Labor relations and their alternatives: realities and problems

Business is affiliated with a lot of risks. How to make a profit, don’t lose customers, minimize costs without breaking the law, while still earning and maintaining a good reputation among colleagues and clients?

In aspect of cost minimization there may be a choice: to hire or not to hire. Employees in Ukraine are the main reason of inspections and fines as well as lawsuits.

This article contains information about advantages and disadvantages of official employment and its alternative.


Employment contract

The employment contract is an agreement between an employee and an employer, which sets the employee’s duties to perform certain work, and the employer’s – to pay salary and provide working conditions.

The first indicator of labor relations is the rules of internal labor order.

The second – regularly paid  salary.

The third indicator – ensuring working conditions by the employer.

Another employer’s responsibility in this context is to identify the workplace, which must comply with the established standards.


Why is it unprofitable for employers to enter into an employment contract with employees? There is a number of reasons:

1 – Compulsory payments to the budget

Employer must pay a personal income tax, military fee and a single social contribution for each employee.

2 – Protection of employee rights by law and liability for breach of warranty

When concluding an employment contract, the employee receives protection, which is established by the labor legislation. Labor legislation establishes a number of guarantees for an employee: the maximum working hours, the mimimum vacation, grounds of the contract termination etc.

Violation of these guarantees cause fines for employer. And each unsatisfied employee may file a lawsuit in case of violation of his rights.


Advantage of concluding an employment contract

The main advantage is your confidence and safety in the case of inspection by public authorities. Avoiding the risk of imposing sanctions for improper registration of an employee is a good motivation, taking into account the size of current fines (UAH 125 190 for each employee admitted to work without official employment contract and another UAH 17 000 as CEO administrative liability).


Civil contract as an alternative to an employment contract

A service contract is the main regulation for partly employment relations. Such contracts can regulate rights and obligations of the parties, the order of services provided and payment for them, responsibility in case of violation of the terms and conditions of the contract – in details. 



The main advantege of civil agreement is its flexibility compared to an employment contract.

You may establish any cost of services, responsibility or grounds for termonation the agreement.

In addition, the employer will not be liable for the employee’s life and health, safety of his work if the relevant provisions are correctly drawn up in the contract.



Again, the first issue is inspections and their consequences. In case the contract contains provisions that can be identified as labor relations, an employer can pay hundreds of thousands, and even millions UAH as fine.

Therefore, when concluding a civil agreement, it is necessary not to mention the  workplace, regularly payments and the rules of the internal order.


So, labor or civil?

As a result, to date, no one can force an employer to enter into an employment contract with employees. But everyone can see risks of civil contracts.

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