Draft of the New Labor Code of Ukraine: What Employers and HR Professionals Should Expect

The Ukrainian government has taken one of the most ambitious steps in reforming labor legislation in recent decades: a draft of the new Labor Code of Ukraine has been submitted to the Verkhovna Rada (Bill No. 14386). The draft was presented to the business community by the Ministry of Economy together with Diia City United.

This document comprehensively rewrites the «rules of the game» in the labor market, introducing changes ranging from the definition of employment relationships and contract formats to digitalization, minimum wage regulation, and State Labor Service inspections. For businesses and HR professionals, this means the need to adapt to more flexible and transparent — and, most importantly, digital — conditions.

In this article, we outline the key provisions of the draft law and the changes the labor market will face once it is adopted.

Draft of the New Labor Code: What We Know

The principles of the current labor legislation, implemented in the Labor Code of Ukraine, were formed back in Soviet times and no longer correspond to modern economic realities. According to the authors of the draft law, the existing labor legislation is overloaded with bureaucracy and contradictory by-laws.

The new labor legislation aims to:

• Increase business flexibility. The need to optimize costs and attract foreign investment requires modern, flexible forms of work organization, which the new code proposes.
• Legalize employment. Simplifying hiring procedures will help bring the labor market out of the shadow economy and expand the scope of formal employment contracts.

The provisions of the new Labor Code will be aligned with the requirements of European Union acts and international legal instruments.

New Labor Code: Key Changes

The Labor Code introduces changes in key areas related to employment in Ukraine. Let’s look at the main ones.

Clear Definition of Employment Relationships and Combating Shadow Employment

To reduce the scale of informal employment, the Code establishes clear criteria for employment relationships. A contract is recognized as an employment contract if five or more of the following features are present:

1. Personal performance of work according to a specific qualification.
2. Performance of work under the employer’s assignment and control.
3. Regulation of the work process by the employer.
4. Performance of work at a designated workplace (office, workshop, etc.).
5. The employer provides tools, materials, and raw materials.
6. Systematic payment of remuneration (salary).
7. The employer sets working hours and rest periods.
8. The employer reimburses expenses for travel, business trips, and training.

These clear criteria will make it possible to distinguish employment contracts from civil law agreements, including schemes involving sole proprietors.

Employment Contracts Become More Flexible

The Code expands the list of contract types, allowing businesses to choose the most suitable model:

• apprenticeship employment contracts (combining work and education);
• contracts with non-fixed working hours (payment for actual hours worked);
• contracts for remote and home-based work;
• contracts for domestic work;
• contracts for temporary agency work.

A written employment contract becomes the standard for employers, significantly reducing the risk of misunderstandings and legal disputes.

Digitalization of Labor Processes

The Labor Code creates conditions for concluding contracts using a qualified electronic signature (QES). Under the new rules, employers will be able to hire and dismiss employees through the Diia portal. Electronic documents in labor relations are equated to paper ones.

Leave and Overtime: New Limits

The draft Labor Code proposes a substantial update to social standards:

• annual basic leave: increased from 24 to 28 calendar days;
• overtime hours: the limit increases from 120 to 250 hours per year (if provided for by a collective agreement or arrangement).

For companies, this means the need to revise leave schedules, time-tracking systems, and internal remuneration policies.

New Termination Mechanisms

The mechanics of dismissal at the employer’s initiative (for economic or organizational reasons) are changing. The employer must notify the employee in writing 60 days in advance or replace the notice with monetary compensation:

• by mutual consent: at least double the average daily wage for each working day until the end of the notice period;
• without the employee’s consent: at least triple the average daily wage for each day the notice period is reduced.

Labor Inspection and Audits

The number of inspections will depend on the company’s risk level. A digital system will automatically assess risks based on data on salary payment delays, documentation violations, and employee complaints.

The draft Labor Code provides for direct financial liability of the employer. In the event of a salary payment delay exceeding 30 days, the employer must pay compensation in accordance with the price growth index.

When Will the Changes Take Effect?

The new Labor Code is expected to enter into force six months after the end of martial law in Ukraine. An adaptation period is provided for the transition to mandatory written employment contracts:

• 1 year for companies with up to 1,000 employees;
• 2 years for companies with more than 1,000 employees.

Employment contracts concluded before the new Code enters into force will remain valid until their expiration.

Digitalization of Employment Relationships

The government emphasizes that the new legislation aims to overcome outdated business processes, insufficient digitalization of public employment services, and the lack of data for effective labor market analysis. Today, a significant number of Ukrainians remain outside the formal labor market, which complicates the work of employment centers and workforce training.

To implement the new legislative norms, the state is introducing the digital system «Obrii.» It will unite all services and data into a single ecosystem, logically completing the reform with an emphasis on electronic document management and digitalization. This will enable the state to:

• create a unified digital pathway for all labor market participants;
• involve businesses and educational institutions in recruitment and reskilling;
• link retraining programs to the specific needs of employers;
• implement modern EU-aligned profession and skills classifiers in the labor market;
• create conditions for real-time analytics and monitoring.

In practice, the launch of Obrii transforms labor relations into a service-oriented model: an application via Diia, support throughout a person’s entire employment lifecycle, and assistance after job loss. Thus, the new Labor Code of Ukraine lays the foundation for a full transition of labor relations into the digital space, making hiring, record-keeping, and dismissal processes more transparent, flexible, and modern.

Digitalization of labor relations is convenient not only for employees but also for employers. Ukrainian businesses are already actively implementing digital tools in HR operations. For example, the Vchasno.Kadry service helps companies automate document management and personnel administration, ensuring lawful use of electronic document workflows in HR. This experience shows that the labor market is ready for full digitalization, and the new law merely formalizes an existing practice.

For companies, changes in labor legislation may create challenges if HR processes and document management are chaotic. With Vchasno.Kadry, businesses can quickly organize personnel files, approval workflows, and document storage — ensuring that preparation for inspections and new requirements is smooth and painless. Learn how this can work for your company.