Key Takeaways

  • Ukraine levies flat 18% PIT and a 5% military levy (from 2025) on employee gross salaries
  • Employer ESV is 22% of gross salary — an employer-only obligation with no upper ceiling
  • Wartime Labour Code amendments require careful management of mobilisation leave and remote work provisions
  • Minimum annual leave is 24 calendar days; maternity leave is fully compensated through the Social Insurance Fund
  • The EOR model enables compliant employment of Ukrainian nationals both within Ukraine and internationally

Ukraine has a large, highly educated workforce — particularly strong in software engineering, IT services, and scientific disciplines — that has attracted significant international investment in the technology sector. The country’s payroll framework is administered by the State Tax Service of Ukraine and is characterised by a flat personal income tax rate, a military levy, and a single employer-side social contribution (Unified Social Contribution, or ESV). Ukraine’s Labour Code provides employment protections, and the country’s wartime operational context since February 2022 has introduced additional regulatory provisions affecting employment, mobilisation, and business continuity.

Payroll outsourcing in Ukraine enables international organisations to engage Ukrainian talent — both within Ukraine and internationally mobile Ukrainians — compliantly, with specialist knowledge of ESV contributions, PIT withholding, military levy obligations, and wartime employment law provisions. This guide outlines Ukraine’s key payroll obligations and the advantages of specialist outsourcing.

What is Payroll Outsourcing in Ukraine?

Ukraine payroll outsourcing involves engaging a specialist provider to manage monthly wage calculations, personal income tax (PIT) withholding and remittance, military levy deductions, Unified Social Contribution (ESV) remittance, payslip generation in Ukrainian, and all associated statutory filings with the State Tax Service. For companies without a Ukrainian registered entity, an employer of record (EOR) arrangement enables compliant employment with the EOR assuming full statutory employer responsibility.

Ukraine’s payroll environment has become more complex since the onset of the full-scale war in February 2022, with amendments to the Labour Code covering mobilisation leave, simplified employment registration procedures in conflict-affected regions, and increased military levy rates. A specialist provider maintains current knowledge of these evolving obligations.

Regulatory Framework for Payroll in Ukraine

Personal Income Tax (PIT)

Personal income tax in Ukraine is levied at a flat rate of 18% on employment income, administered by the State Tax Service. Employers must register with the State Tax Service, withhold PIT from employee salaries monthly, and remit the collected amounts by the 30th of the reporting month (for bank payments) or the date of salary disbursement. Monthly combined tax and contribution returns (Form 1DF and the Unified Reporting Form) must be filed electronically through the State Tax Service’s Taxpayer Electronic Cabinet portal.

Military Levy

The military levy (viiskovyi zbir) is a mandatory payroll deduction originally introduced in 2014 at a rate of 1.5% of gross employment income. Following the commencement of full-scale hostilities in 2022, the rate was increased to 5% of gross salary with effect from 2025. Employers must withhold the military levy from employee salaries and remit it alongside PIT. The levy applies to the same income base as PIT and is calculated on gross salary before any deductions.

Unified Social Contribution (ESV)

The Unified Social Contribution (Yedynyi Sotsialnyi Vnesok — ESV) is Ukraine’s single employer-side social insurance contribution, covering pension, health, unemployment, and occupational injury benefits. Employers pay ESV at a rate of 22% of gross salary with no upper ceiling. ESV is an employer-only obligation — employees do not pay ESV separately. The contribution must be remitted monthly by the 20th of the following month. Employers must also register employees with the State Register of Insured Persons.

Labour Code and Working Hours

Employment relations in Ukraine are governed by the Labour Code of Ukraine (adopted 1971, amended extensively). The standard working week is 40 hours (8 hours per day, 5 days per week). Overtime is permitted in defined circumstances and must be compensated at 2× the regular rate. Employment contracts should be in writing and in Ukrainian. Fixed-term contracts may be concluded for a maximum of 5 years. Wartime amendments to the Labour Code have introduced provisions on mobilisation leave (unpaid, with job retention), simplified redundancy procedures in conflict zones, and remote work obligations.

Leave Entitlements

Employees in Ukraine are entitled to a minimum of 24 calendar days of paid annual leave per year (with some categories entitled to additional leave). Leave must be granted within the leave year and cannot be fully substituted by cash compensation except on termination. Maternity leave (natalene vidpustky) is 70 calendar days before birth and 56 days after (70 days in complicated births), fully compensated through the Social Insurance Fund. Parental leave (decree leave) is available until the child reaches 3 years, with partial state compensation.

Employer Filing and Reporting Obligations

  • Register with the State Tax Service of Ukraine and obtain an employer tax identification code before the first payroll run
  • Withhold personal income tax (PIT) at 18% and military levy (5% from 2025) from employee gross salaries monthly and remit by the prescribed deadline
  • Remit Unified Social Contribution (ESV) at 22% of gross salary by the 20th of the following month
  • File monthly combined reporting forms (Unified Reporting Form) electronically through the State Tax Service’s Taxpayer Electronic Cabinet
  • Register employees with the State Register of Insured Persons at the time of hiring
  • Issue payslips in Ukrainian detailing gross pay, PIT deduction, military levy, and net pay (ESV is employer-side and not deducted from employee net pay)
  • Maintain employment records and payroll documentation for the statutory retention period (75 years for ESV records)
  • Apply wartime Labour Code amendments correctly, including mobilisation leave provisions and any applicable martial law employment rules

The State Tax Service enforces electronic filing deadlines via the Taxpayer Cabinet. The military levy rate increased to 5% from 2025 and must be applied correctly on all applicable income. The 75-year retention requirement for ESV-related employee records is one of the longest statutory retention obligations in Europe and must be factored into document management planning.

Common Payroll Challenges for International Employers in Ukraine

Ukraine’s wartime context introduces unique operational challenges that have no equivalent in peacetime payroll management. Employers must navigate mobilisation leave provisions (male employees aged 18–60 may be called up for military service, triggering unpaid leave with job retention obligations), business continuity planning for payroll in conflict-affected regions, and the possibility of employees relocating internationally while remaining on Ukrainian payroll.

The military levy rate increase to 5% (from 1.5%) effective 2025 significantly increases the employee-side payroll deduction and must be communicated clearly to employees and reflected accurately in payslip calculations from the effective date.

Benefits of Payroll Outsourcing in Ukraine

A specialist payroll provider in Ukraine maintains current knowledge of wartime Labour Code amendments, the military levy rate schedule, ESV obligations, and State Tax Service e-filing requirements — eliminating the need for an in-house team to track a legislative environment that continues to evolve rapidly. For international tech companies with large Ukrainian engineering teams, the EOR model provides a compliant employment framework that remains operational even as some employees work from abroad.

Choosing a Payroll Outsourcing Partner in Ukraine

Select a provider with active State Tax Service registration, ESV compliance expertise, and demonstrated experience operating in Ukraine’s wartime regulatory environment. Verify that the provider maintains current knowledge of mobilisation leave obligations, the military levy rate schedule, and wartime Labour Code amendments. Ukrainian-language payroll systems, electronic Taxpayer Cabinet filing credentials, and experience with internationally mobile Ukrainian employees are critical operational requirements.

Entity Setup vs. Payroll Outsourcing in Ukraine

Establishing a company in Ukraine requires registration with the Unified State Register, tax registration with the State Tax Service, and ESV registration. The process is manageable under normal conditions, but operational uncertainty arising from the wartime context has led many international companies to prefer the EOR model — which provides employment flexibility without the fixed cost and regulatory exposure of a Ukrainian legal entity.

Termination and Final Pay in Ukraine

Termination of employment in Ukraine must comply with the grounds and procedures specified in the Labour Code. Notice periods depend on the reason for termination (typically 2 months for redundancy). Severance pay is required for certain grounds of dismissal. Final pay — including outstanding salary, accrued leave compensation (minimum 24 calendar days per year), and applicable severance — must be settled on the last working day. Mobilisation leave creates additional complexity: employees called up for military service cannot be dismissed for the duration of their service and must be reinstated upon return.

Get Started with Ukraine Payroll Outsourcing

RemotePeople provides compliant payroll and EOR services in Ukraine, managing State Tax Service PIT and military levy filings, ESV contributions, wartime Labour Code compliance, and Ukrainian-language employment documentation in a single, integrated workflow. Our Ukraine specialists maintain current knowledge of mobilisation leave provisions and the evolving wartime regulatory environment — so your Ukrainian team is paid accurately, compliantly, and on time. Contact RemotePeople to discuss your Ukraine workforce requirements today.