15 November 2012
Kyiv Post provides commentary by Oleksandra Yevstafyeva on peculiarities of labor law in Ukraine

Tough road to legality for foreign managers

Have you just been appointed at a high position in Ukraine? Congratulations and beware – you’re in for a legal roller-coaster that could take up to half a year. 

“The life of a foreign manager is not sweet here,” said Oleksandra Yevstafyeva, senior lawyer and head of labor law at the Kyiv office of Egorov Puginsky Afanasiev & Partners, an international law firm operating throughout the former Soviet Union. She cautions prospective managers they should not expect smooth procedures and minimal hassle, like in other countries, when coming to work in Ukraine.

Job titles are the first of many problems. In Ukraine, an expatriate cannot officially be a regional or country manager, the lawyer said, as these titles don’t simply exist. According to the Ukrainian classification, the only top level jobs are director, general director or a chairman of the board. Not adhering to this classification will make obtaining a work permit more difficult, and can result in fines of Hr 510 – 1,700 ($60-180).

Furthermore, employers should prepare a whole package of documents to secure their employee’s work permit. It consists of over a dozen different papers, including a certificate of good conduct often issued by the home country. But while most Eastern European countries know what this strange-sounding certificate is (though Russia takes about a month to produce it), in the United States, for example, there is no governmental body or institution that can issue it.

Nor can companies in Ukraine simply hire a new top manager. First, they must inform the State Employment Center about the relevant vacancy. In practice, this mean a current manager should be dismissed several months before the new one’s arrival, or at least appointed as deputy manager.

This vacancy is needed to secure the future employee’s work permit, a month-long process, which is valid for one year. Trying to get a copy of a lost permit is almost as tough. 

“One should keep a work permit as the apple of an eye,” Yevstafyeva warns. 

If competent authorities learn about a company employing a worker without a permit, or that such an employee continued working after losing it and before getting a new one, they can levy a fine equal to 20 minimal wages, or Hr 22,360. The responsible officials could also face fines of up to Hr 3,400, while the employee could lose up to Hr 850.

On the bright side, foreigners who work at Ukrainian subsidiaries of foreign companies will no longer need such permits starting Jan. 1, 2013, only service cards issued by the Economy Ministry. Those lucky expats with permanent residency are also freed of this responsibility.

After getting the work permit, a type D visa application must be made in a Ukrainian consulate abroad. It usually takes two-three weeks and is valid for a single entry into Ukraine and a 45-day stay. With this document, the foreigner can apply for another important document, a temporary residence permit (also valid for one year). This takes around 25 days, during which leaving Ukraine is prohibited. 

“For a person that is used to working and traveling a lot, this can be a shock,” the lawyer said.

Staying at a hotel is not enough, though. The future expat manager should own or officially rent an apartment. This usually means a price hike of 15-17 percent to compensate for taxes that might otherwise go unpaid, as the owner has to register the foreigner in his apartment.

Losing a temporary residence permit is not as bad as a work permit, but it is still unpleasant. Being unable to produce one for relevant authorities can result in an Hr 3,400 fine for the employer, and Hr 850 for the foreigner.

“The director has to know all this ahead of time in order to be ready to adjust his business schedule for the next three to six months, given the bureaucracy of processes in Ukraine,” Yevstafyeva said.

She said she has her hands full as companies became more careful with human resources issues since authorities started implementing legislation more aggressively in recent years.

Lina Nemchenko, a partner at the Kyiv office of Baker & McKenzie, an international law firm, added that many top managers have been replaced in the last six months.

“Change of management often relates to uneasy economic situation in Ukraine and in the world,” Nemchenko said. “The question that is on the agenda now is whether there will be the second wave of the crisis or not. All companies make different decisions, including changing a top manager, in order to prepare to it.”

So administrative barriers will be the first challenge newly come foreign managers have to face. But they won’t be the last.

by Oksana Faryna