Payroll in Ukraine: Your efficient overview for business compliance in 2025

The correct and effective management of payroll in Ukraine is critically important due to strict government regulations, high levels of tax and social obligations, and frequent changes in legislation. Payroll errors or late payments can lead to financial sanctions, reputational risks –  and even lawsuits.

Ukraine has a complex tax system and a high level of bureaucracy, which adds to the complexity of payroll. In addition, many businesses operate with flexible forms of employment (e.g., civil law contracts, individual entrepreneurs, gig contracts), which affects the specifics of payroll management. Frequent changes in legislation require constant monitoring and adaptation of payroll processes.

In this article, you will learn:

• The legal framework governing payroll in Ukraine, including key regulations and upcoming legislative changes.
• The components of payroll, such as salary structure, mandatory deductions, and contributions.
• The payroll process in Ukraine, including pay schedules, payslip requirements, and reporting obligations.
• The advantages of payroll outsourcing, how it ensures compliance, and tips for selecting the right provider.
• The challenges and compliance risks businesses face when handling payroll in Ukraine.
• Why a deep understanding of Ukrainian payroll is essential and how partnering with local experts can make a difference.

Legal framework governing payroll in Ukraine

There are several laws governing payroll in Ukraine, including:

• The Labour Code of Ukraine
• The Tax Code of Ukraine
• The Law on Remunerationof Labour
• The Law on Unified Social Contribution
• The Law on Collection and Accounting of Single Fee on Obligatory National Social Insurance

The process of changes in labour law in Ukraine is ongoing. However, there are a few important recent changes that businesses should be aware of. These include:

• Increase in the military tax rate
• Increase in the upper limit of the unified social tax charge
• Updates to the payroll reporting form, the frequency, and deadlines for its submission
• Changes to the procedure for the payment of sick leave to part-time employees
• Changes to the requirements for documents confirming disability due to the reform of the Medical-Social Expert Commission

Payroll components: Salary structure and deductions in Ukraine

A clear understanding of Ukraine’s payroll structure is crucial for businesses to efficiently manage employee salaries and ensure compliance with local regulations. Payroll in Ukraine generally includes a gross salary, supplementary components, and required deductions.

Gross salary and components

Salary is calculated on the terms and in the amounts specified in the employment contract and based on the time and attendance sheet.

The main components of gross salary include:

• Basic rate (salary, tariff rate)
• Wage premiums and bonuses
• Pay for overtime and night shifts
• Compensation payments (sick leave, vacation pay, etc.)

Mandatory deductions and contributions

Mandatory deductions from employees’ salaries include:

• 18% personal income tax
• 5% military tax

Mandatory charges include:

• 22% of the unified social contribution – paid by the employer

In addition, since February 8, 2022, Ukraine has a special legal regime called Diia City, developed for the IT sector and creative industries. Its main features are:

• Low tax burden – the personal income tax rate for Diia City resident companies is 5%, while the unified social contribution is paid at 22% of the minimum wage
• Possibility to use an alternative employment model (gig contracts) which allows for flexible terms of cooperation between the employer and the expert while maintaining basic social guarantees

Payroll process in Ukraine

Handling payroll in Ukraine involves meeting strict legal requirements, adhering to set deadlines, and fulfilling reporting obligations to maintain compliance.

Pay schedules and payment obligations

Salaries must be paid at least twice a month. The deadline for the payment of salaries is no later than 7 days after the end of the period for which the payment is made. Accordingly, salaries for the first half of the month are due no later than the 22nd day of the month, and for the second half no later than the 7th day of the following month.

Payslip requirements

The payslip for employees in Ukraine should include the following information:

• Total amount of accrued salary
• Data on hours worked
• Information on any additional payments
• Deductions (personal income tax, military tax)
• Net income (the final amount the employee receives)

Key reporting obligations

Companies must submit Unified Social Contribution, Personal Income Tax and Military Tax reports monthly. These reports provide personalized data on the amounts of accrued personal income, withheld taxes (personal income tax and military tax), and accruals (unified social contribution). In addition, companies must submit monthly and quarterly statistical reports on salaries in accordance with the list determined by the Statistical Service for the enterprise for the current year.

Data protection in Ukrainian payroll

Payroll processing involves employees’ personal data, so companies must comply with the following requirements:

• Limited access to payroll reporting within the company: Only certain employees of the company (accountants, financial department, and management) should have access to payroll information.
• Submission of data to fiscal authorities: Payroll reports must be submitted through certified electronic systems that ensure data protection and require an electronic signature to confirm the accuracy of the data.
• Protection of personal data in external systems: If a company uses external payroll providers or accounting systems, it is important that they comply with the requirements of the Law of Ukraine on Protection of Personal Data.
• Requirements for record keeping: The company must keep documents related to payroll for a period of 3 to 75 years, depending on the specifics of the document. The retention period for basic documents, such as payroll records, should be 75 years. The company must take all measures to protect archived reports from unauthorized access.

Challenges and compliance risks in payroll in Ukraine

Foreign companies handling payroll in Ukraine face several challenges, including frequent legislative changes, ambiguous or contradictory regulations, and the complexity of tax reporting requirements.

The most common compliance risks associated with payroll errors or delays in Ukraine include financial penalties, account blocking, and potential lawsuits.

The penalties for non-compliance with payroll regulations in Ukraine can be significant and mostly depend on the number and severity of violations.

For instance, the penalties for labour law violations vary from 1 to 30 minimum wages (currently, from 8,000 to 240,000 UAH). The fines in terms of administrative responsibility of managers can vary from 30 to 2,000 tax-free minimum incomes of citizens (currently, from 510 to 34,000 UAH). In the case of significant violations, the company may be held criminally liable.

For all violations of the Tax Code of Ukraine there are three types of penalties: financial, administrative, and criminal. The financial fines can be up to 75% of the amount of unpaid taxes. Administrative fines vary from 5 to 20 tax-free minimum incomes minimum wages (currently, from 85 to 340 UAH). Criminal liability in the event of serious violations is self-explanatory.

Payroll outsourcing in Ukraine

Outsourcing payroll in Ukraine provides businesses with an efficient way to streamline operations, reduce costs and ensure compliance with intricate local regulations.

Benefits of payroll outsourcing in Ukraine

There are a few benefits of payroll outsourcing that companies operating in Ukraine should keep in mind. The main advantages include:

• Minimizing the risk of errors and fines: Payroll professionals use automated tools and stay up to date with the frequently changing local legislation. This allows almost no room for mistakes and eliminates the risk of any legal or financial consequences. Correct and timely payments also boost company morale and increase employee satisfaction.
• Optimization of accounting and HR staff costs: By outsourcing payroll to payroll experts, companies can manage their financial and HR teams more efficiently, giving them the opportunity to optimize their resources and use their time and energy to focus on the strategic growth of the company.
• Flexibility and scalability of services: A professional payroll partner can adjust the services to the company’s needs and based on any changes occurring – whether it’s working on a seasonal project or expanding to a different market.

Ensuring compliance for foreign companies

An outsourcing partner can guarantee compliance with Ukrainian legislation, staying on top of any changes in regulations ensuring compliance and accuracy in calculations.

For companies residing in Diia City, outsourcing of payroll services is especially relevant as the regime works with a specific tax model. A payroll provider can help correctly calculate payments to gig contractors, comply with tax accounting standards and avoid reporting errors.

Choosing the right payroll provider in Ukraine

When choosing a provider for payroll in Ukraine, businesses should consider a partner who has:

• Experience with operating in Ukraine and knowledge of the local business environment
• Reputation in the market
• Flexible and proactive approach to clients

Why a deep understanding of Ukrainian payroll matters

Understanding the payroll laws is crucial for companies operating in Ukraine, as failure to comply with the legal requirements can result in serious financial and legal consequences.

The best and most reliable way to ensure smooth payroll processing in Ukraine and compliance with the legislation is to partner with an outsourcing company like Accace. Payroll outsourcing specialists have vast experience, expertise in the local market, and the tools necessary for flawless payroll management.

It is also vital for companies to monitor all changes in legislation and regularly update their knowledge of payroll procedures in Ukraine. In addition, using automated systems and self-service portals will significantly lower the chances of payroll errors.

Local experts can help companies adapt to legal regulations, avoid mistakes, manage tax obligations, and optimize internal processes for better efficiency, allowing them to push administrative tasks aside and focus on strategic growth.