Outsourcing Services. Payroll and Labor Conditions. HWC LLC Information Brochure

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1 Outsourcing Services Payroll and Labor Condi(ons Informa(on Brochure HWC, Kyiv, 2015

2 SPECIFICS OF THE UKRAINIAN MARKET Making business in Ukraine is embedded into a quite unique market situa(on. On the one hand the country is associa(ng itself towards the European Union by ini(alizing reforms and rejuvena(ng its authori(es. This atmosphere of change promises massive chances to capture a remunera(ve market. On the other hand the country conducts its heritage of the former Soviet Union including laws and regula(ons, specific local accoun(ng standards, a variety of different authori(es directly impac(ng the business world by a high level of bureaucracy and corrup(on. Excellent personal rela(onships and the crea(on of trust are essen(al to establish a successful joint venture or market presence. HWC is combining local exper(se with Western European business manner and acts as the interface between you and this complex environment. Adap(ng your business to the Ukrainian market, consul(ng on business relevant decisions and suppor(ng with business services is our core competence. Making your business work is what we do! 2

This atmosphere of change promises massive chances to capture a remunera(ve market.

3 Payroll The monthly salary in Ukraine is limited on the lower side by the Ukrainian government. As of 1 September 2015 the minimum salary is UAH 1,378 per month (approx. EUR 55). It has to be paid in two tranches (advance and balance). The period between the tranches can not be less than 16 calendar days. The balance payment can not be carried out later the 7 th calendar day following the paid month. Unified Social Security Contribu=on (USSC) In general, the mandatory remi^ances to the Pension, Unemployment, Social Security and Accident Insurance Funds are covered by the USSC, which is to be accrued by an employer based on the gross salary of an employee. Nevertheless, currently the gross salary for the USSC purpose is capped at the level of 17 (seventeen) sustenance minimums per month. For the period September December 2015 the cap is UAH 23,426 (approx. EUR 940). The cap is applied for the employer s and the employee s liabili(es. The salary amounts exceeding the cap are not subject to the USSC. The USSC s rates are: - employee: 3,60% (payroll), 2,4% (civil law agreements); - employer: 36,76% - 49,7% depending on the level of the industrial risk set by the Ukrainian government Personal Income Tax (PIT) The USSC cap is not applicable for the PIT calcula(ons. Generally, the gross salary minus the USSC is subject to the PIT; The PIT rates are: - 15 % applies to the up to 10 (mes the minimum salary, i.e. UAH 13,780 (approx. EUR 550) for the period September December % applies to the amounts that are paid on top of 10 (mes the minimum salary Military Tax The gross salary is subject to the Military Tax The Military Tax rate is 1,5% The Military Tax is the sole responsibility of an employee 3

The balance payment can not be carried out later the 7 th calendar day following the paid month.

4 LABOR CONDITIONS The main condi(ons of employment in Ukraine are governed by the Labor Code of Ukraine (further - the Labor Code ). The Labor Code envisages the main obliga(ons and rights of employers and employees. The Ukrainian labor legisla(on is inherited from the Soviet (mes and therefore the emphasis is made on protec(ng the rights of the employees rather than of the employers. The main requirements under the Labor Code are: The length of a working week is not to exceed 40 hours. Over(me work and work during holidays are generally prohibited by the Labor Code of Ukraine. Nevertheless, the Labor Code provides with the exhaus(ve list of the specific cases when the over(me work and work during holidays are permissible; Working during holidays is reimbursed by mutual consent either by giving another day- off or by providing double monetary compensa(on. Over(me work during ordinary working days can not be compensated by providing with the day- off compensa(on but requires the double monetary compensa(on; An employee s minimum annual vaca(on en(tlement is 24 calendar days; The Ukrainian labor legisla(on provides for certain social benefits: maternity leave, paid holidays and vaca(on (me, paid sick leave, and some others; The no(ce period in case of termina(on of the employment agreement by the employee is at least two weeks. The statutory termina(on no(ce for the dismissal of an employee upon the employer s ini(a(ve (the main grounds for this are the staff redundancy or reorganiza(on of the company s structure) is two months; In cases of severe misconduct at work (e.g., thej, alcohol or drug intoxica(on, etc.), the employee may be dismissed immediately. Nevertheless, the termina(on is normally subject to unfavorable judicial interpreta(on for an employer and, correspondingly, requires huge paperwork to protect the employer against further claims from the dismissed employee; An employer should provide an employee with per diems advance for each day of business trip (including day of departure and arrive). The amounts of the per diems are limited by the Ukrainian government and are different for the business trips within the borders of Ukraine and for the business trips abroad. 4

The Ukrainian labor legisla(on is inherited from the Soviet (mes and therefore the emphasis is made on protec(ng the rights of the employees rather than of the employers.

5 PAYROLL SERVICE HWC is able to provide its clients with the comprehensive payroll administra(on. For this purpose HWC has highly qualified professionals and special accoun(ng sojware. HWC is able to provide its clients with the salary computa(ons in accordance with the client s policy, namely: Gross to net salary approach Net to gross salary approach Foreign currency equivalent approach Foreign currency approach Other specific approaches (if any) Except the direct salary computa(on the HWC s payroll service includes: Payroll related repor(ng to the tax and other fiscal authori(es Handling of the queries of a client and/or its employee(s) Mee(ngs with a client and/or its employee(s) Assistance in hiring and termina(on of employee(s) Prepara(on of a labour contract(s) Prepara(on of a job descrip(on(s) Prepara(on of a standard handbook, etc. When payroll services provided by HWC, we ensure: Strict confiden(ality Individual approach Effec(ve and efficient communica(ons Reasonable fees and costs 5

approach Foreign currency approach Other specific approaches (if any) Except the direct salary computa(on the HWC s payroll service includes: Payroll related repor(ng to the tax and other fiscal

6 Making your business work is what we do! HWC LLC Ukraine Kyiv Obolon Residences Obolonskyi Ave

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