Payroll outsourcing in Ukraine: what a foreign company needs to know

Foreign companies running a team in Ukraine usually discover payroll the hard way: the parent treats it as a monthly transfer, and Ukrainian law treats it as a regulated process with fixed dates, three separate taxes and quarterly reporting. Here is what actually applies, in the order it affects your cash and your risk.

The three components of Ukrainian payroll

Start from the gross salary agreed in the employment contract. Three things attach to it:

• Personal income tax, 18 %, withheld from the employee’s gross pay.
• Military levy, 5 %, also withheld from the employee. The rate has applied since 1 December 2024 and runs through martial law and for three years after it ends.
• Unified social contribution, 22 %, paid by the employer on top of gross, not withheld from the employee.

So a gross of 100 means roughly 77 in the employee’s account and roughly 122 leaving the company. Budget from the 122, not the 100: this is the single most common miscalculation in a first-year budget.

Payment dates are not a matter of policy

Salary must be paid at least twice a month, with no more than sixteen calendar days between payments, and no later than seven days after the end of the period it covers. A monthly payroll run, normal in many countries, is a breach in Ukraine regardless of whether employees agree to it.

Taxes and the social contribution are transferred on the day the salary is paid, not at the end of the month. If pay goes out in two instalments, the obligations attach to each.

Reporting

Employers file a combined return covering the social contribution, personal income tax and the military levy, with an appendix listing income and tax per individual. It is filed quarterly, and the personal data in it has to agree with what was actually paid. Mismatches between the return and the bank statements are one of the first things an inspection compares.

What a provider needs from you every month

Payroll is never fully outsourced, because half the input comes from inside the company:

• Who worked and how much: the timesheet, absences, business trips.
• Changes: hires, leavers, pay changes, new positions, with the dates they take effect.
• Variable pay: bonuses, overtime, allowances, and who approved them.
• Sick leave certificates and leave requests as they come in, not at month end.

The realistic rhythm is a short cut-off date each period. Everything received after it goes into the next run.

Three mistakes foreign parents make most often

Paying once a month. Covered above, and it is the easiest breach for an inspector to prove from a bank statement.

Treating private entrepreneurs as staff. Engaging individuals registered as private entrepreneurs is legal, but if the relationship looks like employment in substance (fixed hours, a workplace, subordination, a monthly fee), it can be reclassified, with taxes and penalties assessed for the whole period. This is worth a legal review before the model is scaled, not after.

Ignoring military registration records. Employers keep military registration data on employees and notify the recruitment centre of changes. Foreign-owned companies often learn about this obligation only when an inspection asks for the file.

Personal data

Handing payroll to a provider means transferring employees’ personal data. Agree it in writing: the processing terms, the list of people with access and what happens to the data when the engagement ends. Your group auditor will ask, so it is cheaper to have it from day one.

How we run it

We do payroll outsourcing for representative offices, foreign-owned companies and NGOs, with reporting and correspondence in English. Where the personnel documents also need to be kept, that is HR administration, and it is usually taken together with payroll because the timesheet feeds both. If the existing files have not been checked in a while, start with an HR records audit.