 of Art. 49-8 of the Criminal Code:
- half of the minimum wage – if the sum of the employee’s periods of work with this employer is no more than 30 days;
- minimum wage – if the sum of the employee’s periods of work with this employer is more than 30 days;
- c. three minimum wages – if the sum of the employee’s periods of employment with this employer is more than one year;
- d. five minimum wages – if the sum of the employee’s periods of employment with this employer is more than two years.
NDA or Non-Disclosure Agreement
Previously, the inclusion of non-disclosure clauses in the employment contract was controversial from the point of view of compliance with Art. 9 of the Labor Code (conditions that worsen the position of the employee in comparison with the labor legislation are considered invalid).
The regulation of the simplified regime directly mentions this possibility, and taking into account the changes regarding the addition of forms and the extent of the employee’s responsibility, non-disclosure clauses in the employment contract can become a real tool for protecting confidential information from its improper disclosure by the employee.
Changes in vacation regulation
The simplified regime also allows minor adjustments to be made to the legal regulation of vacations. The following can be determined at the level of the employment contract:
- Vacation can be divided into parts of any duration.
Comment: previously there was a rule that the main part of it could not be less than 14 days (Part 6 of Article 79 of the Labor Code, Part 1 of Article 12 of the ZU “On Vacations”).
- Leave without pay due to family circumstances may be granted for a period of more than 15 calendar days per year, if the parties provide for it in the Agreement.
Comment: earlier part 2 of art. 84 of the Labor Code and Art. 26 of the Law “On Vacations” prohibited the granting of vacation on the specified basis for a period longer than 15 calendar days per year.
- It is possible to provide for the payment of wages for the entire period of annual leave later than before it begins.
Although the simplified regime of legal regulation of labor relations is established during the period of martial law, it is potentially the starting point from which the legislator will move to full liberalization and individualization of labor relations.
Based on both the current state of affairs and the inevitable perspective, employers should think about concluding new or changing existing employment contracts with employees in order to protect their interests in order to take full advantage of the opportunities that the legislation now provides.